Swiss franc shock strengthens companies in the St.Gallen Rhine Valley

The St.Gallen Rhine Valley surprises with its unexpectedly powerful economy. Numerous companies are world market leaders in their respective fields. Thanks to high-tech and high-quality products, the Rhine Valley is one of the leading technology locations worldwide. It is responsible for almost half of the export volume of the canton of St.Gallen. Over 90 percent of the goods produced in the Rhine Valley go to customers abroad.

The franc shock coupled with the strong export orientation presented the Rhine Valley economy with special challenges. How are the companies doing today? What challenges have they faced in the last two and a half years and which measures have been successful? Do they still believe in Switzerland as a place to work? The Rhine Valley companies SFS Group, Bauwerk Parkett, Coltène/Whaledent and Leica Geosystems recently provided information about this in a joint press release.

Comprehensive package of measures to counter the Swiss franc shock

SFS Group, headquartered in Heerbrugg, is one of the world's leading companies for mechanical fastening systems and precision molded parts. The company's main customers are customers in the automotive, construction, fittings, electrical and electronics industries. Precision components from SFS contribute, for example, to increasing passenger safety or improving fuel consumption and emission levels in cars.

SFS's Swiss production plants export around 90% of their products abroad. The prices are typically set in euros, but the costs are mainly incurred in Swiss francs. In addition, the main competitors have their cost base in euros. To restore competitiveness, SFS responded with a comprehensive package of measures built on four pillars, according to CEO Jens Breu: "SFS acted quickly, consistently leveraged its strengths, reduced its dependence on the Swiss franc and actively lived its partnership with its employees."

Thanks to the measures taken following the appreciation of the Swiss franc, productivity at the Swiss production sites increased by 15.9% compared with 2015 in terms of contribution margin per employee. The current figure even exceeds the 2014 result before the abandonment of the minimum euro exchange rate by 5.8%. The company is convinced that it will continue to be able to compete successfully on an international level from its base in Switzerland. In Switzerland, for example, the focus on the development and manufacture of innovative products is being driven forward. Increasingly, know-how-intensive as well as technologically sophisticated and capital-intensive products and processes are being used. In return, the manufacture of other products is being transferred to foreign locations. However, the level of employment in Switzerland can be maintained.

Merger as a challenge and means of success for Bauwerk Parquet

With sales of around CHF 280 million and around 1,900 employees, Bauwerk Parkett is one of Europe's leading parquet manufacturers. After five difficult years, the St.Margrethen-based company is also well on the way to returning to its familiar strength. CEO Klaus Brammertz expects 2017 to close with a good result. The biggest challenge, but at the same time the most successful measure during the Swiss franc shock was the merger with BOEN AS, which had already been initiated at that time. The franc shock forced an accelerated merger of the equally large but culturally very different companies. "From today's point of view, this was by far the most important measure to ensure that we are even stronger today than we were before 2015," says Brammertz. After all, the merger generated access to growth markets and low-cost production facilities in Eastern Europe. However, the Swiss plant location still offers the most reliable basis for the Group and is its most important sales market. "That is why we invested more than 2 MCHF in Switzerland in both 2016 and 2017 and will continue to do so," as Brammertz affirms. He identifies challenges mainly in the expected decline in construction activity in Switzerland, the rampant "stinginess is cool" mentality and the growing importance of some wood substitute products.

Coltène/Whaledent: Maintain high quality and innovation despite strength of the Swiss franc

Coltène/Whaledent, the leading international company in the development, manufacture and distribution of dental consumables and small appliances, also initiated immediate measures in January 2015 to counter the franc shock. In particular, an immediate response was required in the purchasing of raw materials. In addition, efficiency programs and optimizations were launched to get costs under control. "We deliberately refrained from wage cuts or overtime," as CEO Martin Schaufelberger reported. "After adjusting to an exchange rate of CHF 1.10, the current rate of CHF 1.15 is helping us."

Despite the challenges posed by the strong Swiss franc, it was important for Colténe/Whaledent to keep up in terms of quality and innovation, because this is the only way to maintain prices. The plant in Altstätten employs top people with good training and high motivation. But: The wage costs are also top class and increases are expected every year. Nevertheless, the management around Schaufelberger believes in Switzerland as a place to work. "It is the place where we can run our business best. We know our way around here, whether it's suppliers, engineering and consulting partners, the labor market and government requirements. I can't think of any place I'd rather solve problems like currency shock." Coltène/Whaledent is a Rhine Valley company in terms of shareholders, employees and many suppliers. For this reason and because of the various advantages of the location, more than CHF 11 million is being invested in a new building for production and offices in Altstäten. "We are thus cementing our location in the region."

High-performance innovation factory Leica Geosystems in Heerbrugg

Leica Geosystems AG, now part of Hexagon AB, continues to be successful, as CEO Jürgen Dold confirms. "We are sticking to our global growth strategy, which is based on three proven pillars. First, we are pursuing innovation in all of our product lines without interruption and are adding additional technologies to our portfolio through targeted acquisitions. Second, we are expanding our global market presence not only by investing in our distribution network in growth markets, but also through new digital sales channels and new services. Third, we are working to continuously improve our productivity across all our businesses and functions. The franc shock has not changed our strategy, but it has accelerated certain measures in the area of efficiency improvements."

In recent years, there have been a variety of macroeconomic and geopolitical challenges that had to be overcome. The high level of innovation and continuous efficiency improvements are certainly the main reasons why Leica is able to position itself well in a very demanding global market environment. In the short term, the challenges will remain similar. The company must continue to be agile on the road to overcome macroeconomic and geopolitical challenges. In the medium term, it will be exciting to see how quickly the digitization of cross-company business processes will progress. "New technologies will enable us to transform a wide variety of business processes." The CEO is convinced that Leica Geosystems, as part of Hexagon, is excellently positioned to exploit the opportunities of digitalization for its sustainable growth.

Leica Geosystems will soon celebrate its 100th anniversary in Heerbrugg. The company has been at home in the Rhine Valley since 1921. A high-performance innovation factory that successfully launches around 40 new products on the market every year. "In the recent past, we have introduced additional new agile development methods that enable us to bring highly innovative products to market even faster," says Dold. Heerbrugg is one of the largest sites in the Hexagon Group and is not only of central importance for Leica Geosystems, but also for Hexagon, which has expanded its corporate research here.

Further information: Association St.Gallen Rhine Valley, www.rheintal.com