Peter Schweighofer, Cieffe International AG
Peter your route to the heat-treating industry has not been as direct as many. Could you tell us how you ended up here?
“Absolutely, it is more the result of many accidental factors. I joined Accu Holding AG, the former owner and mother company of Cieffe, as M&A manager and Head of Finance back in April 2014 just before the intended acquisition and financial integration of the whole Cieffe Group started. My first project therefore was to perform a due diligence of the acquisition target including a strategic analysis of the end markets with the corresponding economic potential. This gave me a broad and enhanced understanding of the major industry drivers, the structure of the end markets, the players as well as the cyclicality of order partners from different customers. Unfortunately, Accu got into serious financial troubles and was forced to divest all relevant assets. Supported by the two remaining major shareholders, we decided to buy out Cieffe Group from the assets in liquidation and to launch a radical and far-reaching restructuring program. Consequently, I took over this challenging responsibility to lead this project as CEO of the new holding company Cieffe International AG in Zug (Switzerland).”
Please tell us what you can about Cieffe, the size of the company, markets served, the types of furnaces you offer, anything that you feel comfortable sharing.
“After downsizing the company in non-core segments and focusing on the core business we currently employ slightly over 100 people in Italy and a few selective sales agents in important strategic markets. Although our product portfolio offers a full range of products, from chamber furnaces to nitriding lines, we are currently unable to compete on a global basis in every segment. Therefore, we focus on our existing strong customer basis within Europe and to grow our platform through their global expansion. This approach requires a clear focus on innovations and technological developments to secure the competitive advantage for our customer and/or the OEM. The most recent example is the political development regarding electrical cars. This requires us to find efficient commercial solutions for processing smaller parts and/ or combining different materials at various temperatures.”
I don’t want to dwell on this but there were some issues in 2016 having to do with the ownership of the company. Could you address these issues?
“You are referring to the bankruptcy of the previous owner Accu Holding. Unfortunately, the former CEO Marco Marchetti and majority shareholder had been remanded in custody for misappropriate use of funds and falsification of documents on April 11th, 2016. The subsequent investigation revealed multiple and severely punishable criminal offences. This resulted not only into the liquidation of Accu but also triggered massive financial distress in all other companies involving M. Marchetti as owner or executive. To protect us from regressive actions we had to financially restructure Cieffe, to put the companies into liquidation and to restore trust towards our customers by transferring all operating activities into a new structure. Therefore, we incorporated Cieffe Thermal Systems S.R.L. as rescue company in October 2016. Since the 1st of April 2017 we are fully operational and independent.”
Are you comfortable that any past problems are just that, past problems?
“The problems of this company were not based on the technology issues, sluggish customer demand or missing human resources but rather a result of disastrous cash flow planning and misallocation of funds. As my professional background perfectly matches the existing problem areas, strengths of the core competences of the new Cieffe are substantially improved. Key is, to focus on the client, restore confidence and not loose track of the market development or innovation cycles.”
What are your impressions of the heat-treating industry so far? Same as other industries you have been involved with just different products or have you seen more fundamental differences?
“It depends from which part of the value chain of the heat treatment industry you are talking about. The automotive and aerospace OEMs have well understood that there will be some dramatic changes within the next 10-15 years and that heat treatment will play a key role in addressing future needs. This behaviour is well known and understood and mirrors a modern approach of mid- to long-term strategic planning.
On the other hand, the heat treatment industry as such is a very fragmented sector, which mainly consists of smaller sized family owned companies. A lot of them are struggling to finance new investments and push the life cycle of there installed asset base to its limit. Many of these lines are 20 years and older and do not fulfil today’s ecological criteria’s or efficiency requirements. Furthermore, they struggle to find a successor as their descendants have only limited interest in running such a business based on these premises.
The products we are selling belong to the capital goods sector and is it basic nature very similar across all industries. Obviously, we have some specific value drivers, which differentiate the heat treatment equipment from other products but still it remains a project business.”
Over the years I have seen many examples of Cieffe’s work including batch IQ furnaces, vacuum furnaces, continuous furnaces even vacuum carburizing units. Would you say that the company has a product it specializes in or do you feel you have the experience to offer most types of thermal processing equipment?
“Thanks to the trust of various customers we have build a significant knowledge in designing, producing and installing big heat treatment lines (chamber-, belt– , roller furnaces, etc.) globally in various fields of application. This not only gives us a competitive advantage but also allows us to rely on a broad database of different challenges and solutions, especially from projects realized in emerging markets. On the other hand, we have lost some ground in vacuum furnaces where we are currently not competitive in economical terms. It is yet to see within the next twelve months where we will set our key targets.”
