Aalborg Industries A/S

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Aalborg Industries A/S

P.O. Box 661
Gasvaerksvej 24
Aalborg, DK-9100
Denmark
Telephone: (45) 99 30 40 00
Fax: (45) 98 10 28 65
Web site: http://www.aalborg-industries.com

Private Company
Incorporated: 1937 as Aalborg Værft A/S
Employees: 1,906
Sales: DKK 2.15 billion ($280 million) (2006)
NAIC: 333414 Heating Equipment (Except Electric and Warm Air Furnaces) Manufacturing; 332313 Plate Work Manufacturing

Denmark's Aalborg Industries A/S is a major producer of steam, hot-water, composite and gas-fired boilers, and related energy generating devices, including inert gas systems and thermal fluid heaters. The company also produces a range of heat and steam generation components, including heat exchangers, burners, and control systems. Aalborg, which originated as a shipyard in the early part of the 20th century, has long held a leading position in the global marine boilers market.

While the maritime industry remains the company's largest area of operation, it has also targeted the closely related offshore oil and gas industry, as well as the general industrial sector as its core markets in the 2000s. In 2006, the company completed a restructuring that has refocused the company around six core business concerns: Marine Boilers & Heaters; Marine After Sales; Thermal Fluid Heaters; Inert Gas Systems; Floating Production Systems; and Industrial Boilers.

Aalborg operates on a global scale, with foreign revenues accounting for more than 90 percent of its total sales, which topped DKK 2.1 billion ($280 million) in 2006. The company's European operations include manufacturing facilities in Denmark, the United Kingdom, Sweden, Finland, and the Netherlands. In the Americas, the company operates factories in the United States and Brazil, while the group's Asian presence extends from Singapore to China, Hong Kong, Japan, South Korea, Vietnam and Australia. Formerly part of the J. Lauritzen shipping group, Aalborg was spun off into a management buyout, with financial backing by investment groups Axcel and FIH, and FD, the company's employee pension fund, in 1998. In 2005, Axcel and FIH sold their shares to investment fund Altor 2003. At that time, Jan Vestergaard Olsen was named company president and CEO.

DANISH SHIPYARD IN 1912

Aalborg Industries began life as part of Denmark's thriving shipbuilding industry at the turn of the 20th century. The company's origins traced back to the founding of a shipyard in the port town of Aalborg by a Mr. Stuhr, who had worked as the chief engineer at another important Danish shipyard at Frederikshavn. Stuhr left that company and, joined by his brother, opened his own shipyard in 1912. Called P.Ph. Stuhrs Maskinog Skibsbyggeri, the Aalborg yard soon extended its operations to include the production of its own boiler designs. The first of these, a marine boiler, was introduced in 1919 and was destined for the company's own vessels.

The Aalborg business continued to develop its boiler operations. Into the 1920s, the company began producing boilers for the Danish industrial sector, particularly for the textiles and dairy industries. By the 1930s, the shipyard had expanded its production wing to include its own heater designs as well. Toward the end of the decade, however, the Danish shipbuilding sector, hard hit by the difficult years of the Depression era, had been struggling. The Danish government was forced to step in to rescue a number of shipbuilders, including the Frederikshavn shipyard. By 1937, the Aalborg yard too was nearing collapse, and in that year the company was acquired by the city of Aalborg. That purchase proved only temporary, and by the end of the year, the company had been sold again, to Danish shipping giant J. Lauritzen A/S.

Renamed as Aalborg Vaerft (Aalborg Shipyard), the company played an important role in enabling J. Lauritzen to establish itself as a leading shipping company on an increasingly international scale. A pioneer of the reefer (refrigerated) shipping sector, Lauritzen had also been building up an industrial arm as support for its shipping lines. To this end, the company had added engineering, construction, and refrigeration systems subsidiaries. Aalborg's boiler and heater production proved a strong complement to these operations. Meanwhile, the backing of the larger Lauritzen group allowed Aalborg to add to its range of operations, such as the launch of its first power station boilers in 1944.

