B. Braun is currently enjoying high growth rates. However, how can these be secured in the long term? The answer: by expanding production capacities substantially. This has led to the most extensive investments ever made by the company.
Take Brazil, for example, or Peru, Vietnam, Spain, Germany or the USA. Be it implants or infusion pumps, equipment or solutions, whether country or product: listing the projects currently lined up by B. Braun would take quite a while. This is because a total of €1.4 billion will be invested in expanding the company’s internal capacities over the next few years – all over the world, in all divisions and in various product lines (see overview on the bottom of the page). “Fortunately, we have been – and still are – very successful in selling our products and are outpacing market growth”, says Chairman of the Managing Board Professor Dr. h.c. Ludwig Georg Braun. He adds that, although the company is enjoying the fruits of its intensive research and development efforts, it is also reaching the limitations of its production capacity: “Because of this, we must expand our capacities considerably so that we can continue to achieve the high growth rates that we have been enjoying recently.”
Strength through equity capital
This goal is ambitious – after all, total sales rose by almost ten percent over the past year. As well as the current favorable results, there are other factors that are important for this target. For instance, the company’s own share in its total capital. The higher this is, the lower the loan requirements for investments. At the same time, this increases the company’s creditworthiness, which in turn leads to better conditions from lenders. Professor Braun: “We have generated a lot of income and economized at the same time. And we are now enjoying the fruits of this, in the form of a healthy, ever-growing equity ratio that increases our scope considerably.”
In addition, the Braun family aims to boost its company’s ability to generate income, thereby minimizing its profit withdrawals. All of this has helped to put B. Braun in a favorable position for further extensive investments and expansion.
Needless to say, in addition to financial strength, the structure of the organization must be optimized in order to pave the way for future growth. At B. Braun, this is reflected by the Centers of Excellence (CoEs). Firstly, bundling all competencies for the individual product lines worldwide brought about economies of scale. On the other hand, by having CoEs and their manufacturing facilities all over the world, it is possible to minimize the effects of currency fluctuations that can have a very negative impact on financial results. Professor Braun: “By broadening our base in this way, we are safeguarding the stability of the company as a whole”. Accordingly, these structures are to be further expanded.
Manageable risk
Success on the market, high equity ratio, restructured organization – B. Braun has clearly done its “homework” and has established the conditions required to implement a successful investment program. How about the risks associated with the high financial investment? “Of course, it is always possible that a product does not sell as well as expected”, notes the Chairman of the Managing Board. However, the projects that are lined up are concerned exclusively with products that are already well-established on the market and which, owing to growing demand, the company wishes to further enhance and produce in greater volumes. “We have worked according to this principle with great success for decades, so the risk is manageable”, emphasizes Professor Braun.
To ensure a rapid and sustainable yield from the invested capital, the many construction projects are accompanied by changes in the production processes. For instance, automated procedures ensure faster and more efficient production. Professor Braun feels that there is no alternative to this: “Even though we are currently very successful and the market environment is positive, competition is tough and we cannot afford to rest on our laurels.” This is why one of the main priorities – especially for the management – is to ensure that productivity continues to improve.
Responsibility for employees
This new wave of investments is by no means restricted to machines and procedures, but also extends to employees. Particularly in view of the many changes in manufacturing, processing and data processes, today’s companies must be sure to recruit suitable new staff and ensure that their team engages in continuous training. A clear indication of B. Braun’s commitment to its workforce is the construction of the new training workshop in Melsungen.
In addition, the company organizes a wide variety of training courses for participants to practice altered production processes. Professor Braun: “Our responsibility for our employees is something that we take very seriously. This means that we also encourage them to take on new challenges, show them new perspectives and give them all the support we can. In return, however, we expect our employees to face up to the new requirements of their work and to develop their skills accordingly.”
Advantages through the European Union
The general outlook is good, with healthcare markets expected to grow both now and in the long term – worldwide. This is because, on the one hand, societies are growing older – particularly in developed countries – with people requiring more and more medical products. On the other hand, there is a great demand from emerging markets anxious to “catch up” with regard to healthcare. B. Braun would like to participate in both developments. Because of this, the booming markets of China and India – but also of Indonesia – are seen as being the markets of the future. The advantage of these highly populated countries is that it is only necessary to register the product with one authority in each market – and then there is a potentially huge market to be targeted.
Similarly, both the Americas and Europe continue to be key growth markets. Professor Braun: “Europe is our home market and the European Community has clearly helped us enormously, by strengthening our locations and helping us to tap new sales areas”. He adds that it is important to establish closer ties with Russia, Turkey and the Ukraine: “Through increased harmonization of standards and regulations in the healthcare markets, it is possible for all parties to benefit – patients, providers and healthcare systems.”
“No letting up”
As well as expanding capacities, the forthcoming investment projects aim to further increase quality and inventory availability. These questions are of growing importance to customers – and B. Braun aims to build on its leading role as a provider of high-quality products and reliable services. “To do so, we must keep on our toes and deliver top quality at all times, otherwise it can all go downhill very quickly”, warns Professor Braun, and proceeds to draw a parallel with endurance sports: “It is like long-distance running. You cannot let up. If a gap emerges, it takes more energy to close it again than it does to stay ahead of the pack.”
The investment program is instrumental in allowing B. Braun to continue to run at the head of the pack. The aim now is to make the most of the favorable conditions without taking action for its own sake: Professor Braun: “As a family company, we do our utmost to ensure continuity. Because of this, we will continue to concentrate above all on our own strengths and to deploy our energies strategically.” This is a principle upon which all current construction and expansion projects are based. Because they aim to further develop B. Braun in the areas in which the company can play a key role in the healthcare market of the future.
