Understanding SFS

The COVID-19 pandemic has convinced SFS that it is on the right track strategically. The cornerstones of its strategy were a major reason why the company was able to close the past financial year with a good set of results:

• Consistent implementation of our “local-for-local” strategy, making us a local engineering partner for customers around the world and enabling us to supply them with locally manufactured components.
• Balanced focus on applications across different end markets and geographies in order to reduce the impact of economic cycles and crises on business operations.
• Establishment of a leadership position by concentration on a selection of core technologies allows us to realize the full potential of the selected technology.
• A healthy balance sheet is the basis for continuous, forward-looking investments.

SFS remains committed to its strategic roadmap and will continue to steadfastly implement it.

SFS manufactures products for various automotive applications, ranging from seat belts and airbags to brake systems. Innovation and growth in these application fields is driven by trends towards greater comfort, safety and efficiency, and in an overall context by the autonomous vehicle trend. SFS profits from the resulting vehicle electrification through the additional growth opportunities; for example, actuators for electronic brake systems. Sales generated with products for internal combustion engines currently represent a low, single-digit percentage of overall SFS Group sales, so the phase-out of internal combustion engines in the long term will not have a significant impact on our business.

Cold forming is not only a highly productive manufacturing process for large production runs, it is also an environmentally sound process thanks to its extremely high material efficiency. In contrast to alternative machining methods (e.g. milling or turning machining processes), cold forming does not remove excess material to produce the final part; instead, it forms cold metal blanks into the specified shape in two to six progressive steps. The amount of material saved compared with conventional machining processes depends on the shape of the part, but it is significant in most cases.

Looking at the entire range of cold-formed products made by SFS, we estimate the material savings are equivalent to about 67% of material consumed using conventional manufacturing processes. Based on our annual consumption of raw materials and taking into consideration the emissions generated both to produce the steel and by conventional machining processes, we calculate that we save about 300,000 tons of CO² emissions a year through cold forming manufacturing processes.

Sustainability is important to us. You can read all about sustainability at SFS at sustainability.sfs.com. SFS has published a standalone Sustainability Report since last year. The report for the reporting period 2020 will be published at the end of May 2021. Reporting on sustainability reflects SFS’s long-term goal of a holistic integration of sustainable business practices into its corporate strategy and business model. As a signatory of the UN Global Compact, SFS is committed to the Sustainable Development Goals (SDGs) and currently prioritizes the following four goals: SDG 4 – quality education, SDG 8 – decent work and economic growth, SDG 12 – responsible consumption and production, and SDG 13 – climate action. This prioritization is reflected in the material topics identified in the materiality matrix 2019 (economic performance, occupational health and safety, training and education, reduction in greenhouse gas emissions, and socioeconomic compliance). SFS reports annually on the goals, measures and progress of the individual topics within the framework of the Communication on Progress report (UN Global Compact) and the GRI Report (Core option).

By making selective acquisitions, SFS gains access to new markets, customers and applications, and by extension lays the groundwork for future organic growth.

The Construction division offers its customers in Europe and North America a comprehensive range of building envelope fastening solutions through multiple channels. This market is geographically and technologically fragmented, and thus offers attractive acquisition opportunities that enable the division to steadily improve its market position and expand its technology and product portfolio.

Two acquisitions were closed in 2019. The takeover of Triangle Fastener Corporation (TFC) gave us direct access to about 6,000 active customers in the North America construction industry, and the acquisition of Moderne Befestigungselemente GmbH (mbe) expanded our range of fastening solutions for façade systems and our presence and customer base in the European construction market.

The D&L segment represents SFS Group's historical roots. Founded as the Stadler hardware store in Altstätten, Switzerland, in 1928, this trade business evolved over time and grew to include new products and application areas. Throughout all these years, the segment has kept its geographic focus on Switzerland and thus steadily expanded and strengthened its market position. D&L is now selectively expanding its logistics solutions business beyond Switzerland’s borders. Large international customers are increasingly deploying SFS’s logistics solutions, which offer convincing scalability and other features, at their production sites around the world. These customers benefit from the many advantages these logistics systems offer, such as lower levels of inventory, higher supply chain readiness and reduced process costs. They are also able to access SFS’s product range at their sites outside Switzerland, and thus this international expansion creates additional growth opportunities for the segment.