The production of boilers and heaters became an increasingly important part of Aalborg's operation, especially as the Danish shipbuilding industry once again entered a long decline starting in the 1970s. Yet the success of the company's boiler division enabled Aalborg to remain an active part of the Lauritzen group. The company backed up its sales to the shipping industry with the creation of a service subsidiary in the Netherlands in 1978. At the same time the company followed the gradual shift of the shipbuilding sector toward shipyards in the Far East, opening a service subsidiary in Singapore as well.

FOCUS ON BOILERS IN 1987

By 1985, Lauritzen had taken the decision to phase-out the Aalborg shipbuilding operations, as it found itself struggling more and more to meet the new competition in the global shipbuilding industry. By 1987, the last vessel to be produced at the Aalborg yard had been completed, and the remainder of the company's shipbuilding operations were transferred to the Lauritzen's other shipbuilding operation, Danyard, the modern name for the shipyard in Frederikshavn. Following the shutdown of its shipbuilding business, Aalborg Vaerft was restructured into two divisions, Aalborg Boilers A/S and Aalborg Marine Boilers & Engineering A/S. The latter took over the company's marine boilers operations, as well as the servicing arm for the company's international industrial and marine boiler sales. The former focused on sales of industrial boilers, while overseeing Aalborg's manufacturing operations.

Aalborg launched a drive to establish itself among the world leaders in the boiler market. Acquisitions formed an important part of this effort, starting with the purchase of Dansk Fyrings Teknik, based in Odense, Denmark, in 1988. This acquisition enabled Aalborg to add to its production of gas and oil burners. The following year, the company's presence moved to an international level, when it acquired Ciserv AB, a specialist in diesel engine services. The newly expanded company then restructured, merging the two Aalborg Boilers subsidiaries to form a single company, Aalborg Ciserv in 1990.

COMPANY PERSPECTIVES

On the basis of world leading technology within our defined core business, we provide our customers with reliable, innovative and optimal steam, heat and safety solutions that are environmentally friendly and ensure lowest life cycle cost. We are dedicated to sustainable growth and value creation; we aim to encourage and develop our employees to be high performing in all aspects; we encourage innovative and firm leadership; we are committed to total care; we respect cultural and religious differences; we strive to be the best with a high moral and ethical behaviour.

Aalborg continued to acquire new products and technologies to expand its operations in the 1990s. In 1994, for example, the company took over ABB's Sunrod Group, adding that company's marine boiler production, but also its line of exhaust gas economizers. The Sunrod acquisition also enabled Aalborg to enter the mainland Chinese market, with the addition of a factory producing boilers in Jiaozhou. By then, Aalborg had also incorporated the Vesta line of preheaters, heat exchangers, and incinerators, acquired through its takeover of Copenhagen's Vesa A/S in 1993. These acquisitions played a part in Aalborg's launch of its first modular boiler system, launched under the Mission brand.

INDEPENDENT IN THE NEW CENTURY

Aalborg maintained its active acquisition strategy through the dawn of the 21st century. The company entered Finland in 1997, buying Pipemasters Oy, formerly owned by Finnyard. Pipemasters produced both boilers and steam generators. That year marked Aalborg's entry into the United States, when it acquired the industrial boilers division of Zurn Industries. That operation was at first renamed as Aalborg Keystone. In 1998, however, Aalborg renamed all of its operations as Aalborg Industries.

The name change came as Lauritzen launched a restructuring of its own in order to refocus itself on its core shipping operations. This led to the spinoff of Aalborg Industries as an independent company, in a management buyout backed by investment groups Axcel and FIH.

By then, Aalborg had completed two more acquisitions, buying Wiesloch Marine & Industries BV, a Netherlands-based producer of thermal fluid heating systems, in 1999. The purchase enabled Aalborg to claim a top position in that market worldwide. The next year, Aalborg moved into South America for the first time, buying Mitsubishi Heavy Industries' ATA Combustão Técnica, based in Petrópolis. These acquisitions helped boost the company's revenues into the early 2000s, from DKK 3 billion in 2000 to more than DKK 4 billion by 2002.

