„WE HAVE PREPARED OUR ORGANISATION EVEN BETTER FOR FUTURE CHALLENGES“

Interview with the board of directors

An interview with the members of the Board of Directors of the POLYTEC GROUP about market changes, corporate strategies and future prospects.
From left to right: Markus Mühlböck (CFO), Martin Resch (COO), Peter Bernscher (CCO/Deputy Chairman of the Board), Markus Huemer (CEO).

Mr Huemer, 2024 was heavily affected by the stagnation of the European economy and, consequently, the automotive industry. How did that impact the performance of the POLYTEC GROUP?

Markus Huemer: Let me start with the most important part: despite all negative influences, we managed to reverse the trend and returned to a positive operating performance after a significant loss in the previous year. Although that cannot be satisfactory in the long term, it is a clearly positive signal in view of the difficult environment.

The automotive industry is struggling, especially in Europe. We see sustainable declines in the automotive sector and – as always in unstable times – also for commercial vehicles. Volatility is high, while medium-term predictability is still low, though better than in the past years. The number of vehicles produced in Europe now stands at roughly 15 to 16 million per year – compared with 20.6 million in 2017, the peak value to date. The forecast for 2025 is at a similar level and therefore nearly 30 percent lower than in 2017.

We closed six plants in the last several years, while most other companies in the plastics sector did not take any such steps. Overcapacity and, consequently, price pressure are therefore high. We have laid an important foundation with our streamlining, although the concentration on the remaining plants involved additional challenges.

On a positive note, our non-automotive business is doing very well and compensated for the declines in the automotive sector last year. On this basis, we recorded solid revenue growth.

At the same time, we had been struggling with operational difficulties at two of our plants – Lohne and Weierbach – since 2023 due to a disproportionately high number of production launches and a change in the portfolio structure. This led to significant burdens. However, thanks to comprehensive, rapidly initiated measures, the situation stabilised significantly in the third and fourth quarters of 2024. On balance, our EBIT is therefore positive, but certainly nothing to be happy about. Our EBITDA, by the way, improved over 2023 in every single quarter.

In addition to the measures taken at the plants in Lohne and Weierbach, we also generally worked on our structures in order to strengthen our power and profitability. This also includes an ongoing evaluation of our products and our footprint.

Irrespective of the difficult framework conditions, we also managed to improve our balance sheet structure in addition to increasing the operating result as mentioned before. Our solid balance sheet indicators provide a good basis for the sustainable trust of investors, banks and employees, which had certainly been put to the test over the last few years.

Which concrete measures did you take to counter these difficult conditions?

Markus Huemer: We are moving away from the strong centralisation of the past years towards a measured re-decentralisation. Another focus is on optimising material costs and adapting our cost structure to the industry’s production level in Europe, which will remain lower in the long term. Moreover, we are working on controlling the complexity of our extensive product and technology portfolio even better. Increasing efficiency through targeted automation is also important – not only regarding direct value creation, but also regarding indirect manufacturing areas and in administration.

We are also paying special attention to the Painted Exterior Product Line, where the previously mentioned excess capacities in the market have had a particularly strong impact. This is why we are currently analysing in detail which products we can manufacture, which resources to use and at what cost.

Is the POLYTEC GROUP affected by the latest savings programmes of the European auto manufacturers?

Peter Bernscher:The entire industry is called upon to save because we will no longer achieve the high production volumes of the past. In addition, there are inflation-related cost increases. It is obvious that this causes cost problems.

Volkswagen is a prominent example in this context. However, their situation is less dramatic than presented in the media: the VW Group as a whole even recorded an increase in revenue of almost 1 percent in 2024 and remains the European market leader with roughly 9 million vehicles sold globally, 4.8 million of them under the VW core brand. However, sales of purely electrically powered vehicles declined by approximately 3 percent compared with 2023.

As far as VW’s savings plans are concerned: none of the main locations will be closed, but there will definitely be production cuts – by how much VW will reduce its production capacity is currently unknown. Pressure on the supply industry to increase competitiveness has already been high in this area – and it would be counterproductive to step it up even further. In 2024, we were once again able to negotiate adjustments in pricing, which became necessary in view of the drastically changed framework conditions. The atmosphere remains constructive. In addition, the success of the POLYTEC SOLUTION FORCE has improved our standing over the years; today, customers have even greater confidence in us to deliver better and even more comprehensive solutions.

What does the current revival of combustion engine mean for you?

Peter Bernscher: In the short and medium term, we are benefitting from the revival of combustion engines, which is likely to be limited in time, due to higher quantities and longer running times. As a result, revenue from combustion engines (including hybrid vehicles) will remain a key factor in POLYTEC’s Powertrain Solutions segment. We had originally expected the share of this product group to decline more rapidly, but now the trend has slowed down. This will be confirmed by the expected delay of CO2 reduction targets by the EU. In January 2025, vehicles with electric powertrain components accounted for around 60 percent of passenger car registrations in Europe; however, 42 percent of them were hybrid cars, meaning that they also have combustion engines. In other words, more than 80 percent of all new vehicles were still equipped with conventional powertrain technology.

