Ulrich Leidecker Sps 2023 6554fa25a426c

Automation demand affected by high inventories throughout the value chain

Nov. 15, 2023
Phoenix Contact navigates economic downturn with strategic investments and sustainability initiatives

During a press conference at the SPS automation trade fair in Nuremberg, Germany, Ulrich Leidecker, chief operating officer of Phoenix Contact, spoke about the company’s economic development, which, after two years of above-average growth, has been characterized by a significant decline in incoming orders since the second quarter of 2023.

It is currently forecast that Phoenix Contact will close the 2023 fiscal year with a fall in revenue of around 2% compared to the previous year and a total revenue of 3.5 billion euros. “If we consider our development from 2019, we have actually achieved an average growth of 9.1% year-on-year up to today,” said Leidecker. “This shows that the current economic development is not a structural problem. Phoenix Contact’s products and solutions are used in particular for electrification and automation, which are areas in which investments will continue to be made in the future.”

The decline in demand, driven by excessively high inventories at several points throughout the entire value chain, is affecting all regions of the world. This is particularly noticeable in Asia, whereas some European countries continue to record growth. The number of employees is increasing only very slightly and remains just below 22,000.

Leidecker emphasized just how special 2023 is for Phoenix Contact, despite the onset of an economic downturn in the second half of the year. “We had the pleasure and privilege of celebrating our 100th anniversary with our employees and customers worldwide,” he noted. “We have achieved a great deal throughout these 100 years and have remained true to the values and culture of our family business despite our growth and development.”

The general managers and shareholders used numerous events, family days and staff parties as opportunities to express their appreciation to employees for their exceptional dedication and commitment, which has made it possible for the company to become what it is today.

“We also highlighted and strengthened our partnerships with our customers by sharing special moments with them at events,” explained Leidecker. “After all, it is together with our customers and business partners that we are driving forward solutions for the energy revolution that form the basis for a sustainable world.”

The focus was therefore also on global sustainability projects, which were implemented together with partners and global subsidiaries in 2023.

In order to prepare Phoenix Contact for growth in the medium to long term, Phoenix Contact has planned an investment program of more than 1 billion euros over the next five years.

The first measures for the extension to the existing logistics building at the location in Blomberg, Germany, have already been launched. The fully automated building will provide 220,000 cubic meters of additional storage volume. In the future, it will also be possible to supply customers outside of Germany directly from here. At around 100 million euros, this represents the largest single investment in the company’s history.

At the location in India, three new buildings with production, logistics and office spaces, with a footprint of 70,000 square meters, are being built. The investments here amount to around 40 million euros. “With this expansion in capacity, Phoenix Contact is responding to the challenge of making global supply chains more resilient and minimizing dependencies on individual regions of the world,” explained Leidecker.

China is the fastest-developing market for e-mobility with its own approaches to mobility. Phoenix Contact is therefore expanding its e-mobility production capacity with a new facility in Lishui, China.

The foundation stone was laid at the end of June 2023. At this new production site, Phoenix Contact E-Mobility will develop and manufacture various charging cables for electric vehicles, which will be supplied to Chinese automobile and charging infrastructure manufacturers.

The company relies on local-for-local sourcing, where the purchasing, production, and sales markets are located close to each other. The new building has a total footprint of around 26,000 square meters, of which 20,000 square meters is production and storage space and 6,000 square meters is office space.

With Building 60 at company headquarters, Phoenix Contact is setting new standards in terms of sustainability and efficiency. This investment is an example of the vision of an all-electric society in which carbon-neutral electricity is the central energy source. The building is designed such that it will not only cover its own energy requirements with self-generated electrical energy, but will also have a positive energy balance during operation. The amount of energy generated will be greater than its own requirements.

Phoenix Contact’s investment in this production and technology center amounts to around 35 million euros. With 18,485 square meters of floor space for 400 workstations, the building illustrates the networking of the energy, mobility, infrastructure and building sectors. The result is a tangible blueprint for scalable solutions that can be used to network entire districts in the spirit of an all-electric society.

In the building, thermal energy is integrated into a heating network at the local level, using heat pumps and a 1,500 cubic meter ice storage system. The demand for heating, cooling and the generation of waste heat from the processes is integrated in such a way that enthalpy exchange is possible. The first stage involves the use of battery storage systems, a photovoltaic system with an output of 1,100 kilowatt-peak, an open-field photovoltaic system with an output of 1,500 kilowatt-peak, and a partial dc power grid. Connected to this is a bidirectional charging infrastructure for e-mobility based on the premise of vehicle-to-grid. The installation of a dc power grid for industrial use is a deliberate strategic decision, as this will play a crucial role in driving the energy revolution forward—renewable energy sources, battery storage systems and e-mobility are based on direct current and can thus be integrated more easily.

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