Alfa-Laval AB

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Alfa-Laval AB

Post Office Box 12150
Gustavslundsvägen 147
S-102 24 Stockholm
Sweden
(08) 809900
Fax: (08) 256759

Public Company
Incorporated: 1883 as AB Separator
Employees: 20,000
Sales: SKr15.23 billion (US$2.45 billion)
Stock Exchanges: Stockholm London Amsterdam Geneva New York

Alfa-Laval’s operations are divided into three divisions: industry, which accounts for approximately half the group’s sales; foods 30%; and agricultural equipment 20%. The industry division comprises five business areas: automation, dosing and analyzing equipment, flow equipment, separation, and thermal equipment. The product range includes separators for liquids in food-processing and other industries, heat exchangers, dosing and analyzing, flow-control, and automation equipment. The food division’s product range includes complete production lines and individual components for the food-processing industry. These products are used for the manufacture, storage, and pasteurization of dairy products and fruit juices, oils and fats, wine and beer, fish and meat, and other foods. The agricultural division has gradually shifted toward an increasing range of goods and services related to milking equipment. Aftersales services accounted in 1989 for more than half of the agricultural division’s sales.

Alfa-Laval (AL) is a highly international company, with 90% of sales coming from abroad. The European Community accounted for 36% of total sales in 1989, North America 21%, Asia 12%, and Scandinavia—including Sweden, Norway, and Finland—17%. AL has subsidiaries in more than 40 countries, and its products are sold in a further 100 countries. Even though the agricultural division accounts for only one-fifth of the group’s sales, Alfa-Laval traditionally is connected with agriculture.

In 1877 the Swedish engineer Gustaf de Laval began to develop the first Swedish milk separator. A year later he secured a patent for his design. Gustaf de Laval, after matriculating at Uppsala University, entered the Technological Institute, and passed the final examination in 1866. Times were hard and de Laval was forced to take a position as clerk in the general store at the Falun mines; an engineer with a first-class diploma, he weighed out nails, herring, and salt to miners. In 1867, however, Gustaf de Laval received a grant from the Swedish House of Lords, and finished his studies at Uppsala University in 1872, receiving the degree of doctor of philosophy.

The process of mechanically separating cream and milk through the physical application of centrifugal force was first exploited by the German Wilhelm Lefeldt in 1876 and the Danish L.C. Nielsen in 1878. The latter technology was acquired by Burmeister & Wain of Copenhagen in 1882. Lefeldt’s and Nielsen’s separators could not work continuously, unlike Gustaf de Laval’s superior system. On February 26, 1878, de Laval entered into partnership with Swedish engineer Oscar Lamm. Together they founded the trading company Oscar Lamm Jr. of Stockholm. The partnership was successful, with de Laval in charge of the technical side and Lamm the financial and commercial aspects of the business. Lamm tried to interest influential agents in Europe, among these H.C. Petersen & Company, Copenhagen; Bergedorfer Eisenwerk near Hamburg; Th. Pilter, Paris; the trading firm D. Hald & Company, London; and Boeke & Huidekooper of Groningen in the Netherlands. In the company’s first year of business, 1879, overseas sales accounted for 50% of the company’s turnover. Foreign demand for cream separators rose sharply, and in 1883 around 80% of sales were from overseas. Almost 97% of exports were sold through foreign distributors in the more industrially advanced countries. The product in question was the energy-intensive power-driven cream separator. Manual cream separators were not introduced until 1887.

The company did not set up a domestic marketing division until four years after it had established its foreign distribution network. Its agents were already specialized in marketing dairy equipment, and cream separators complemented their existing product mix.

Four other European companies also manufactured power-driven cream separators in the late 1870s. They were Nielsen & Petersen—from 1882 owned by Burmeister & Wain—in Denmark, and Lefeldt, Fesca, and Petersen in Germany. The industrial exploitation of this process was protected by patent. The holder of the patent for the separation method secured temporary legal protection against imitation and had the opportunity of gaining an international monopoly. The patent on the application of centrifugal force for separating milk and cream, which had been granted in 1884, expired in the countries in which it had first been granted in 1892— namely in Sweden, Denmark, France, Germany, and the United States—and in countries where these patents had subsequently been registered. The reason no domestic cream separator industry had evolved in more industrially advanced countries like the United Kingdom and France is probably that foreign patent registrations from the late 1870s blocked the establishment of an indigenous industry until the beginning of the 1890s.

The work that Oscar Lamm put in during his travels produced positive results, and overseas sales increased during 1880. The growth of the business demanded another form of collaboration between the two partners and a limited company was the natural solution. On April 5, 1883, the company’s statutory meeting was held, with de Laval and Lamm as the major shareholders. Oscar Lamm controlled 48% of the company shares and Gustaf de Laval 47%. The remaining 5% of the company was controlled by four individual members of the new board. Lamm was chairman of the board and managing director. In the same year the company, named AB Separator (ABS), established a subsidiary in the United States. The managing director for this new company, the De Laval Cream Separator Company, was J. H. Reall of New York. He was not an engineer, nor did he own a workshop, but edited and published the Agriculture Review and the Journal of the American Agricultural Association. The Swedish separators were manufactured by P. Sharpies of Westchester, New York. In 1886, Oscar Lamm left the corporation as managing director, and was replaced by John Bernström in 1887. Gustaf de Laval was elected to the Royal Swedish Academy of Science and to the Royal Swedish Academy of Agriculture and Forestry. In the United Kingdom, the Dairy Supply Company, ABS’s main customer, became sole agent.