Switzerland is where it all began: SFS Group traces its roots back to a hardware store opened in Altstätten, Switzerland, in 1928 under the name Stadler. The establishment of a metal press shop in Heerbrugg in 1960 laid the foundation of the company’s manufacturing activities and subsequent international expansion. Our desire to be close to the customer was the driving force behind the internationalization and global presence of our company.

Switzerland is still very important to SFS Group. The country accounts for nearly 20% of its total sales and a quarter of its employees are based in Switzerland. In addition to the Distribution & Logistics segment, where activities are focused on Switzerland, and the corporate functions, the Automotive and Industrial divisions serve their European customers primarily from their sites in Switzerland. Our Swiss sites have remained competitive on the international stage, even with the sustained strength of the Swiss franc, through a focus on the development and production of expertise-intensive, technologically advanced products and on highly automated, capital-intensive manufacturing processes. The relatively good availability of skilled workers is an important locational advantage and another reason why Switzerland is our innovation and technology hub.

The global political stage has become more complex over the past year. Nationalism is gaining ground in many countries. The confrontational approach to international trade relations is becoming a risk factor. The potential consequences for the world economy are not predictable.

Despite these challenges, SFS is guardedly optimistic about the future. As a value engineering specialist that creates added value for the customer with precision components in selective niche applications that are often mission-critical, we have always maintained close ties with our customers. That has motivated us to innovate and internationalize our business and it explains our global production platform. Standardized production facilities make us very flexible and this flexibility can, in a worst-case scenario, quickly become a critical competitive advantage.

For example, we are rigorously analyzing scenarios in which supply chains for the electronics industry are transferred to locations outside China, and we have been discussing these possible contingencies with our customers. SFS’s established production sites in Malaysia and India could serve as potential alternative production platforms. Our strong footing in various niche applications puts us in a good position to cushion the impact of negative developments in any one market.

SFS's internal R&D departments examine technological developments in all relevant business areas. New developments and processes that fall within SFS’ strategic focus are added to the value chain or product portfolio.

SFS is pursuing the development of additive manufacturing processes and has already successfully applied it in the production of prototypes. Our focus, however, is on markets and applications that involve very large production quantities: SFS produces more than 30 billion precision components a year. With these high production volumes, cold forming – one of our core technologies – offers significant advantages owing to its very high productivity. Today's additive manufacturing processes are not a feasible alternative in the production of high volumes. However, as additive manufacturing technology matures, it could become a viable add-on to SFS’s manufacturing technology portfolio.

In terms of fastening solutions, SFS is focusing on specific mechanical applications that offer our customers added value. This added value can be in the form of a more efficient fastening process, greater reliability or improved ergonomics. In these applications, alternative fastening solutions, such as adhesive bonding, are not viable, or do not offer the same level of value added.

The new production platform in Nantong will create major strategic benefits for the Electronics division and eventually for other SFS divisions in different business areas. The wide range of production technology offered by the new site in Nantong has attracted considerable interest from existing and potential customers.

The Nantong plant is the most important production site for the Electronics division and replaces four separate production locations. In the automotive business, the plant satisfies customer needs for greater localization in component manufacturing, which SFS is addressing with its “local-for-local” strategy:

• The production site is equipped with modern infrastructure and has all the relevant surface treatment certifications for components.
• Thanks to the new platform in Nantong, the Electronics division was able to realize efficiency gains over the course of the year in the wake of the successful consolidation of multiple sites in China at this one location.
• In the automotive business, new projects from local customers were acquired. The first large-scale production runs are scheduled for the first half of 2021.
• In addition, the Nantong platform will enable the D&L segment and the Medical division to serve customers in China as a local supplier, giving them a key locational advantage.