ElringKlinger wants to grow by acquisition

Gasket supplier sets sights on small, specialized firms

Dettingen/Erms. Specialty gasket supplier ElringKlinger wants to achieve part of its future revenue growth through acquisitions.

Board spokesman Stefan Wolf said the company is targeting small, highly specialized firms.

"For an acquisition, the company's technology is the highest priority for us," he said. "That means it must produce parts that carry our automotive customers forward."

In addition, the candidate's product portfolio must fit ElringKlinger. Wolf said ElringKlinger is looking for specialties such as dies, gaskets, shielding, coatings, and plastic parts and covers.

"When a company only produces parts that anyone can copy, we aren't interested," he said.

Japanese market targeted

ElringKlinger is also taking aim at the Japanese market. Besides two international competitors, Federal-Mogul and Dana, Japan has 10 other smaller gasket producers.

"If one of these traditional family firms was available, we would certainly enter into negotiations," Wolf said.

Wolf also wants to expand ElringKlinger's activities outside Germany. ElringKlinger is negotiating with Russian gasket producers about possible cooperation.

But he sees establishing operations in Russia as risky because of corruption and organized crime.

ElringKlinger is also eyeing the Indian growth market. Currently, the company is only represented with a technical license agreement.

Despite the complicated Indian administrative system, ElringKlinger is examining how to expand its commitment there.

Profits boost

ElringKlinger seems well armed for acquisitions and investment. Despite the current high raw material costs, in fiscal 2004 it boosted profits 57 percent from the previous year, to 42.6 million euros, or about $51 million at current exchange rates.

This year, Wolf expects steel prices to rise between 8 and 12 percent. Altogether, he projected an increase in material costs of 4.2 percent this year.

The supplier has tried to pass higher prices on to its customers, but has only partly succeeded, Wolf said.

Last year, ElringKlinger had revenues of 454 million euros, or about $545 million, worldwide. It expects to reach about 470 million euros, or $564 million, this year and more than 500 million euros, or $600 million, in 2006.

Besides the traditional engine gasket business, ElringKlinger also manufactures plastic and metal gaskets for transmissions and elastomer coatings for automatic transmissions.

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