In recent years, your development activities have been heavily focused on electromobility. Did your investments overshoot the market in this context?

Peter Bernscher: The development and awarding of projects have only been postponed. Thanks to innovative solutions, POLYTEC is well positioned – for example with the battery module, in thermal management or with underbody solutions. We have built considerable expertise in this area and can offer a highly attractive modular package, but are not yet in full industrial production. In any case, we should be able to score good points in this area in the medium term because we possess the technology and the suitable products.

At the moment, the slowdown in e-mobility even tends to benefit us, as we only have to invest selectively in new production lines. That is not a disadvantage in the current situation. When the trend turns again, we will have the appropriate product solutions ready – so it is a win-win situation.

In terms of innovation, what else do you focus on? For example, does hydrogen play a role, especially for trucks and commercial vehicles?

Peter Bernscher: So far, hydrogen has not made it to mass production at any OEM, neither for trucks nor for passenger cars, which are our main focus. At this point, hydrogen production is still too expensive and on top of that, the availability of green hydrogen is only limited. Against this backdrop, it is expected that diesel will still account for around 70 percent of trucks sold worldwide in 2030. Hydrogen is currently primarily suitable for applications where batteries do not provide a viable alternative, for example in maritime shipping. But of course, we are watching the development in this sector very closely.

Apart from that, we are concentrating on developments applicable to high-volume production. One important focus is on reusable packaging solutions in the Smart Plastics segment, for example. In addition to typical applications for fresh products, i.e. fruit, vegetables or meat, there are also many new areas: shelf-ready packaging for other consumer goods or plant trays. All of these are reusable and fully recyclable, because returnable packaging is an issue that concerns the entire supply logistics industry. We consider this a very promising market and are currently implementing a number of pilot applications, one of them in China.

Speaking of China: It looks like an increasing number of Chinese OEMs will gain a foothold in Europe in the coming years. Which opportunities do you see there?

Peter Bernscher: POLYTEC will engage with every market participant producing in Europe. We are monitoring the situation very closely and are reviewing the conditions under which production for Chinese manufacturers would be possible. However, with the exception of one plant each in Hungary and Turkey, we are primarily talking about plans at this stage, but not about specific projects yet. The decisive question will be whether Chinese manufacturers will rely on European suppliers or continue to work with their existing suppliers from China. Partnerships and networks are another possibility – here, we are also reviewing potential options.

So, the growing non-automotive business is responsible for the fact that you were able to increase your revenue in 2024 compared to 2023 despite the stagnation in the automotive segment?

Peter Bernscher: Yes, because our non-automotive business was exceptionally successful in 2024. We currently generate just under 15 percent of product revenue in this area, compared with 9 percent in 2023. This is equivalent to a 60 percent increase in the Smart Plastics business. And the trend continues to rise in the medium term.

But that was not the only reason why our revenue grew. Thanks to the previously mentioned constructive negotiations with our automotive customers, we managed to agree on price increases which largely covered our inflation-related cost increases.

So, the non-automotive share in revenue is set to rise further?

Peter Bernscher: We consider a share of 20 percent in product revenue realistic in the coming years and aim for 30 percent in the long term. In order to drive the development in the non-automotive segment, we established the new Performance Center Smart Plastic Applications in 2024, which puts an even stronger focus on this area. Along with the packaging solutions mentioned before, energy – which comprises both charging infrastructure and energy storage – is also an area that is interesting for us. Thanks to our profile on the market, we are also well positioned among potential customers.

Nevertheless, automotive activities will remain our core business. In our Truck, Bus and Agricultural Applications Product Line, for example, we are setting a focus by increasing our presence in the tractor segment. Thanks to intensive marketing, we now supply all major European manufacturers. In contrast, new forms of mobility such as people movers or air taxis are not taking off as fast as expected because the products simply have not reached appropriate market maturity. However, we are monitoring the developments very closely and thanks to our technological and manufacturing expertise, we can also offer attractive solutions in this market segment any time.

Do you expect any further consolidation in the automotive supply industry? And is growth through M&A still an option for POLYTEC?

Markus Huemer: In principle, we have been convinced for years that the industry could benefit from consolidation. However, this consolidation is only taking place to a limited extent. In view of the stagnating market development in Europe, investments in significant organic growth need to be viewed very critically, whereas active consolidation would represent an attractive growth scenario. Without a doubt, however, we first have to improve our own earnings situation in order to create space for this option. The earnings turnaround is an important step in this direction, but ultimately it also depends on the right opportunities.

