IA Insider: Automation and Control

Automation Company Yokogawa Back On The Growth Track

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Industrial Automation and Control (IAC) represented 85% of the order intake, and 65% of this business was obtained outside Japan. Yokogawa has had to face a significant annual decline in the value of their home market sales, ever since FY2004, which has made their overall sales growth record all the more remarkable. The budget for FY2011 (to March 2012) suggests a total annual sales value of 336Bn Yen (US $ 4.4Bn), and operating income of 15Bn Yen, i.e 4.5% of sales.

Ambitious Target: Becoming the Number 1 in Automation

A plan for the IAC business to become “Number 1” in the world from this start point is fairly ambitious, particularly when taking the annual reports from just two competitors - Rockwell reported $6Bn sales, and Emerson Process Management $7Bn sales, for their years ending 30th September 2011. Consulting the 2010 charts derived from the ControlGlobal rankings, even for the “Rest of the world” market - i.e excluding sales made in the USA - Yokogawa was ranked at 6th place So how will Yokogawa achieve that Number 1 slot?

The Masterplan: Concentration On Automation and Control

The plan for the mid-term period to the end of fiscal year 2015/16 envisages annual sales by then of 400Bn Yen (US $ 5Bn), a growth of [only] 20% from the budget level for 2011/12 [which is a growth rate of 4.7% pa for these four years] – plus an operating income improvement to 10% of sales. So these financial figures look easily achievable, and this is not too arduous a forecast, when compared to the published ABB plan for the next five years, which anticipates process automation growth of 6-9% per annum.

Recently reported results show that over the last year Rockwell increased sales by 24%, and Emerson Process Management increased 16% (the latter admittedly from 2010 sales that were marginally down on 2009), and Invensys Operations Management reported 21% growth in the period April to September 2011 (note that IOM is less than half the size of Yokogawa in terms of sales). So Yokogawa will have to accelerate a little more to catch up with their competitors – and it looks like it will be an extended, multiyear journey to achieve that Number 1 slot, unless they can add a few notable acquisitions. Significantly, Kaihori does say that Evolution 2015 is the first step in this plan, and he has not announced a target date for reaching the final objective.