Freudenberg Group reflects on CY23. With a commitment to sustainability and expansion, the company is confident of R&D and strategic initiatives fructifying, writes Richa Tyagi.
Global technology conglomerate, the Freudenberg Group released the calendar year results for 2023 (CY23). Reflecting on the company’s 175-year journey in innovation and component manufacturing, the focus is on building on the achievements in India and chalking out a sustainable roadmap with expansion strategies in place.
G. Sivasailam, Managing Director of the Group company, Freudenberg Performance Materials
In a virtual conference, G. Sivasailam, Managing Director of the Group company, Freudenberg Performance Materials, addressed the press as the new Director and Chief Executive Officer of Freudenberg Regional Corporate Center India. Sivasailam succeeded Georg Graf, who held the position since 2016, when the Regional Corporate Center was set up to further the group’s continued commitment and growth plans for India.
In his address to the media, he highlighted an organic growth of 3.5 per cent despite adverse currency effects in CY23. The company attained a turnover of Euro 11,902.8 million, surpassing the previous year’s turnover of Euro 11,753.1 million.
With this growth, the operating margins of the company have increased an estimated 15 per cent known to be significantly higher than the previous year’s levels (CY22). In CY23, the margins jumped from Euro 941.8 million to Euro 1081.6 million. This substantial growth as per Sivasailam can be attributed to various success factors. First, the company’s commitment to innovation produced exceptional results, with the introduction of innovative products. In addition, its flexible and customer-focused approach has enabled it to provide customised solutions for diverse industries. Furthermore, The Freudenberg Group strategically expands into appealing markets on a global scale. The Freudenberg e-Power Systems Business Group has increased its manufacturing and assembly capacity in the US for battery systems production. Freudenberg Sealing Technologies has relocated to a new facility in Parets del Vallès, focusing on elastomer products for the automotive industry. The operating result for 2023 has been robust and the group has announced investments close to INR 350 crore in CY 2024 across facilities in Punjab, Karnataka and Tamil Nadu. In Morinda, India, Freudenberg has invested in a new production facility for its Vibracoustic Business Group and its Freudenberg-NOK India joint venture. These business areas played a major role in driving growth, he explained.
Dr Mohsen Sohi, CEO of Freudenberg Group
Referring to the group’s annual results and its financial figures made public, Dr Mohsen Sohi, CEO of Freudenberg Group, expressed, “Numerous records were set during the fiscal year 2023. We achieved the highest figures ever for sales and operating profit. When we look back over the past decade, it becomes clear how impressive these figures are.”
Sohi drew attention to the company’s remarkable growth trajectory over the decade, stating, “Within a single decade, we have roughly doubled our sales and operating profit with an average annual growth rate of six per cent and 7.7 per cent respectively.” This growth not only demonstrates the company’s resilience but also its ability to thrive in challenging market conditions.
Investing in innovation
As an industrial company, Freudenberg is said to be heavily invested in Research and Development (R&D). In 2023, the company allocated Euro 603.6 million. This is higher than the Euro 576.8 million earmarked for CY22. Moreover, the R&D investment as a percentage of total revenue has also seen a rise, reaching 5.1 per cent in 2023 compared to 4.9 per cent in 2022.
R&D bears fruit
To gauge the effectiveness of R&D efforts, the company tracks the proportion of sales generated from products introduced less than four years ago. In 2023, this figure stood at 32.4 per cent, indicating the significant contribution of recently introduced products to the revenue. Sivasailam G stated, “This is one of the measures of our R&D performance.” Compared to the previous year, when sales from new products accounted for 31.6 per cent of revenue, the company recorded a slight improvement. “This upward trend underscores the ongoing commitment to innovation and the successful execution of the company’s R&D strategies,” he added.
Dr Sohi emphasised the significance of R&D investments as well. “Our R&D investments have grown by 9.4 per cent annually, even more strongly and almost tripling. I would like to thank all our employees worldwide. Their commitment enabled us to achieve these historic results,” he averred.
Freudenberg India growth and investment plans
In Freudenberg, the company employs 52,241 employees for the Freudenberg Group as a whole as of December 31, 2023. They are hired from 148 countries. The company has a presence in 60 countries around the world. In India, the CY23 witnessed a growth of about 10.8 per cent in comparison to CY22. The revenue for CY23 stood at Rs. 3,803 crores, a rise from Rs. 3,431 crores in CY22. More importantly, the operating margin has jumped by 18.3 per cent, touching Rs. 695 crores, up from Rs. 568 crores in CY22, reflecting a positive change, remarked G Sivasailam.
India as a global hub
The company’s exports are pegged at Rs. 800 crore from India. “We continue to invest in expanding our facilities and 2024 promises to be another year of key milestones we will achieve in India” Sivasailam opined. Freudenberg Group operates through 11 companies across diverse segments in India including automotive, chemical, energy, technical textiles, and cleaning products. Freudenberg is banking on strong business ties with companies in India enjoyed for over nine decades. Currently, the company operates 11 active entities throughout the country, comprising production centres, sales and service offices, as well as R&D hubs. The company’s presence in India is linked to the livelihoods of 3,000 people across 20-plus locations.
Sustainability is a top priority
The Freudenberg Group is driving the energy transition with its products. Sustainability is a priority for the company, focusing on the efficient use of energy and material resources. Freudenberg aims to attain net-zero CO2 emissions by the year 2045, through energy conservation, electrification, purchasing and the generation of green electricity. Keeping in mind the rapid urbanisation of India, the company has initiated new programs to reduce its carbon emissions footprint. Freudenberg has been sourcing green electricity from photo voltaic and wind power systems for years, including from its facilities. It has recently installed around 20 photo voltaic systems worldwide, with approximately 60 more in various planning and execution stages.
Building on a rich legacy of 175 years in the industry since 1849, the Freudenberg Group wants to rely on the tried and tested. It has been developing innovative solutions, improving materials and making technological progress that convinced stakeholders that financial success and the well-being of society are interlinked goals. “As then, so it is now, curiosity has been the engine driving us forward. We have been truly curious since 1849,” commented Sivasailam G on chalking the future roadmap.