Mr Huemer, you handed over your operating responsibilities to Martin Resch as of 1 January of this year …

Markus Huemer: Yes, I had taken over these responsibilities in mid-2023, but it was not intended to be a permanent role. A manufacturing company needs a dedicated COO, especially when the market environment is as tense as right now. In early 2024, Martin Resch joined us as Managing Director Operations North. His responsibilities included, among other things, the plant in Lohne, which was faced with substantial operational difficulties as previously mentioned. Martin Resch was instrumental in fixing these problems and, with his expertise, personality and experience, also made a very positive contribution in other areas of the company. In this way, he very quickly qualified as future COO. He brings valuable experience in terms of operations and lean management from Magna Powertrain, where he was responsible for production facilities with more than 3,000 employees in his function as General Manager and Managing Director. All of this also convinced our Supervisory Board to appoint him COO. I myself can now fully concentrate on my core responsibilities as CEO again.

Mr Resch, what specifically did the problems at the Lohne plant consist of?

Martin Resch: We had a number of production launches and, in addition to that, several tool transfers from closed plants. Moreover, there was a lack of automation in crucial processes or ordered machines were delivered too late. That simply overstrained the organisation, and we permanently had to work in task-force mode. This resulted in high scrap rates, low productivity, supply bottlenecks and inefficiencies in personnel planning.

Productivity and scrap have now returned to the benchmark levels. Material costs were reduced by more than 10 percent, and smart automation solutions were implemented for high-volume products. At the same time, we thoroughly examined our inventories and achieved a remarkable year-on-year reduction by more than 30 percent.

What did you learn from these experiences?

Markus Huemer: One fundamental finding was that we have to take a step back in the centralisation of the past years, as mentioned at the beginning. The concentration of important competences and functions initially had a very positive effect, above all in the form of the POLYTEC SOLUTION FORCE, which brought us considerable successes in market development. In times of uncertainty about future mobility concepts and the necessary products and expertise, it allowed us to utilise the USP of our technological breadth to realise innovative products for new requirements. However, during the enormously important phase between acquisition and production launch, the strong centralisation caused considerable disadvantages. Above all, communication between the central units and production in our plants fell by the wayside to a certain extent. The problems in Lohne and Weierbach showed that we were not able to control the high level of complexity of our very broad technology and product portfolio in a satisfactory way. Therefore, we implemented organisational changes and are convinced that we have now found a good balance between centralised and decentralised responsibility. In this way, we prepared our organisation even better for future challenges.

Martin Resch: We also learned that during challenging launches, both the project team and the launch team have to focus on series production optimisation at a very early stage of the project, i.e., during product development. Not least because of that, the responsibility for program management (formerly project management) was transferred to Operations. As a result, competences and responsibility – from the acquisition of a project to the end of production and spare part management – are now bundled. In parallel, we have to continue to invest in automation in production in measured doses and in artificial intelligence, where useful. Moreover, we aim to roll out the successful reduction of inventories in Lohne to all plants – with the corresponding positive effects on our working capital. At the same time, we are working on evaluating our product portfolio. The aim is to find the best suited product portfolio for each plant, thus defining our ideal production footprint. The market has now accepted that the production level will only come to 15 to 16 million units per year in the longer term – that will have to be reflected by the production landscape.

In the report on the third quarter of 2024, you addressed the Painted Exterior business segment. What does the situation in this segment look like?

Markus Huemer: This is precisely the topic of portfolio evaluation. Painted Exterior operates in the niche and small series segment – we are talking about a few thousand up to 20,000 vehicles per year. The upper end of this niche in particular, that is to say quantities ranging from 10,000 to 20,000, is really interesting for us. But lately, large series manufacturers have been pushing exactly into this segment because they want to use their excess capacity created by investments in the last few years. This is putting both prices and volumes under extreme pressure. In addition, both capital employed and overhead costs are above average in this business segment. All of this has recently led to losses for us. Against this backdrop, we have to ask ourselves for which customers an offer still makes sense – and for which products and at which price.

You reduced the planned expansion plans at your British sites in 2024. Why?

Peter Bernscher: We see considerable volume losses also in Great Britain due to postponed projects for premium vehicles – while the market outlook is uncertain. That is why we adapted, and reduced the investment risk. Faced with the question “make or buy”, we chose to purchase injection-moulded parts rather than producing them locally ourselves. However, these parts are then painted and assembled at our plant. As a result, we were able to significantly reduce investments. Nevertheless, we will adhere to two additional sequencing centre locations; a third one will follow once commissioned by the customer. Overall, this was a necessary, and at the same time smart, adaptation to changed circumstances.

In 2022, you set ambitious goals for your company with the “Go Neutral 2035” initiative. How are you doing on your path to climate neutrality?

