2021

One thing in the world is certain – the summer season is here!

The last 18 months have represented lots of unpredictable happenings, both in the world and in business. The Covid-19 pandemic, as we all know, has been and still is a black swan, which came as an unwanted surprise and changed the world and the way we all live, interact, and do business.

Fortaco and our industry, amongst many others, was negatively impacted in 2020. With fast actions in the spring 2020 and onwards, the Fortaco team made a quick recovery securing the safety of our employees and deliveries in the difficult environment with a successful outcome. For more insights concerning year 2020, check out our Annual Report, which can be ordered from our web-page www.fortacogroup.com.

From decline to a clear growth trajectory

Subsequently in 2021, and despite the Covid-19 pandemic still present, the overall business outlook has changed, perhaps a bit surprisingly, from decline to a clear growth trajectory, which is further strengthened by ramping up additional business awards granted to us by our valued customers. Depending on the industry, the current level of demand is everything from high to low, and the constrained supply market, availability of people, and Covid-19 restrictions are adding a special flavor to the situation.

The ability to cope with uncertainties is one of the factors differentiating high quality companies from the rest. Our approach is “Master of Flexibility”, the Fortaco way of coping with volatility, enabling us and our stakeholders to be successful in different market environments. It entails an extensive focus on safety, delivery, and quality, added by a high level of flexibility, to address the changing needs. And all this in a collaborative spirit with our customers and supply chain.

We have set our bar higher

As a proof of our concept, our year to date delivery accuracy is >95% (note, measured strictly according to the first promise!) and lost time injury frequency is 2.0. Both already represent a solid performance, but we have set our bar higher. We aim for nothing less than 100% delivery accuracy. In terms of safety, our professional approach can be found from our fresh Safety Handbook. Our motto is clear: Go for Zero.

Green and sustainable future

During H1/2021 we have also been working with defining our approach on sustainability. We have several on-going initiatives addressing the global need to find new solutions, contributing positively to the greener and more sustainable future. We believe we have a good position to address the need to decarbonize the industry together with our customers. More info to come later on.

Second half of 2021 pointing towards more growth

As said, the marketplace is currently busy, and the demand outlook for H2/2021 is pointing towards more growth. Our May 2021 year to date financial performance shows further improvement towards our long-term target of delivering 7% EBITA over the cycles. At the same time, several factors, such as supply chain bottlenecks, increasing raw material costs, and people availability are causing issues to all companies in the industry. We need to continue addressing these issues as professionals, and we feel we are on the right track to secure the needed operational and financial performance in 2021.

I would like to thank our customers, suppliers, and the Fortaco-team of professionals. Have a great summer season – stay safe!

Kimmo Raunio
Senior Vice President & CFO

by Fortaco Group

Two Journeys of Gruža

Aleksandar Djordjevic went from mergers and acquisitions to manufacturing. His factory went from making cannons to winches.

On March 19, 2021, Fortaco Gruža in Serbia was born from the acquisition of Rapp Zastava by the Fortaco Group.

What is now Fortaco Gruža may trace its history to October 1853, when Zastava Arms cast its first cannons and howitzers. Zastava would become a large holding company, its subsidiaries making military and hunting arms, as well as automobiles.

Zastava Machines would be created to provide parts and services to the auto-manufacturing subsidiary, and would be privatized in 2006 by Norwegian investors, who would convert the factory to produce deck equipment and winches for the marine industry.

A knack for the business

Aleksandar Djordjevic, Fortaco Gruža’s business site manager, entered the picture in the early 2000s, as Serbian companies were being privatized. Serbia’s privatization history began in 1990, but lack of legislation and other factors caused a decade-long delay before the process began in earnest.

Djordjevic represented Serbia’s privatization agency, overseeing the sale of companies, helping them restructure. “I noticed that I was providing advice to management teams that had been in place for 30 years,” he says. “I had no factory floor experience, but I had a knack for pinpointing important issues in their businesses. I thought I could be good at it.”

An opportunity arose for Djordjevic to move to China as the general manager of a Serbian-Chinese venture to galvanize steel. Eventually, the partnership dissolved and he found himself back in Serbia, this time running the M&A department at Société Générale. But he still longed for the factory.

