Kverneland Group, one of Europe’s largest farm machinery manufacturers, has begun a major program of factory improvements and upgrades having secured approval for a major investment plan from new owner Kubota Corp. of Japan.
“We had the biggest challenge wanting to make these investments when the funds were not available, says Løyning. “But Kubota has the financial strength and a long-term strategy for growth, which has given us the opportunity to invest.”Speaking to Ag Equipment Intelligence Europe correspondent at a launch event in Germany, Kverneland Group CEO Ingvald Løyning said funds totalling more than $135 million could be spent at the group’s major competence centers over the next 3 years to improve production efficiency and increase capacity for manufacturing hay tools, tillage and crop care products.
The expenditure on factory upgrades, which comes on top of a significant R&D budget that will accelerate new product development, is part of a plan to double Kverneland Group’s sales revenues over the next 5 years to the equivalent of $1.3 billion.
Another important component of the strategy is to start selling Kverneland products through Kubota Tractor Corp. in the U.S. Details are to be announced this fall.
“We have a good selection of small implements from mowers to fertilizer spreaders that are suited to the type of tractors made by Kubota and the utility and ‘sun downer’ markets where they are popular,” says Løyning. “Because of Kubota’s position in these sectors, with more than 1,000 dealers in the United States, I wouldn’t be surprised if this business doesn’t come to represent 10% of our turnover.”
For now, 80-85% of revenues are generated in the 27 countries of the European Union. Kverneland closed its U.S. sales and distribution business 3 years ago and turned to independent distributors in selected areas for Kverneland tillage and Vicon hay tool products: Cummings & Bricker in Batavia, N.Y., and Carlisle, Pa.; ACI Distributors, St Charles, Mo.; and Ellis Equipment, Logan, Utah for Vicon equipment.
In addition to these outlets, Kverneland supplies New Holland Agriculture in the U.S., Canada and Mexico with selected hay tools — mostly large triple mowers and grass rakes. The agreement was secured shortly before Kubota made its 2012 acquisition bid.
Løyning emphasizes that the products supplied to New Holland are significantly bigger and more sophisticated than the limited range of smaller products to be supplied through Kubota Tractor Corp.
Kverneland Group is no stranger to OEM business, in Europe, as a wide range of hay tools are supplied to Same Deutz-Fahr for selected markets and it handles sales and distribution of Massey Ferguson and Fendtbranded round balers to AGCO dealers in a handful of countries.
Contract manufacturing and assembly is another strand. Kverneland produces two models of air seeder for John Deere at the Soest seed drill plant in Germany, where a new paint facility has been opened to improve finish quality and clear a production bottleneck. There is also a bigger R&D center there.
These major projects were signed off before the Kubota acquisition (AEI, March 2012), but money is now available to provide more modern buildings and facilities for component manufacture and assembly at Soest; in total around $27 million will have been spent at the plant. In Norway, where Kverneland Group is headquartered, the Klepp factory will get more than $40 million to increase capacity from between 4,500 and 5,000 mouldboard plows to 7,000 annually.
The hay mowers factory in Denmark and baler plant in Italy are also destined to get large sums for improvements as Kverneland and Kubota managers prepare the way for future growth.
“Unlike our previous investor who was looking for short-term returns, Kubota sees Kverneland Group’s potential for growth and profitability in the long-term,” says Løyning. “We will be looking to exploit Kubota’s tremendously strong position in Asia but also working to increase our business in Russia and other Central European states, as well as aiming to improve our share of established markets.
“The management approach at Kubota is very analytical and we’ve had to be very clear and detailed in making our business case for investment,” he adds. “Now we have approval from the board, the Kubota management is committed to driving forward with a program that will see Kverneland Group growing to a new scale.”