Markus Huemer: Very well. Despite limiting conditions, we achieved a lot again in 2024. For example, we connected additional photovoltaic systems to the grid. Our recycling plant in Ebensee, which was installed in 2022, reached full volume for the first time during 2024. As a result, we recycled 5,000 tonnes of plastics in Ebensee alone last year. Loaded onto trucks, this corresponds to a 3-kilometre-long train. Moreover, we increased the capacity of a plant by 50 percent based on efficiency enhancements.

Regarding recycling, we also have an interesting in-house development to eport, which allows us to raise the recycled thermoset fibre composite share to a remarkable 25 percent. In addition, we reduced the CO2 content per kilogramme of processed material across the entire company.

Regulations such as the CSRD and the EU Supply Chain Act pose new challenges for the industry. How do you implement them?

Markus Huemer: The underlying idea is right, but it is essential to reduce the bureaucracy involved to an efficient level. Moreover, with all legitimate initiatives, Europe’s competitiveness as a business location must not be neglected. We are implementing the requirements in such a way that they create actual added value for our sustainability strategy without putting any undue burden on operational processes.

What about your supply chains and purchase prices?

Peter Bernscher: The supply chains have normalised, and there are no longer any shortages like in the times of corona. Raw material prices decreased in 2024; energy prices remain high by international comparison despite the decline that has occurred. When it comes to raw materials, energy and capital goods, we continue to rely on a careful, risk-aware approach in our purchasing policy.

In 2024, some refinancing fell due for the POLYTEC GROUP. Did you have any difficulties with it?

Markus Mühlböck: In autumn of 2023, we were faced with the challenge of setting a new course for core funding. And we were successful: we refinanced a large part of the EUR 80 million which became due late 2023 and early 2024, not least due to the contribution of our core shareholder. In addition, we were able to expand the group of our financing banks, and our credit lines were not only maintained but increased. This gives us a solid capital basis that supports our business model – with a broader portfolio of partners and instruments, which impressively underlines the trust in our performance. At the same time, we have created the flexibility needed to respond to changes in the market. For larger investments, we frequently also use the instrument of lease-purchase agreements.

The structure of the new core funding differs from previous financing …

Markus Mühlböck: Historically, our financing was based on bullet promissory note loans. This option was no longer available to us in 2023. The challenge was to find a new financing structure. The result was the previously mentioned syndicated loan with amortising character. It is very positive that we succeeded in obtaining this loan as a company operating in a strained industry where the earnings situation is anything but convincing.

The POLYTEC share lost roughly 40 percent of its value in 2024. Do your shareholders have to write off their investment?

Markus Mühlböck: No. The performance of our share is nothing to be happy about, there is nothing to gloss over. However, this issue is not specific to POLYTEC but affected the entire automotive and automotive supply industry. But since the beginning of 2025, we have recorded a significant increase of 30 percent so far. I personally already bought POLYTEC shares in early 2025. So did long-standing investors, with new shareholders also participating.

How satisfied are you with the development of the key figures?

Markus Mühlböck: We are not satisfied with the earnings figures. EBIT improved by EUR 10 million and is therefore positive; the negative earnings trend was stopped. Nevertheless, the net result remains negative due to the high interest rate burden. But I also see an easing of the situation: our financial liabilities are lower than in the previous year, and the Euribor is also declining. As financing largely carries variable interest rates, we expect the interest rate burden to decline compared to the previous year.

Regarding POLYTEC’s balance sheet, we are generally satisfied: net debt was substantially reduced and the net debt to EBITDA ratio significantly improved from roughly 3 to 1.2. It is primarily working capital where see further potential. At the Lohne plant, the roll-out of a planning tool gave us valuable findings regarding the reduction of inventories. Our aim is to apply these findings to the entire POLYTEC GROUP now and anticipate a noticeable reduction in capital requirements.

Which investments are you planning for the coming years?

Markus Mühlböck: We invested roughly EUR 25 million in 2024 – slightly less than originally planned. As in previous years, we responded flexibly to the market environment. In 2025, we will continue to invest very cautiously. One focus will be on further automation, which we expect to benefit us economically.

Finally, what is your outlook for 2025 and beyond?

Markus Huemer: We will continue to focus on improving our operating efficiency, and consequently our earnings power, in 2025. By initiating measures over the past two years, we have created a good basis for that. In addition, we will analyse our product and service portfolio in detail and make adjustments if necessary. Based on revenue in the range of EUR 650 million to EUR 700 million, our target is an EBIT margin of roughly 2 to 3 percent. Thanks to the significant reduction in net debt, coupled with presumably lower interest rates, we also strive to achieve positive earnings after tax. Of course, this forecast involves uncertainty, above all regarding the volatile market environment in the automotive industry and the uncertain development of demand. Given our good market position in both the automotive and the non-automotive sectors, however, we look to the future with optimism.