At the same time, Gustaf de Laval constructed a turbine engine, which could be used as a power source for the separator. A very important acquisition was the Alfa patent, bought in 1889 from a German, Clemens von Bechtolsheim.

In the years prior to 1890, the Danish company Burmeister & Wain won an ever-increasing share of the market. Burmeister & Wain was a major competitor both in Denmark, where it almost ousted ABS, and after 1883 in the international market. ABS marketed a product inferior to that of Burmeister & Wain; its cream separator had a lower skimming capability. In the short term, however, ABS managed to increase its sales because of the high demand from small dairies overseas, which Burmeister & Wain could not yet cater to effectively. Burmeister & Wain’s dominant market position in Denmark, ABS’s decline in that market, and Lefeldt’s inferior position in relation to foreign competitors in its home market, Germany, can be taken as evidence of the key importance of product quality to company growth.

When ABS began to find it hard to sell power-driven separators, it fitted them out with a new energy source—the turbine. At the same time, ABS launched its manual cream separators in the hope of reaching new groups of customers. Fourteen years were to pass before another Swedish company established itself in the Swedish and overseas markets. Before this competition had begun to seriously threaten ABS’s future, the market was broadened to include more countries.

Further Swedish companies began to establish themselves in the home market when de Laval’s patent ran out shortly after 1890. A new wave of patent registrations took place in the international market in the following decade, but these new entrants to the market produced manual cream separators.

In the mid-1890s, ABS diversified further by constructing industrial separators. The principle of centrifugal force was thus applied to a higher level of technology. At the same time, ABS diversified into technically simpler manual cream separators. Lower prices for these products ensured a far wider market than for power-driven separators.

By 1898 there were 35 plants worldwide manufacturing separators. Newcomers gained entry to the market by producing manual cream separators, which were not only less resource-intensive but also had a far larger market than the power-driven variety. Of the companies established after Burmeister & Wain, Lefeldt, and Fesca, the most prominent were Sharpies in the United States, Mélotte in Belgium, Josef Meys, of Hennef in Germany, Edmond Garin, of Cambrai in France, and Svenska Centrifug in Sweden.

The most dangerous rival to the Alfa system was the Belgian Mélotte patent. ABS acquired U.S. exploitation rights for this patent, but never made use of those rights, and thus greatly benefited the sales of its own system in the United States. In Europe, however, the Mélotte system was a major competitor.

After 1903 there came a wave of new companies worldwide, which exploited the expired Alfa patent. With only a few exceptions, entry to the market for the new companies was secured via manual cream separators. By 1906 ABS was competing with 50 companies in the German market. By 1912, there were 135 firms operating in the international market, 70 of them in Germany and 16 in Sweden. The most important of these were AB Pumpseparator and AB Baltic in Sweden, ABS’s former agents Bergedorfer Eisenwerk— which became a major competitor in 1904, Miele & Cie. and Westfalia in Germany, and A/S Titan in Denmark. These were mostly companies already established in other branches of engineering production, which had moved into separators.

In Stockholm, news had been received of impending bankruptcy at ABS’s competitor, Svenska Centrifug AB. ABS’s management persuaded several major Centrifug stockholders to exchange their shares at above-par rate for Alfa shares. In 1905, a majority stake was taken in Centrifug, including its subsidiary, Gloria Separator GmbH Berlin. The next competitor to be bought by ABS was one of the most important dairy machine plants in Germany and one of the largest in Europe in the early 1900s, the Bergedorfer Eisenwerk. As in the case of Svenska Centrifug, the financial position of the enterprise was too weak for the owner Carl Bergner to demand better sales terms, least of all to fight a takeover bid.

The last big competitor to be bought before World War I was Burmeister & Wain, in 1910. This firm, at the time equal in reputation to ABS, and financed with capital from its U.S. subsidiary, had been bought for SKr1.8 million so that it could be closed down; it would not have contributed anything new to ABS’s existing business.

During the period 1905 to 1910, when ABS began to take over competitors, it had at its disposal sufficient capital to act without endangering its own liquidity. During the 25 years between the foundation of its first overseas subsidiary in the United States in 1883 and the takeover of Bergedorfer Eisenwerk in 1907, more than SKr100 million had flowed into the coffers of the parent company in Stockholm.

The profits of the U.S. subsidiary company, transferred between 1895 and 1914, amounted to about SKr46 million. This sum provided the stockholders’ dividend, so that ABS could use the net consolidated profit of the whole company for reinvestment.

