FLSmidth & Co. A/S
FLSmidth & Co. A/S
Sales: DKK 14.91 billion ($2.62 billion) (2004)
Stock Exchanges: Copenhagen
Ticker Symbol: FLS
NAIC: 237990 Other Heavy and Civil Engineering Construction; 327310 Cement Manufacturing; 327331 Concrete Block and Brick Manufacturing; 331111 Iron and Steel Mills; 333131 Mining Machinery and Equipment Manufacturing; 333298 All Other Industrial Machinery Manufacturing; 333922 Conveyor and Conveying Equipment Manufacturing; 333923 Overhead Traveling Crane, Hoist and Monorail System Manufacturing; 336412 Aircraft Engine and Engine Parts Manufacturing; 336413 Other Aircraft Part and Auxiliary Equipment Manufacturing; 551112 Offices of Other Holding Companies
FLSmidth & Co. A/S (FLS) is a world-leading manufacturer of industrial and civil engineering production equipment and machinery: The company's historical core has been in the cement making industry, and FLS produces a wide range of machinery and equipment, including cement grinding machines, gears, and silos; crushers and raw materials storage systems; fans, conveyors, gates, valves, and dampers; and kilns and firing equipment for cement and concrete production. Since 2002, FLS has been implementing a new strategy, which on the one hand focuses on a core of machinery and systems production and on the other hand narrows the group's target industries to just the cement and minerals industries. As part of the implementation of that strategy, the group sold off its Unicon cement production unit and its Aalborg Portland cement operation in 2004. In that year, also, the company announced its intention to exit production of machinery and systems for power generation and industrial processes. FLS Group remains a geographically diversified group operating through a number of subsidiaries, including FLSmidth Airtech, FLSmidth Materials Handling, FLSmidth Automation, FLS Airloq, and Densit in Denmark. Internationally, the group's companies include Kovako Materials Handling in The Netherlands, MAAG Gear in Switzerland, MVT Materials Handling and Pfister in Germany, and Ventomatic in Italy. Denmark accounts for slightly more than 14 percent of group sales; the rest of Europe adds more than 43 percent of sales. North America adds 20 percent of the group's revenues, and Africa and Asia combine to generate nearly 17 percent of sales. FLS Group is listed on the Copenhagen Stock Exchange. The group has been led by chief executive Jørgen Huno Rasmussen since 2004.
Danish Cement Pioneer in the 19th Century
Frederick L. Smidth launched his engineering career in a single room in a building owned by his family. Smidth's earliest interests went toward developing steam-powered milling machinery and equipment. Before long, however, Smidth began to focus on building machinery for the brick and tile industry, and in 1884 completed his first large-scale contract for the construction of a tile works. Smidth's innovation was to build a works capable of operating year-round, a rarity in the industry.
Smidth began hiring new employees, including Poul Larsen and Alexander Foss, who became partners in the company in 1887. At that time, the company was renamed FLSmidth & Co. By then the company's work for the tile industry had given it contacts with the growing cement industry. This led to Smidth being given a contract to build a complete cement plant in Limhamm, Sweden, finished in 1887. Cement plants and machinery quickly became a core area of operations for the firm. The successful completion of that contract quickly led to others, including the construction of the cement works in Christiania (later known as Oslo), in Norway. That plant was completed in 1888.
The company next joined in constructing the works for the Aalborg Portland Cement Plant. That project helped the company build on its expertise in the cement manufacturing process. This in turn led the company to invent a new type of cement, sand cement. Sand cement, which mixed sand into the typical cement mixture, was more economical to use than traditional cement. Its success allowed FLSmidth to become a major figure in the global cement industry, as well as an important cement producer in its own right.
FLSmidth opened its first foreign office in London in 1890. By the turn of the 20th century, the company had opened additional offices in New York, Berlin, Paris, and elsewhere. Another factor in the company's continued success was its 1893 acquisition of the rights to the newly invented tube mill, which made possible a number of difficult grinding processes, notably in sand cement production. The company's redesign of the tube mill increased its efficiency and quickly found a worldwide market.