Rapp Zastava

Zastava Machines was now Rapp Zastava, having been acquired by the Norwegian investors, Rapp Marine Group. The company needed help preparing a business plan to get grants from the state, and Djordjevic played that role. When the general manager of Rapp Zastava retired, the COO in Norway suggested Djordjevic for the job. “I had the skills which were needed at the time, like change management and financial analysis.” He took the job. Five years later Rapp Marine Group became part of Cargotec, whose policy was not to operate far-flung offices. Rapp Zastava was carved out of Rapp Marine Group and then sold to Fortaco in March 2021 by the Norwegian owners.

Expanding the footprint

What does Fortaco see in Gruža? Lars Hellberg, Fortaco Group's President and CEO, has remarked that the factory is aligned with Fortaco's strategy to be the leading partner to the off-highway and marine equipment industries. The acquisition, he's noted, “provides customers with increased value in steel fabrication and assemblies."

From the factory floor in Gruža, Djordjevic sees it as a great way for Fortaco to expand. “Cargotec is a large client of Fortaco. In my opinion, this acquisition allows Fortaco to expand its presence in a new market niche with known clients. By manufacturing winches, Fortaco now expands its footprint.”

It’s an acquisition that makes sense, even though Gruža’s business does differ in some key respects.

Fortaco Gruža operates a 10,000-square-meter modern factory and employs 150 employees, but it relies less on automation than other Fortaco plants. “There's really no such thing as a standardized winch,” says Djordjevic. “We do single pieces or small series manufacturing, where CNC equipment and automation are used less. It's a business where manual work still replaces modern equipment. And that’s also our competitive advantage."

Another difference is temperament. How do hot-blooded Serbians work with cool northern Europeans? "Countries like ours on the hot seas are accustomed to emotions and raised voices," laughs Djordjevic. "You can imagine how the Norwegians saw us – the loud bunch. And we saw them as too cold." But the two parties quickly learned to work together. "Bad news or criticism isn't meant to be taken personally. Because everyone wants the exact same thing: to have a positive impact."

by Fortaco Group

Deep Roots In a Heavy Business

Fortaco’s Narva business site has a long history with various products and ownerships. It was established in 1947 and 2013 acquired by Fortaco Group. Business Site Narva is the biggest unit in Fortaco Group, manufacturing high quality steel fabrications for the off-highway equipment industry. Some of the employees have worked for the company a respectable time period, one of them being Nikolai Golubev, Welding Supervisor.

Mr. Golubev has worked at the factory for 47 years. Those decades are full of changes, growth, new products, machines, and also various scientific developments. He started as a mechanic at the mechanical assembly in a vacuum laboratory, at the time, when the plant was an industrial site for the various scientific developments of leading research institutes in the country (former USSR).

”It was an interesting time. We didn’t only work, but also studied, played sports and actively participated in the public life.” For several years Mr. Golubev was a member of the trade union committee, and the chairman of the workshop committee in the technical control department.

Years at the factory have not always been easy going – Mr. Golubev has definitely gone through both good and bad with the company. The huge reduction in the 90’ was dark time, also for those people who were able to keep their jobs. ”It was necessary to survive, and so we did - still, it is hard for me to remember that time”.

Values In Action

Our values define the way we work and solve problems at work and in personal life. Mr. Golubev knows well his values, and those are probably the ones, which have helped him and the team to manage harder times, and also grow during smoother sailing periods.

”What I truly appreciate in people are responsibility, integrity and the ability to quickly make right decisions, leading to the goal.” Those are the qualities, he aims to put into effect also at work. And this is probably why, he is leading the bottleneck areas these days. The team is ambitious. “When facing a challenge, people usually try to find solutions before heading off from work.”

Working in a leading position has provided him great tools to handle stressful situations at work, but also has taught him to pay great attention to find ways to release stress outside of work. Mental health is a forever important topic and cannot be underlined too much, especially during these days. Mr. Golubev has created a perfect recipe to take care of himself, he is relaxing at countryside with his wife, grow exotic vegetables, go fishing and hunt some mushrooms.

