Takoma Oyj is composed of three fields of industry. The basis of the hydraulics field is the traditional Tampereen Laatukoneistus Oy, which began its operations already in the 1960s. The basis of the subcontracting field is Hervannan Koneistus Oy, which specialises in the mechanisation of demanding parts. In the future, the third field will be the production of the company’s own technology products.

In Finland, Takoma has a strong position as the vendor of large hydraulic cylinders. The company exports especially to Germany, Sweden, Norway and the Far East. Approximately 70% of the company’s own design and measuring of cylinders are directly exported. The company employs 44 professionals.

Takoma believes in the future of the Finnish machine workshop industry and in the possibilities brought on by international operations. Takoma aims for a strong growth executed organically and through acquisitions.

 Key figures

EUR 1.000	2008 IFRS	2009 IFRS
Turnover	18,397	15,408
Operating profit	1,059	-328
Number of personnel	86	82
Ownership share 31.10.2009		65,1%

Hydraulics market (Takoma Hydraulics)

Takoma Hydraulics manufactures demanding, customised hydraulic cylinders for the shipbuilding and offshore industries, for heavy duty machinery and the mechanical engineering industry. The hydraulics market can be divided into more straightforward bulk products and specialised products, which are customised for the clients. The total turnover for bulk products in northern Europe was €200 million in 2010. Total turnover in northern Europe for customised products was approximately €100 million in 2010. The economic recession has taken its toll on manufacturers in the hydraulics market. The impact of the recession has been clearly more significant in the bulk product markets than in the markets for specialised products, which are customised according to client needs.

Development of the hydraulics market

§          In the 1980’s, Takoma Hydraulics’ current clients used to primarily design and manufacture the hydraulic components they needed for their own use

§          In the 1990’s, major clients stopped manufacturing components and a number of small, highly specialised component providers were established

§          In the 2000’s, individual component manufacturers continue to specialise and grow; integration in the sector begins

§          At present, the sector is characterised by a large number of small manufactures, the integrations remains in the initial phase and restructuring of the field is to be expected

Predominant factors in the hydraulics market

§          General economic trends and the demand for investment goods

§          Integration development

§          Technological solutions of the future (electromechanical solutions vs. hydraulic solutions)

§          Environmental factors

§          Productivity development

§          Economic trends in the shipbuilding industry (manufacturers of customised goods)

§          Availability and quality of raw materials, during both upward and downward trends

§          Economic trends for heavy duty machinery

Special characteristics of the hydraulics market

The threshold to get into the market is high, due to the expensive machinery required for productions, the technical requirements of high quality productions and specialised expertise needed. The most important competitive factors consist of technical expertise, new technologies and competence in the customer sectors. Finland has a reputation for excellence in the respect of machinery, components and outsourcing in the shipbuilding and offshore industry. In addition, Finnish equipment manufacturers are active. In the future, centralisation in the field will continue and, as a result of this, internationalisation opportunities will improve. Larger, more specialised component manufactures will prevail in the field in the years to come. The digitalisation of the market may introduce new, innovative solutions to end-user applications. Furthermore, the environmental regulations continue to become stricter and new technologies will be introduced. The demand will probably remain at a good level with regard to infrastructure projects.

Outsourcing market (Takoma Subcon)

Takoma Subcon’s operations include detailed machining of large components for the mechanical engineering industry and engine manufacturers. Market potential for outsourcing operations is approximately one third of the turnover of the customer segment. The largest outsourcing manufacturers in the mechanical engineering industry in Finland are primarily specialised manufacturers or system providers in a narrow sector; there are no bulk producers.

A structural change is ongoing in the outsourcing industry, and only the cost-effective operators will stay alive. However, moving heavy industry outsources to lower cost-level countries is not as easy as it is for operators in the lighter electronics industry, for example, as heavy industry’s anchors are deeper. Total volume in the sector will not resume to the level of 2006-2008, but the living space of strong operators will grow with the centralisation of the industry. Businesses must grow in size in order to be able to carry out the required investments. The companies that will stay in the field will become increasingly specialised and international and grow in size.

Predominant factors in the outsourcing market

§          The development of overall productivity is a key factor

§          LCC (CCC) strategy combined with downward trends shapes the field

§          A counter reaction to the so-called LCC strategy is already visible outside Finland

§          Manufacturing cannot be localised in all continents

Special characteristics of the outsourcing market

The automation level of office operations and productions is high in Finland. The challenge in the field is to take advantage of the further development of the technologies that decrease the number of manual steps required. Furthermore, even many quite large companies take advantage of the opportunities of ICT poorly and this offers opportunities for development.

In the current economic situation, manufacturing by clients themselves (insourcing) constitutes the most significant competition. The increase in insourcing is, however, temporary and outsourcing remains the stronger of the trends. This results from the fact that the clients’ cost-efficiency is better realised through outsourcing. Investments in the upkeep of competence, developments and technology are better justified for the outsourcer than the client. This means that the significance of the outsourcing sector will be increased as a part of the heavy duty industry’s refining chain.

Takoma’s goals

Takoma gathers together the Finnish top quality expertise in the sectors it operates. Takoma commits to the long-term development of its units and will take active part in their operations. With the help of the development activities, Takoma’s units are constructed to become internationally competitive operators, whose business operations are based on strong expertise and its further development, not forgetting entrepreneurship. At present, Takoma operates in two sectors:

§          Takoma Subcon concentrates on the more demanding machining of the mechanic engineering industry

§          Takoma Hydraulics specialises in large hydraulic cylinders

§          Takoma is looking for its third anchor in the sector which concentrates on its own products and components (Takoma Products)

The financial objective is to achieve a turnover exceeding €100 million, net operating profit of more than 10%, equity ratio of over 40% and annual ROI exceeding 20%.

Panostaja Plc’s goals in the sector

Panostaja Plc’s goal is to be an active majority owner, involved in the building of Takoma towards a strong, Finnish company entity in the mechanical engineering sector, which is undergoing a radical change. Achieving Takoma’s objectives may also require the use of its own shares as a means of payment in company acquisitions and/or other capital market operations. The objective of Panostaja Plc is to increase the value of its ownership – the ownership in Takoma is not the end but the means. For Panostaja Plc, Takoma is a financial investment, and the share of ownership can be changed significantly as a consequence of company acquisitions, share transactions or other measures.

Sources:

Assessments regarding the current state and developments in the market by Takoma and Panostaja Executives

 The Federation of Finnish Technology Industries

It must be noted that any statements contained in this market description that are not historical facts, are forward-looking statements. Such statements are based on the best assessments of the management in the light of the information available at the time of issuing the statement. Forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from current expectations. Unidentified or unpredictable factors or exceptions that prove to be inaccurate may result in actual results being materially different from the predicted results recorded in the forward-looking statements and the expected results recorded in the statements. Panostaja Plc will not update or revise the forward-looking comments and statements based on new information, future events or other reasons, unless to the extent this is its statutory obligation.