The headquarters of the Zurich-based locking technology group Dormakaba in Rümlang is being significantly downsized. Even more jobs are being lost in Germany.
Dormakaba manufactures key blanks in Wetzikon. The factory will remain open despite severe job cuts in Switzerland.
Mergers are a risky business, and the merger of the two locking technology specialists Dorma and Kaba is the best example of this. Even after more than nine years since the announcement of the Swiss-German elephant wedding, the group has not managed to bring together what belongs together.
Too many duplications
Dormakaba continues to have too many duplications and the company’s decentralized structure is too complex, said Till Reuter, the new CEO, at the annual press conference on Tuesday. The company, based in Rümlang, is now making drastic cuts in both Switzerland and Germany.
In Switzerland, for example, 180 jobs are to be cut, where 913 employees were still employed as of June 30, 2024. The restructuring, the extent of which was already announced last October, particularly affects functions within the company headquarters such as human resources, IT and accounting.
Relocation to low-wage countries
In Germany, the company plans to cut up to 406 full-time jobs, according to an agreement with the social partners that was concluded at the end of April. The factory in Velbert, North Rhine-Westphalia, is to be closed and production will be relocated to the existing plant in Bad Berka. In the middle of this year, Dormakaba still had just under 2,800 employees in Germany.
Many of the personnel measures now decided are related to the relocation of administrative activities from high-wage countries to three shared service centers that the company has set up in Mexico, Bulgaria and India. 250 employees have already been recruited to work at these locations. In addition to employees in Switzerland and Germany, those on the losing side also include employees in Austria, the USA and Singapore.
What does the company stand for?
Reuter, who took up his post as CEO at the beginning of this year, is the third manager in three and a half years to try to turn things around at the helm of Dormakaba. During the conference call, he not only said several times that the company needed to become leaner. He also mentioned that the group needed to work on its culture. Apparently, many employees and customers still don’t really know what Dormakaba stands for.
Till Reuter, CEO of Dormakaba.
In the past financial year (ending in June 2024), Dormakaba nevertheless performed reasonably well. Sales stagnated at 2.8 billion francs due to the weakening of various foreign currencies, but adjusted for exchange rate changes, organic growth of almost 5 percent resulted. “This means we have grown more strongly than other players in the market,” said Reuter.
At the same time, however, the operating result (EBIT) shrank by 13 percent to 165 million francs due to high special expenses and write-downs. The EBIT margin fell from 6.6 to 5.8 percent. In 2015, when the merger was announced, it was still over 13 percent at the Zurich-based predecessor company Kaba.
Main competitor Assa Abloy is much more powerful
Dormakaba’s profitability is particularly poor when you consider the performance of market leader Assa Abloy, which generated an EBIT margin of just under 16 percent in the first half of this year.
With the equivalent of 11.6 billion Swiss francs, Assa Abloy also has more than four times as much revenue as Dormakaba. Unlike its Swiss competitor, the Swedish company has steadily gained importance through acquisitions in recent years. Just over a month ago, it was announced that Assa Abloy was taking over the Skidata subsidiary of the western Swiss technology company Kudelski for 340 million euros.
Dormakaba, on the other hand, has been largely preoccupied with itself in recent years due to the many management changes and the many open issues related to the merger. The group lacked the time and energy to swallow up one competitor after another like Assa Abloy.
The wrong objects chosen
In the few transactions that Dormakaba did carry out, the company repeatedly showed “no luck,” admitted Reuter. In other words, the wrong properties were chosen, and some things went wrong with the integration of the new business units. In the future, however, Dormakaba also wants to grow through acquisitions, the CEO stressed several times.
However, the company has no other choice. The business with door locks and access systems for airports, office buildings and sports stadiums, among other things, is still highly fragmented in many countries. “The market will have to consolidate further,” Reuter is convinced.
In order to avoid further widening the gap between Dormakaba and Assa Abloy and the number two in the industry, the Irish company Allegion, Dormakaba is under pressure to act, especially in the USA. Reuter said openly that the company has lost market share there. At the same time, the USA is considered the most profitable market in the area of locking technology.
Investors were pleased on Tuesday about the streamlining that Dormakaba now wants to implement. The company’s share price rose by almost 7 percent to 572 francs on Tuesday.
However, analysts at Vontobel Bank point out that there are still numerous challenges on the road to improvement. The shrinking process is also associated with further high expenses. According to the analysts’ calculations, the restructuring will probably cost more than 90 million francs in terms of operating cash flow in the current financial year. In the previous period, 124 million francs had to be spent on this.