Merging For Future

Mr. Golubev is very optimistic about the process, which is laying ahead of everyone. The factory extension was built last year, and the team is excited about the new possibilities the extension will offer in the future. ”I believe that the merge of veteran experience, enthusiasm and knowledge of modern technology among young workers, combined with a thoughtful strategic leadership, are the key to success for the further development of our factory and its prosperity. I am absolutely confident about this!”

by Fortaco Group

Emotional Intelligence and the Bottom Line

I think highly of myself. I feel I have something to contribute. I am aware of the impact of my mood on others. I make rash decision when I am emotional. I perform well under pressure.

The way you react to statements like these shows a lot more than how you feel about yourself. The answers actually impact your company’s bottom line.

‘Covid opened our eyes’

“We’ve often talked about targets,” says Agnieszka Koziara, Fortaco’s Senior Vice President for People and HR. “But Covid opened our eyes about the fact that we need to be aware of what’s going on with our people. How’s the home situation? How’s the family?”

Koziara wasn’t thinking about the company’s bottom line. She was more concerned with the mental health of her colleagues. When she discussed the behavior she was witnessing with Lars Hellberg, Fortaco’s President and CEO. Hellberg suggested she get in touch with Dr. Margareta Sjölund, Founder and Chief Psychologist at EQ Europe, one of the pioneers in emotional intelligence.

More than hugging

Everyone is familiar with IQ – the intelligence quotient. In 1995, a bestselling book by psychologist Daniel Goleman popularized the idea of the EQ, or emotional quotient. “Research makes clear that EQ is not just about hugging people,” says Dr. Sjölund. “It’s directly related to performance. If you’re a leader who works on relationships, then your people feel appreciated, listened to, and respected. Through that you can motivate people to do their very best.”

Sjölund is quick to point out that the World Economic Forum lists EQ among the top skills employers are looking for. “How you relate to others is so basic to being human. Feelings drive behaviors. Behaviors affect your success.”

Not everyone, however, is good with feelings. But the good news is that EQ is not like IQ: EQ skills can be learned. EQ can be developed and improved.

Getting emotional

Fortaco decided to examine the emotional skills of its managers, and brought in a team from Sjölund’s company to help.

Fortaco’s top 25 managers were tested using the EQ-i2.0 inventory which measures emotional intelligence. The test measures 15 social/emotional competencies, including stress management, self-awareness, confidence, self-expression, and assertiveness. How'd the managers do, talking about themselves to strangers on a video call? “We were touched that people were so open,” says Birgitta Söderström, EQ Europe’s Senior Consultant and Master Trainer. “People shared in a courageous and vulnerable way.”

EQ-i2.0 scores subjects from 60 to 130, with scores below 90 and above 110 considered low and high, respectively. “Most important is the balance between the competencies,” says Söderström. “We look for gaps. If I’m high on empathy but low on assertiveness, what happens if I work to make this more balanced? How can it make me more effective?”

When you’re low on empathy

Scores were kept strictly confidential and not shared with management. “You’re the owner of your own results,” says Söderström. “You decide what to do with them.”

Generally speaking, Fortaco employees scored well in stress response, self-responsibility and self-awareness, with lower scores in in collaboration and empathy. “But this is completely natural,” says Agnieszka Koziara, “because people aren’t seeing each other anymore. Turn off the camera and we’re even farther from each other. Camaraderie, the team, the ‘we’ — these were weak.”

What’s the solution to improve weak areas in the time of Corona? “More camera is one,” says Koziara. “Seeing each other’s faces is important. Because of connection speed issues, we used to have meetings without the camera, but now we always turn it on.”

"We've got to consciously focus on having time together, since it doesn’t happen by the coffee machine anymore," she says. "We've got to create a virtual coffee machine.”

Profit and performance

Creating a virtual coffee machine to boost EQ scores has implications that go well beyond the world of psychology. The results achieved by Fortune 500 companies speak for themselves.

At PepsiCo, for example, executives with high EQ competencies generated 10 percent more productivity with 87 percent less turnover. In computer programming, research shows that the top 10 percent of EQ performers beat average performers in producing effective programs by 320 percent. Superstars, those in the top one percent, produced twelve times better than average

In manufacturing, research has shown that when supervisors are trained in emotional competencies like listening and helping employees resolve problems on their own, key performance indicators improve. In one company, lost-time accidents were reduced 50 percent, formal grievances were reduced from an average of 15 per year to three, and the plant exceeded its productivity goal.

