THE ECHO - Ferrostaal

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financing
MAN Ferrostaal is not strictly a large plant engineering and
construction company. According to VDMA, you must spend
several million hours each year on purely engineering activities
to earn that title. This isn’t the case for MAN Ferrostaal. In other
words, we are not a builder of large plants according to the strict
definition. Rather, we are a project developer and arranger. This
is our role. It is true that we have no proprietary engineering and
construction processes. In this regard, we are at a competitive
disadvantage compared with the renowned plant engineers
when it comes to projects that are put out to tender and where
the financing is already in place. In this case, we can’t compete
with companies that have proprietary procedures. If a company
says “I have already earned enough money to cover my next
chemicals plant and I am going to use my profits to build this
plant,” we have no added value to offer compared with our competitors.
Our business lies wherever there is potential for new
industrial projects to be developed from the ground up. This
project development market is huge, and there is rich potential
for new plants all over the world. This is where we have the
advantage of being much more flexible than the competition.
Wherever a project is possible, where there is a business plan and
where the feasibility is clear, we can put together the ideal technology
and financing package.
And who decides whether or not a project is feasible?
This question is examined both by us and by the partner credit
institution. We examine the economic basis for the project independently
of each other and, happily, we usually come to the
same conclusions. These are always highly dependent on the
various parameters of each individual project. Take, for example,
petrochemical plants in the area of natural gas. The composition
of the gas in the earth can be a crucial factor in determining
which technical procedure to use for further processing. If we
were an plant engineering and construction company with only
one procedure, this could put us out of the picture straight away
if the gas is “wrong” gas for our procedure. MAN Ferrostaal has
more flexibility because we bring together the best partners for
the job and then implement the project with an intelligent
financing model. Large plant engineering and construction
companies are technology-driven and try to develop their sales
based on technology. In contrast, we try to achieve successful
sales based on financing. We are very well positioned to do so,
as is confirmed by banks.
Is financing also important in the machines and transport business?
Yes, though not to the same degree. Financing makes just barely
half of our machine business possible. We act as an exporter and
we finance machines and transport solutions for our customers over
a period of up to five years. There is a particularly high demand
for our financing solutions in South America and Asia. We mainly
finance in euros and US dollars, but sometimes also in yen.
Why do customers use us for financing instead of their local
credit institutions?
We can offer better conditions. We take out insurance cover for
our customers and we then grant the customers loans based on
this cover – at extremely attractive interest rates. Currently, we
can offer approximately 6 percent. In South America, for example,
where interest rates of 15 to 30 percent are the norm, our rates
are incredibly attractive.
What happens where a customer is from a country where the
currency is unstable?
Then there is naturally a currency risk, which is borne by the
customer. However, we can master this scenario in most cases.
An extension often helps the customer get through a temporary
shortfall. If the currency of a country drops in value and the
liabilities in the local currency rise as a result, the repayment
term can be extended until inflation has counterbalanced the
currency deterioration and the purchasing power of the currency
is essentially restored. The risk of currency deterioration has
become much smaller over the last 20 years, not least because
the control measures of the World Bank have been greatly improved.
Governments today no longer get into spiralling levels of
debt as they once did. Our export credit, which we also provide
without insurance cover in certain cases (that are subject to
rigorous scrutiny), gives us a very clear advantage over competitors
because not many companies in the machine business
segment can offer customers the same deal.
Is that why MAN Ferrostaal has such a wide-ranging portfolio,
in particular in the printing press area?
One reason is the financing solutions we can offer, not only for
MAN Roland presses, but also for individual presses from other
companies from different countries. The other reason is, of course,
our ability to bring various manufacturers together under one
umbrella. This is traditionally one of our key strengths because
we have been doing it for so many years. We don’t make our own
products. Instead, we represent other companies, as we have
always done.