By the end of the 19th century, FLSmidth had added yet another machinery specialty, becoming the first in Europe to develop a coal-fired rotary kiln in 1898. The company built its first two 18-meter rotary kilns that year, and went on to sell more than 2,000 rotary kilns over the next century.
Technological Advances in the Early 20th Century
Smidth's technical expertise placed it at the forefront of the rapidly developing cement and concrete industries, not only in the Scandinavian region, but worldwide as well. The early 20th century saw the adoption on a massive scale of cement- and concrete-based building techniques. The need for new and more efficient cement production machinery and factories meant a steady stream of orders for Smidth. By the outbreak of World War I, the company sales had taken it to North and South America, across western and central Europe into Russia, as well as into the United Kingdom. The company opened a number of new sales offices during this period to support its growing geographic reach.
The company's sales branches proved vital to its survival during World War I. With its primary European markets all but shut down during the war, the company relied on its foreign offices, and especially its New York and London branches, to win continuing business. Meanwhile, the company's Copenhagen headquarters turned its engineering expertise toward developing machinery for other industries, marking FLS's first diversification.
The company also continued to develop its technologies, and during the interwar period Smidth remained one of the cement industry's top innovators. Over the next two decades, the company rolled out important industry innovations such as the Tirax mill, Symetro gears, and the Unax cooler. These played an important role in improving the efficiency of the cement-making process. During the 1920s and 1930s, also, FLSmidth developed into a major producer of ready-mix concrete and fiber-cement.
Just prior to the outbreak of World War II, Smidth's management took the precautionary measure of transferring parts of its operations, including many of its technical plans and other documents, to its office in New York: A number of staff members moved to the United States as well. The move proved prescient, as the Nazi occupation of Denmark soon put an end to the group's normal business. The Copenhagen operations remained in business on a reduced scale.
Business boomed for the company again during the postwar era. The reconstruction of Europe, coupled with an extended period of economic prosperity throughout much of the West during the 1950s and 1960s, created a new surge in demand for FLS's machinery and plant engineering skills. By the late 1950s, Smidth was able to claim that its machinery was responsible for some 40 percent of the global cement production of the period.
Yet FLS leadership position came under threat in the 1960s, as a number of new competitors stole its thunder. By the 1970s, the company found itself struggling to keep up, both technologically and commercially. Nonetheless, FLS continued to play a role in the developing industry. In the 1970s, for example, the company developed a new technology it labeled Densified Systems, or DSP, which formed the basis of a new type of extremely durable, synthetic cement. In 1978, the company launched the new material commercially as Densit, marking the company's extension into specialty mortars. In 1983, the Densit operation was restructured as a separate subsidiary.
FLS also had branched out into a number of new businesses areas. One of these was materials handling, especially such difficult-to-load products as cement and related materials. During the 1980s, FLS increased its operations in this area, adding subsidiaries such as Kovako of The Netherlands, MVT Materials Handling of Germany, and H.W. Carlsen of Germany. FLS's expansion and diversification also brought it into a number of other business areas, such as the production of machinery for power generation and industrial processes.
By the end of the 1980s, FLS had grown into a full-fledged conglomerate, overseeing a global empire of more than 125 companies. To gain more efficient control over its operations, the company restructured in 1989, creating a new parent company, FLS Industries, to oversee its diversified operations.
Refocusing in the New Century
In 1990 FLS made a significant acquisition when it purchased the United States' Fuller Company. That business traced its origins to two companies founded in the early part of the century. Traylor Engineering and Manufacturing Company had been founded in 1902 to provide engineering services for the mining industry. The second company, Fuller Company, was founded in Pennsylvania in 1926 by James W. Fuller, and began producing cement production equipment as well as turnkey cement plants. In 1959, Fuller acquired Traylor, and the combined company emerged as one of the United States' largest cement-related groups.
It is the vision of FLSmidth to continuously strengthen the position as the preferred partner and leading supplier of equipment and services to the global cement and minerals industries.
