My guest, Prettl CEO Carsten Ellermeier shares his insights on the challenges, trends, and future projections of this rapidly changing sector. Carsten’s experiences leading a family-owned business, grounded in cable assembly, plastic injection, and electronic assembly, offers an invaluable perspective to anyone keen on understanding this volatile industry.
This episode is a deep-dive into the state of the EMS industry amid economic uncertainties and global disruptions. We discuss the inventory bubble, its impact on businesses, and the strategic steps to stabilization. Carsten also reveals how Prettl Electronics Group is navigating the shifting sands of the European, NAFTA, and Asian markets. If you're concerned by the intricacies of global business, supply chains, and the electronics industry, this conversation will engage you with its depth and candor.
Like every episode of EMS@C-Level, this one was sponsored by global inspection leader Koh Young (https://www.kohyoung.com) and Adaptable Automation Specialist Launchpad.build (https://launchpad.build).
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
My guest, Prettl CEO Carsten Ellermeier shares his insights on the challenges, trends, and future projections of this rapidly changing sector. Carsten’s experiences leading a family-owned business, grounded in cable assembly, plastic injection, and electronic assembly, offers an invaluable perspective to anyone keen on understanding this volatile industry.
This episode is a deep-dive into the state of the EMS industry amid economic uncertainties and global disruptions. We discuss the inventory bubble, its impact on businesses, and the strategic steps to stabilization. Carsten also reveals how Prettl Electronics Group is navigating the shifting sands of the European, NAFTA, and Asian markets. If you're concerned by the intricacies of global business, supply chains, and the electronics industry, this conversation will engage you with its depth and candor.
Like every episode of EMS@C-Level, this one was sponsored by global inspection leader Koh Young (https://www.kohyoung.com) and Adaptable Automation Specialist Launchpad.build (https://launchpad.build).
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
Hello, I'm Philipp Stoten, I'm here at Productronica 2023 and I'm joined by Karsten from Prettle. Karsten, good to see you. Thanks for taking the time to talk to me. Let's start with just a brief, very brief introduction to yourself and to Prettle.
Speaker 2:Yeah, thanks for having me. Phil Karsten Elamai is my name. I'm 43 years old. I'm the CEO of the Prettle Electronics Group, which is the electronic division part of a family group which is called Prettle Group. This is a family-owned company in the third generation, 70 years old, based in the south of Germany and close to Stuttgart, but of course, globally footprint and, yeah, in each kind of the world working with cable assembly business, plastic injection business, electronic assembly business. So E-Q, ems overall with own brand names for solar inverters, for example, for medical tech applications or for power generators, for example, with own brand names. But the biggest share is 90% EMS business overall.
Speaker 1:Okay, that's interesting and I'm going to cut to the chase. We seem to be in a very strange place. In the industry. We've had some years of substantial growth, partly through organic, partly through acquisitions, but we seem to have a market that's stuttering at the moment. We have a big inventory bubble working its way through the system. How's all that playing out in your business and other businesses in the industry, and where do you see it leading to with respect to 2024 performance?
Speaker 2:Yeah, this is the most difficult question and the hope there, definitely. So what we are currently seeing is decreasing, especially in the European economy situation. We've seen still a stable trend in the NAFTA business and, of course, asia is driven by the political situation mainly. So there's this very, very difficult to give a sentence for 24 right now. Based on that, we have a lot of faps that are not operating based on the crisis, the world crisis. So we have, for example, four faps in Ukraine who cannot operate completely. Meanwhile we have faps who has to compensate that to bringing the products in. Besides that, we have the situation that some of the interstitial are still really good. For example, the medical industry is still on a high level. Also, everything was not has to do with passenger like passenger cars, so trucks or train business is still on a high level. Infrastructure business is still on a high level. We're seeing first investments from government sides out of Germany, to be honest To work against the situation. We have a very, very good business when the US was a lot of pushing from the government side, and especially for BEV applications for charging infrastructure. So we will see.
Speaker 2:I think it is too aggressive to plan on the same level for next year. We should act in the from the planning side in a small degrees of the business overall to stabilize. The positive point is, as you, as explained, we have no problems with getting stock again, so it is much more easier to produce all the orders that we have in the books. Also, the two years ago, it doesn't help to have 200% order book if you don't can get the components. So maybe it could feel next year like a normal year, but the feeling right now is more negative, as you, as you, as you see in all the discussions. Yeah, yeah, but from the, from the real facts, from the numbers, I don't see a small degree next year.
