Chennai: Matti Alahuhta, president and chief executive of Finnish elevator maker Kone Oyj, spoke to Mint in Chennai during a recent visit about the importance of India as a market and how the company held its own during the global downturn. Edited excerpts:
What brings you to Chennai?
I visit India a few times a year because the market development in India is speeding up. We have a strong local operation led by (Neeraj) Sharma and that also includes a factory, and, in addition to that, we have global R&D (research and development).
Lifting targets: Kone president and chief executive Alahuhta says the firm wants stronger presence in India’s office and hotel segments. Sharp Image
If you were to look at India and China, how similar and how different are they?
Both India and China are seeing economic growth. Urbanization is a big factor and environmental issues are being taken seriously. Still, we have a stronger market position in India than China. In China, we have become stronger in the last five years where we are now among the four leading companies.
Kone recently acquired ASBA Mantenimientos SL, a Spanish elevator company.
If you look at the last 10 years, we have acquired typically more than 20 companies every year. Typically, we acquire small or medium-sized services companies. So that is one way for us to increase our maintenance base. Otherwise the most straightforward way is we grow our new equipment business. We are able to convert a big part of our new installation business into maintenance contracts.
But doesn’t think kind of inorganic growth put a pressure on your balance sheet?
Our balance sheet remains strong. In India, we made a big acquisition about five years ago. (The company acquired the elevator business of government-owned Bharat Bijlee Ltd.) We are open to opportunities, but it is impossible to say more.
But this is a good time to acquire.
In general, we are growth-oriented. We are open to acquisition activities.
What has been the growth driver for your India business?
Urbanization is a big factor in India. Speed of urbanization is fast here. That is the key driver for growth in India.
What are your expectations for sales in India considering your company is expecting a 5% drop in global sales in 2010?
China and India have been least hit in this recession. We don’t divulge country-specific number. In India, we expect it to be clearly positive.
In double digits?
I hope so.
How would you rate Kone’s performance during the global recession?
Last year was a record year, and this year we are expecting another good year.
How is that?
First of all our strong service business brings more stability. But already in Spring 2008—at a time when there was a lot of speculation in the world about when the recession will end—we decided at Kone that we should assume that the economic crisis will be difficult. And we decided that we should build an approach that this difficult situation has an opportunity. Services represents 53% of our business.
Which markets are hurting you?
First of all, the estimated 5% decline in sales is a very small negative compared to many other companies that are active in Europe and North America. There are companies operating in America who have seen their sales drop 50%. The markets that have been suffering most are Europe and North America.
What is challenging about the Indian market?
Our position in India is quite solid. We have 1,000 engineers working for us in India and we are covering more or less the entire country... We want to get stronger in the office and the hotel segment. We are already strong in the residential segment.