Fortaco results

What should Fortaco expect? “What Fortaco is attempting to do is improve their culture,” says Sjölund. “We’re starting with the leaders, and we’re looking for it to trickle down, creating a successful organization with happy customers. How do you get happy customers? Through efficient and happy employees. This is only part of what you get with EQ-savvy leaders.”

Improving the bottom line was never one of Agnieszka Koziara’s goals when she began the current EQ project. If that happens, it will be an added bonus. For the moment, she’s putting into play what’s been learned and looking beyond Corona. “We’ve had some deep conversations. We’ve learned we can do more via video than we previously thought. And once Covid is over there will again be meetings. We’ll hug and drink wine. People are a lot like plants in the desert. We can learn to grow if we want.”

***

Want to learn more? Read Emotional Intelligence: Why It Can Matter More Than IQ by Daniel Goleman (Bantam Books, 1995). And forthcoming in autumn 2021 is EQ in Action by Dr. Margareta Sjölund (Black Card Publishing).

by Fortaco Group

What You Can Learn from Gelato

Enrico Scalzi, Fortaco Sales Manager in Holíč, Slovakia, sees gelato as a metaphor for flexibility and professionalism.

Gelato, the frozen dessert of Italian origin, is generally made with a base of a few percent milk and sugar, its density setting it apart from other ice creams. But despite gelato’s basic characteristics, it is different wherever you go in the world.

“Gelato is sold everywhere, from Italy to Germany to Indonesia, Kazakhstan, Colombia,” says Enrico Scalzi, Sales Manager at Fortaco in Holíč, Slovakia. “European gelato is different from Russian gelato or Japanese gelato. There are different grades of sweetness. What’s good for one country, isn’t necessarily good for another. Even among single countries gelato can change from north to south.”

Scalzi spent four years traveling the world as a gelato machine salesman. If gelato taught him anything, it’s that you have to listen to the customer and craft a solution to their particular taste.

The highest professional level

Work isn’t so different at Fortaco in Holíč, Slovakia, where the company produces vehicle cabins for the mining, forestry, and container handling industries. Holíč’s production is oriented toward flexibility, the ability to make what each client wants and produce large-scale production runs. “We can change frames, add doors, whatever the customer requires,” says Scalzi, who says a good example is the NCEA Cabin developed for the customer Hyster-Yale. Fortaco Holíč was involved in all project stages, from the initial sketch and design phase to the current series production. The new cabin was presented at the beginning of 2020, receiving very good feedback from end users on the market.

“What I’ve learned is that every situation is part of a continual learning process,” says Scalzi. “Our customers, suppliers, and partners are true professionals who can teach us. Our customers have been in the business thirty years. You can’t approach the business thinking you’ll teach customers something. Instead, you have to support them in what they want to do, and help them make things even better. Our objective is to deliver at the highest professional level.”

Scalzi’s target is for the Holíč facility to broaden its sector scope to serve customers in agriculture and construction. Geographically, he sees opportunities in Italy, Germany and France. “We have cross-sector experience. We’ve developed from scratch a variety of cabins working closely with our customers. We’ve got a highly trained labor force in welding and assembly, plus skilled engineers. And the Fortaco Group behind us gives us the stability to take projects without the risk that they’re too small or too big.”

Straddling two cultures

Scalzi studied economics at university, with a focus on planned economies transitioning to market economies. His course of study seems to reflect his personal history. The son of an Italian father and Slovak mother, he was raised in Italy, but spent summers with his mother’s family in the 1980s in then Czechoslovakia. Raised straddling the two cultures, he eventually entered graduate school to study diplomacy. “I learned conflict resolution and studied the differences in cultures,” he says, “all the things you need in business.”

Before he found his way to Fortaco, the cultural-straddling diplomat gained experience selling gelato machines. “It was a product that made people smile,” he says. “When it was minus 18 degrees outside in Kazakhstan I saw people in malls consuming gelato, which is served at minus 12. We used to joke that gelato is served hot in Kazakhstan.”

by Fortaco Group