Trumpf Results: Record Year, Cloudy Horizon

Trumpf Group, the behemoth international industrial-laser and machine-tool firm based near Stuttgart, Germany, reported that it had logged a 20.5% gain in sales, to €4.2 billion (US$4.19 billion), for the fiscal year ended June 2022. The company’s order intake during the year was up a blistering 41.2% year to year, to €5.6 billion, and earnings before interest and taxes (EBIT) advanced 26.8%, to €370 million. And the company managed to eke out a small gain in the EBIT margin, from 10.5% in fiscal 2021 to 11.1% in fiscal 2022, despite inflationary cost pressures.

The company’s CEO, Nicola Leibinger-Kammüller, said in its annual report that she was “cautiously optimistic” about the prospects for the current fiscal year, which will end in June 2023, around the time of the firm’s 100^th birthday. Yet she acknowledged substantial uncertainties related to ongoing supply-chain difficulties, materials- and energy-cost inflation, and geopolitical instability that could affect the growth picture going forward.

Dutch treat

One trend that stood out for Trumpf in fiscal 2022 was a shift in its revenue focus away from Asia, and toward Europe and North America. Interestingly, the Netherlands is now the country’s strongest single market by a significant margin, accounting for €838 million in sales during the year—a stunning 81.9% gain in Trumpf’s sales in the country. That shift has been attributable to strong demand in EUV business from ASML, the Dutch semiconductor lithography equipment giant, which itself encountered significant demand for its wares as chip companies scrambled to expand capacity in advanced semiconductors.

Revenues from North America came in second for the company, at €646 million, and Germany—once the company’s biggest geographical market—is now third, logging sales of €589 million in fiscal 2022. China has now become only Trumpf’s fourth-largest geographical market, as its fiscal 2022 growth, at 9.6%, significantly lagged the gains posted elsewhere.

Geopolitics, energy and coronavirus

In a press release accompanying the announcement of the fiscal 2022 numbers, Leibinger-Kammüller suggested that the company’s strong order intake in the second half will give it some resilience as fiscal 2023 moves forward. Nonetheless, the Trumpf CEO said “there remains considerable uncertainty for the coming months as to how the supply chain bottlenecks, high inflation, rising material and energy prices and transportation costs will impact our business.” And the “geopolitical uncertainties” tied to the ongoing war in Ukraine and US–China friction are “making me pensive,” she added. “We’re sensing growing restraint in demand in many markets.”

One obvious source of such contemplation would be increasing alarm about natural-gas shortages and energy availability in Europe generally, and Germany in particular, as winter approaches. Trumpf maintains that it is “not a gas-intensive company” and says that its fiscal 2022 results were “only marginally affected” by increases in gas prices. Still, the company is looking for “a noticeable increase” in the ratio of energy costs to sales during fiscal 2023, and has taken or is mulling a number of steps to cut gas demand, according to the firm.

Also during fiscal 2022, the company substantially boosted its number of workers, and employed 16,554 persons globally at the end of the fiscal year—a 12.1% rise from the previous year. The share of those employees in research and development climbed even faster, rising 14.3% year to year. That growth was coupled with a 17.3% increase in R&D expenditures, which reached €448 million in the year ended June 2022.

In an interesting sign of the times, Trumpf also reported coronavirus-infection numbers, noting the company reported 3,958 COVID infections globally in fiscal 2022 versus only 877 in fiscal 2021. “This is attributable,” according to Trumpf, “to the overall greater number of infections abroad as well as advanced test diagnostics and systematic recording.”

Intrepid penguins

In a curious analogy, in her opening message to Trumpf’s fiscal 2022 annual report, Leibinger-Kammüller compared her company to the chinstrap penguins of the South Sandwich Islands—a photo of which, from acclaimed nature photographer Sabastião Salgado, appeared on the report’s cover. “It is clear that, in staying ahead, a company has to show pioneering courage,” the Trumpf CEO wrote, “and, like Salgado’s penguins, be the first to ‘plunge into the deep end.’”

Trumpf’s performance during the year, Leibinger-Kammüller maintained, showed such fortitude. “Trumpf reacted with extreme rigor to the Russian invasion of Ukraine in February 2022 and suspended all business,” she said. “Despite the direct and indirect consequences this had on our business, alongside ongoing supply-chain bottlenecks and the coronavirus flare-ups in China, we managed to close the year successfully. This was an immense feat on the part of our entire workforce.”