Recognizing that you are based in Italy what geographic areas do you concentrate on?
“We will focus on our existing customer base within western and eastern Europe but with a global approach. This means that we would design a project for our French customer in Mexico or for our German client in China. Production will be concentrated in Italy as we have a well established and reliable supply chain within 150km. However, the dispersion of our current client basis will require us to increase local physical presence in the southern part of Germany within the coming year. Also attracting new talents and key hires will play a key role in this topic.”
Last year we did a ranking of the largest European furnace builders and Cieffe was very respectable at #6, however since that time the rankings have changed slightly due to acquisitions. The result is that some of the larger players are growing at a very substantial rate-does this pose a problem for your company, namely that your resources are more restricted than those of some of the really large players?
“I am glad we still rank somewhere! The focus of 2016 was to rescue Cieffe Group and the key challenge of 2017 was to re-store and re-launch Cieffe as a manufacturer for heat treatment plants and equipment. Analyzing the performance of our competitors requires to draw a clear line between organic and absolute growth, otherwise we are comparing apples and oranges. The growth of Aichelin for example, is due to an acquisition in the US and predominantly a strategic move to have a meaningful footprint in this market. This is fine for them but not something we would consider now. Size in terms of turnover is certainly not the only criteria which makes-up and defines a successful company. Nevertheless, we aim to grow our company sustainable up to manageable level within the next three to five years with the clear aspiration to become a dominant top three player within the European market.”
I just asked you about European furnace builders but what about Asian furnace builders? There are several very large ones but to date they have concentrated mainly on the Asian market. Are you seeing any signs that this is changing?
“Asia is a market on its own and we currently have no interest engaging Cieffe in such a price-war driven geographical area. However, as already stated, we are very keen to support our customers for heat treatment lines and equipment for their Asian subsidiaries. On the other hand, I doubt that European customers would shift their orders to an Asian manufacturer even if they would have a production facility in Europe. This does not mean that we are not following or ignoring strategic moves from Asian furnace builders.”
I am going to ask you to be brutally honest on this question. What do you see as the strong points and weak points of the Cieffe organization? I have a high opinion of the company but I have yet to see any company that was perfect on everything.
“We have lost some trust from our customers due to bad execution pre-dominantly causing delays in production start. Furthermore, during the reorganization process, we have partially lost confidence from our employees regarding the whole restructuring, which resulted in loss of human capital. Some competitors used this situation to distribute falsehoods to our customers and to spread rumors about bankruptcy, failing production, etc., irreverent in a very unprofessional way.
From my point of view the whole picture has changed since the 1st of April 2017 when Cieffe Thermal Systems took over the operational activities and full control. One of the key topics within the next years will be to transfer the know-how from the founders’ generation to the new generation.
The good thing about this is that we have a unique chance to restart this company on a clean basis. We have been very fortunate that two of our strategic customers committed to support us in relaunching Cieffe by placing some sizable orders of larger heat treatment lines. And I certainly do not forget to mention our suppliers, which reach out to us even in times of high uncertainty as well as all employees that remained with us and believed in the future of a restructured Cieffe.
We started to promote our new concept – Italian passion for technology and Swiss reliability in execution – and have received very positive feedback from our clients. New hires in Italy helped to increase motivation and restore trust with existing employees. Fortunately, current market conditions are still very favourable and this is further reflected in our very promising order book. However, it is very important to understand that we have prepared the new Cieffe not for 100-meter-sprints but for a marathon. Therefore, we tend to act thoughtful and not like a gunslinger.”
On a personal note what do you see for Peter Schweighofer down the road? Can you see yourself travelling the world promoting the company? More of an administrative role? Can you picture yourself getting old and grey in the industry?
“My motivation is to successfully relaunch this company and to execute on the expansion steps within the coming years. I am fully committed and currently spend a lot of time on-site in an executive operational position. This will not change in the near future.
However, to get this company to the next level we need to change the way we do business, with whom we partner our research and development activities and in which fields of activity we want to be successful in the mid- to long-term. This will be a key strategic task and will automatically shift my centre of gravity towards a broader oriented business development role within the next twelve months.
Nevertheless, I will always act as first ambassador for Cieffe to our customers, not only to reflect my passion for this company but also to pay respect to all our employees, which have been tremendously supportive also during very unpleasant times.”