New dimensions Agrikon Kam

NEW DIMENSIONS

Agrikon Kam Ltd in Kiskunmajsa, Hungary, has been the exclusive supplier of drivers’ cabs to the leading combine harvester manufacturer, Claas, since 1976. As part of its new strategic direction the factory has recently identified the need to diversify its product range and is now targeting the construction industry and exploring new market opportunities. Edina Beale reports.

The previously state-owned agricultural machinery manufacturer Agrikon Kam Ltd first diversified its activities in 1968 in order to start developing and producing drivers’ cabs for lorries. Eight years later the company secured a contract to supply cabs for the internationally recognised Claas group. Since then Claas has remained the most important partner for Agrikon Kam – two thirds of the factory’s production is currently supplied to the German group. Following a successful emergence from the recession, Agrikom Kam has recently reviewed its operations and developed a new strategic plan to accelerate growth. Mr Pál Velkey, managing director of Agrikon Kam Ltd, explains: “We have examined our current position and the future of our company and introduced many changes. In the last two years it has become apparent that we have one fundamental direction – the need to reduce our dependence.

“What are these dependences?” continues Mr Velkey. “One is customer dependence. Without losing our valuable long-term partners we are on a mission to acquire new clients by diversifying our products.” In the last three decades Agrikon Kam has solely served the agricultural sector. Production has been run on two lines – cabs and other welded metal components for combine harvesters and a similar product range for tractors. “These two lines are based on two different technologies; however, this volume of dependence is not enough.” Examining the market for new opportunities to increase their customer base, the construction industry was a natural choice. The construction industry requires various specialised vehicles, with robust, reliable and efficient components, very similar to the requirements for the agricultural industry. The provision of custom-built cabs for excavators and other plant type machinery is now in the sights of Agrikon Kam.

With the current economic situation and the concerns relating to the banking sector in particular, an important strategic decision has been made to reduce the company’s reliance on banks. “By the end of 2011 we will clear all our debts. And we believe that we will be able to continue our operations without taking on any more loans, just using our own financial resources,” confirms Mr Velkey.

Since its privatisation in 1993, Agrikon Kam has maintained its ownership structure, two-thirds of the company is still owned by Hungarian private investors. Today the company employs 320 staff generating €23 million sales revenues this year. In 2012 management expect to achieve a moderate growth of sales in excess of €25 million.

Large volume production

In the cab manufacturing market Agrikon Kam chose to focus on the large volume sector and aims to compete for clients requiring a minimum of 300 cab units per year. The company has the ability to develop bespoke products that meet specific client requirements whilst using world-class technology. “Our state-of-the-art KTL technology to provide e-coating for large components is very rare in Hungary. The operation of this modern technology requires a considerable amount of human input which gives us an advantage due to lower salaries compared to western Europe. This is our main competitive advantage against our rivals in Europe,” explains Mr Velkey.

Agrikon Kam’s resolve to diversify was strengthened by extremely positive initial research and encouraging feedback. In fact, the company’s portfolio has already been extended by a new product, which gives an example of how the expansion programme is taking shape. The development of a new cab for an Austrian construction company, with an initial order for between 4–5000 units highlights the company’s determination to diversify and its ability to meet the demands of the new market.

While the French market also continues to grow, unexploited opportunities have been identified in Russia. A new cab has been developed to fit in Terrion tractors for a Russian partner. The Russian market is a significant area for the company, to such an extent that consideration is being given to identifying a manufacturing partner in Russia to help meet the demand.

Agrikon Kam currently uses only twothirds of its production capacities. The company’s main objective is to keep up with modern technologies and to regularly update its facilities to improve quality and to

increase efficiency across their operations. “We have made investments to improve our e-coating facilities. We currently provide surface coating but are also considering implementing powder coating technology to increase competitiveness,” says Mr Velkey. “We have spent significant amounts on improving our infrastructure on the site and logistics as well as reducing our energy consumption. Our focus is to reduce the use of material and therefore we are continuously updating our welding machines.

“After the recession, the company completely reviewed its internal operations and made significant changes to increase productivity and efficiency. Now our aim is to keep our fixed costs at this level whilst increasing our turnover.” n