Speaker 1:Yeah, yeah, okay. And with respect to the inventory bubble, do we see, do you see that that at least being corrected next year? Do you see a reduction in your own inventory, which are like I'll actually Shift cash to the right place in the balance sheet?
Speaker 2:Yeah, this is the the biggest target for the MS industry next year. So creating cash flow again or Maybe, after some years, creating positive cash flow again, I would say we see it. I would say the the complete supply chain normalized Since three or four months ago from the, from the feeling maybe not exact facts, but we see it on the last four months that the stock level is reducing From the EMS point. Of course, we have the other point that, the distribution Market. So all the distributors still have extreme high level on on components and we have, yeah, daily Discussions with our distributor partners and our OEMs to ship material as we need it. Yeah, so this will balance time and Some agreements are very easy to handle. Some agreements are difficult to handle, as you know. Don't to talk in details about that, but you can imagine. So I think we will have a normal situation, hopefully in the second quarter, the second half of next year.
Speaker 1:Yeah, okay, and one of the interesting things when you do have this market is the M&A market changes completely. Last year, the M&A market and the year before was all about increasing capacity people paying high, high prices. Now I think we move to something that's much more opportunistic. Is that something that is Significant for a company like Prattle? Do you see opportunities, maybe to grow your business because you are in a good cash position?
Speaker 2:definitely, as explained, we are a family business company and and search generation and Search and a range means I have to explain the second generation is still operating the company, but we are talking about two brothers orders in 70 years and the search generation in the middle of 40s is taking over the company and that Normally, also without the economic situation in EMS, has has one shift in the yeah, business orientation of the company, in the vision of the company, in the new leadership and therefore we are discussing since the last year, during this period, last years, during this period, about the new and future business modules for our company and, of course, a half a year ago we made the decision to sell, especially one big division for us was focusing in sensor and cable assembly for passenger car industry and and we sell it to an Asian player, to a daughter of Foxconn.
Speaker 2:So the strategic view is clear yeah, we're taking this amount of money and do it Strategically. Looking about the next M&A option, yeah, and what we see from the C level side right now, I never had the situation in the EMS industry before. How many options and aim and M&A, especially an electronic assembly industry, yeah, on the desk right now and this is not mainly driven about, yeah, bad Results. This is mainly driven on cash flow issues, yeah, but also when we look about our company, if I really just looking about net cash flow over the last two or three years, you need to say, as an owner, this is not a profitable business. Yeah, but the situation as you know in EMS, an electronic industry, after an allocation phase Change during the last two years, hopefully we will not get the next allocation Too short in too short time.
Speaker 1:Yeah, and that'll it'll. It'll be a brighter future from there. And in the meantime, when you do see this kind of leveling off or lack of growth in the market, is that a time to kind of consolidate and focus on operational excellence and focus on getting the right talent in and building the business in the best way you can?
Speaker 2:Yeah, the problems are the same, from the development of the companies itself and hopefully you have a little bit more time and not every day customer escalation, supplier escalation, manufacturer escalation to run as much as possible for the customer demand, to solve their possible business and hopefully getting back to normal and can produce in normal shifts. I think it is not a secret if you ask all the C leaders and EMS industry in Germany that all of us are running minimum six days, three shifts, the lines. I also know some companies who are running in seven days, three shifts, and that for a long time. So this is getting back to normal and of course, the problems. That I want to say is still the qualified engineers, the qualified people for the growth that will come again.
Speaker 2:So what are the tasks we have to solve? We have to look about our next generation. We have to bring the right people to the right position. We should use this time, maybe next year, to optimize our processes, especially not always in operations excellence, because everybody of us is always focusing on operation excellence, maybe also the commercial processes. Business excellence overall is the right and, of course, the digital transformation of the business completely from supplier side to customer side and the transparency in all processes should be the next major step for the industry and this time maybe could be a good option. Also, we are deciding to implement a new EAP system globally next year. So this investment is done for the future, also for the period next year, and hopefully everything will run in best performance with a switch to the first January of 25.
Speaker 1:So this is our other task for next year, I guess, and we'll keep you busy. Thank you so much for your time, kastun, pleasure to talk to you. All the best for the remainder of this year and next year and we'll talk again soon, thank you.