Following the acquisition of Fuller, FLS restructured its operations, placing its own and Fuller's mineral processing business into two separate divisions, Fuller Mineral Processing Inc. in the United States and FLS Minerals A/S in Europe. The remainder of the company's business was placed into FLSmidth-Fuller Engineering, or FFE. After incorporating Fuller Mineral Processing and FLS Minerals as independent subsidiaries in 1995, the company merged them into a single entity, placed under the oversight of FFE. In the meantime, FLS expanded its North American presence again in 1994, when Fuller acquired Canada's Technequip, a leading maker of hydrocyclones and knife gate valves.
FLS's expansion also included the acquisition of Switzerland's MAAG Gear Wheel. The manufacturer of mill gear units for cement product plants, as well as high-speed gears and high-power main gears, was originally founded in Zurich in 1913. Soon after its acquisition by FLS, MAAG moved into Poland, buying up ABB's Polish gear operations in 2000.
In 1998, FLS made another significant acquisition, that of Germany's Pfister Group. That company was founded in Augsburg by blacksmith Ludwig Pfister to produce mechanical weighbridges. The company remained in the Pfister family through much of the century, when it was acquired by Klockner-Humboldt-Deutz in 1970. In that year, also, the company launched its first fully electronic scale. Pfister was later acquired by The Netherlands' Koninglijke Machinefabriek in 1989, before majority control passed to Maximilian Scheugenpflug in 1991.
The purchases of Pfister, MAAG, and Fuller encouraged FLS to launch a new strategy in the early 2000s. In 2002 the company decided to refocus its operations in a two-step process. On the one hand, the company decided to refocus its business around its machinery and plant systems manufacturing operations. On the other, the company decided to restrict its target industries to the cement and mining industries. As such the company began selling off its newly noncore businesses. This process reached its culmination with the sale of the company's cement production operations in 2004. In this way, the company more or less came full circle, returning to its engineering roots in order to turn fully into the new century.
Bhagwati Designs (India); Densit; FLSmidth Airtech; FLSmidth Materials Handling; FLS Airloq; FLSmidth Automation; FLSmidth Pneumatic Transport; Kovako Materials Handling B.V. (Netherlands); H.W. Carlsen; LV Technology; MAAG Gear Wheel (Switzerland); MVT Materials Handling GmbH (Germany); Pfister (Germany); Ventomatic (Italy).
Principal Operating Units
Eurovia S.A.; Balfour Beatty plc; Ferrovial Agroman S.A.; NCC AB; Bilfinger Berger AG; Groupe Fabricom S.A.; Bauholding Strabag AG; Technip-Coflexip; Power Group of Cos.; George Wimpey plc.
- Frederick L. Smidth founds an engineering firm in Denmark.
- Poul Larsen and Alexander Foss become partners; the company is renamed as FLSmidth & Co.; the company's first cement plant is constructed in Limhamm, Sweden.
- The company enters cement production with the creation of Aalborg Portland Cement Plant.
- The company opens its first foreign office in London.
- The company launches production of ready-mixer concrete and fiber cement.
- Smidth machinery accounts for 40 percent of global cement production.
- Densit synthetic specialty cement is launched.
- Operations are restructured under FLS Industries.
- The company acquires the Fuller Company of the United States.
- The company acquires MAAG Gear of Switzerland.
- The company acquires Pfister of Germany.
- The company announces a new strategy of refocusing operations around a core of machinery and plant systems for the cement and mining industries.
- The company sells off cement production units in Europe and the United States.
- FLS Industries is renamed FLSmidth & Co. A/S.
"FLS Industries A/S Completes Sale of Aalborg Portland and Unicon to Cementir," Nordic Business Report, October 29, 2004.
"FLS Industries A/S Divests German Subsidiary Motan Materials Handling GmbH," Nordic Business Report, May 4, 2004.
"FLS Industries' Unicon Divests US Operations," Nordic Business Report, October 11, 2002.
"F.L. Smidth A/S Merges Subsidiary into Parent Company," Nordic Business Report, March 4, 2004.
Penman, Andrew, Michael Greenwood, and Guy Dennis, "Future Looks Shaky for FLS," Mirror, September 18, 2003, p. 40.
—M. L. Cohen