In that year, however, Aalborg restructured its operations in order to refocus itself around its core marine and industrial boilers operations. As part of that effort, the company sold its Ciserv operations to South Korea's Daekyung Machinery & Engineering in 2001. The following year, the company sold off its U.S. unit, based in Erie, Pennsylvania. The effect of the restructuring was reflected in the company's turnover, which fell back to DKK 1.3 billion for the 2003 year. At the same time, the company's net profits nearly tripled over the previous year.

Aalborg found a new expansion opportunity in 2004, when it reached a joint-venture agreement to build a new US$ 3 billion boiler factory in Haiphong, Vietnam. The deal, in partnership with Vietnam National Shipbuilding Industry Corporation (Vinashin), gave Aalborg a 75 percent stake in the joint venture. The Vietnam plant launched production in 2006.

By then, new owners, and a new management team, had taken over Aalborg. In 2005, Axcel and FIH sold their stakes in the company, which were acquired by the investment fund Altor 2003. The new owners then brought in a new management team headed by president and CEO Jan Vestergaard Olsen.

Under its new owners, Aalborg, already the world leader in marine boilers with more than 50 percent of the world market, set its sight on new territory. The company targeted the leadership position in boilers and energy generation systems adapted to the closely related offshore oil and gas industry.

In support of this strategy, Aalborg once again hit the acquisition trail. The company's first move was to enter the Australian market, buying that country's Gosfern Pty Ltd. That company, which added expertise in combustion technology and control and safety systems, had originally been founded in 1978 as part of the U.S.based Forney International, before being spun off in a management buyout in 1989. By 1992, Gosfern had established a strong business in export sales, while expanding strongly through the Australian market. Following its takeover by Aalborg, Gosfern was renamed as Aalborg Industries Pty.

KEY DATES

1912:: Creation of P.Ph. Stuhrs Maskinog Skibsbyggeri shipyard in Aalborg by former chief engineer of Frederikshavn shipyard and his brother.
1919:: Launch of company's first boiler design.
1937:: J. Lauritzen acquires shipyard, which is renamed Aalborg Vaerft.
1987:: Aalborg focuses on marine and industrial boiler production after transfer of shipbuilding operations.
2000:: Lauritzen sells Aalborg Industries in a management buyout backed by Axcel and FIH.
2005:: Axcel and FIH sells stakes to Altor 2003 investment fund; Aalborg launches new strategy focused on marine, industrial and oil and gas markets.

Aalborg expanded its range of technologies again in 2006, this time buying the Netherlands-based Smit Gas Systems, part of Delft Instruments. The new Aalborg subsidiary had started out in 1882 as a producer of electric motors, transformers, and the like, before developing an international reputation for its Smit Ovens division in the 1960s. Aalborg and Smit also formed a working relationship during this time, with Aalborg serving as a sales representative for Smit in Japan.

The purchase of Smit gave new expertise, as well as the top position worldwide, in the production of inert gas systems. In particular, Smit's experience in the liquefied natural gas market became a highly valuable addition to Aalborg's strategy to gain a leadership stance in the oil and gas market. Aalborg's acquisition drive, and its own organic growth, helped the company's revenues top the DKK 2 billion mark by mid-2007. With a clear strategy, and market leadership in most of its core markets, Aalborg Industries had established itself as a globally recognized industrial group.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Aalborg Industries (Shanghai) Ltd.; Aalborg Industries A/S; Aalborg Industries A/S (Dubai Branch); Aalborg Industries BV (Netherlands); Aalborg Industries Co. Ltd. (Vietnam); Aalborg Industries Inert Gas Systems BV (Netherlands); Aalborg Industries K.K. (Japan); Aalborg Industries Limited (Hong Kong); Aalborg Industries Ltd. (South Korea); Aalborg Industries Oy (Finland); Aalborg Industries Pte. Ltd. (Singapore); Aalborg Industries Pty Ltd (Australia); Aalborg Industries S.A. (Brazil); Aalborg Industries UK Branch Office; Aalborg Industries, Inc. (United States); PT Aalborg Industries (Indonesia).