Production and organization techniques were also transferred from the U.S. subsidiary to the parent company and its European subsidiaries. In this way, ABS secured advantages of scale in the international separator market. Already in 1892 the U.S. subsidiary, the De Laval Cream Separator Company (Lavalco), was buying out all the U.S. shareholders and had built a new factory at Poughkeepsie, New York. This factory was highly profitable. In 1895 Francis Arend became managing director of Lavalco. The company had branches in Philadelphia, Pennsylvania, and in Chicago, and a subsidiary in San Francisco, California. A branch office opened in Canada in 1899, and became a subsidiary in 1912 under the name of the De Laval Dairy Supply Company. In 1899, the Swedish ABS participated in the formation of the De Laval Steam Turbine Company in the United States, by contributing US$240,000. In 1908, Gustaf de Laval left the ABS board of directors. He died five years later at the age of 67. In 1911, new subsidiaries were formed in Milan and Riga.

By the time World War I began in 1914, ABS had acquired shares in Goldkuhl & Broström, Buenos Aires. This was raised to a majority interest in 1927, when the name was changed to Sociedad Alfa-Laval. In 1960, it became a wholly owned ABS company.

In 1915, ABS’s John Bernström resigned as managing director and was replaced by his nephew, Captain Erik Bernström. J. Bernström left his post as chairman of the board in 1916, to be succeeded by Ernst Trygger, and his son Richard Bernström was vice chairman until his death in 1919. The U.S. company Lavalco produced a milking machine in 1918, and four years later the first milking machine based on the Lavalco design was manufactured by ABS in Sweden. In 1922 Axel Wästfelt succeeded Erik Bernström as managing director, and the company Zander & Ingeström became ABS’s sales representative for industrial separators in Sweden and Norway. In the United Kingdom the De Laval Chadburn Company was formed in 1923 for sales of milk and industrial separators. In 1925 an ABS subsidiary was formed in Helsinki, and in 1926 British De Laval Chadburn Company changed its name to Alfa-Laval Company, a wholly owned ABS company. In the same year subsidiaries were formed in Sydney, Australia, and Palmerston North, New Zealand. Between 1927 and 1929, subsidiaries were formed in Oslo, Warsaw, Danzig, and Zagreb, Yugoslavia.

In 1928, in cooperation with its Swedish competitor AB Pump-Separator, ABS bought the rival company AB Baltic. Only a few months later, ABS acquired its last major Swedish competitor, AB Pump-Separator itself. Both acquisitions, AB Baltic and AB Pump-Separator, had been more energetic than ABS in seeking ways to take advantage of the upswing in trade at the beginning of World War I, and had expanded their capacity and grown faster than ABS. These two acquisitions were the most important mergers within the Swedish separator industry.

In 1930 Jacob Wallenberg, of the Swedish banking house Stockholms Enskilda Bank, was elected to the board of directors. The U.S. company Lavalco had a bad year and ceased paying dividends until 1935. The German subsidiary Bergedorfer Eisenwerk also operated at a loss until the end of 1933. In 1934, the Alfa-Laval Company (U.K.) moved to facilities in Brentford, near London. A new subsidiary was formed in Melbourne in 1936, and the last important Swedish competitor, Eskilstuna Separator, was acquired in 1939. The outbreak of World War II brought with it an upswing for the U.S. companies. During the war, Lavalco increased the number of personnel from 700 to 2,300 and the U.S.-based Turbinbolaget increased personnel from 1,100 to 2,400. The companies’ sales increased by more than five times the prewar figure. More than 50% of the Poughkeepsie factory’s capacity was taken up by precision work for defense purposes, but at the German factory in Bergedorf manufacture of munitions was extremely limited. In 1942 Francis Arend, managing director of Lavalco, died and was succeeded by Ralph Stoddard, who three years later was succeeded by his son, George. ABS acquired Arend’s 10% share in Lavalco.

In 1939, Alfa-Laval Company at Brentford began producing industrial separators and milking machines, and increased its sales by 70%. During World War II’s so-called Skagerack blockade, Sweden and ABS were cut off from many business partners, but this period was to be a watershed between the old and the new periods.

In the United States Lavalco was given the task of constructing an oil separator for the U.S. Navy. Orders started pouring in from marine authorities, shipowners, and shipyards. U.K. Alfa-Laval Company became the European development center for these industrial separators. The research-and-development activities were transferred to Stockholm and several engineers were sent away on study visits, to rubber plantations in Southeast Asia, to olive groves in Italy, and on board whalers in the south Atlantic. Thousands of owners of olive groves and vineyards in Italy and France exchanged their ancient equipment for separators. By 1945, there were hundreds of applications for separators within industry and scientific research.

During the 1950s, the cellulose industry became the major customer group for plate heat exchangers, or PHEs—used in the pasteurizing process and for yeast manufacture. ABS’s interest in these developments was taken care of in Germany by Bergedorfer Eisenwerk. PHEs could be used to comparable advantage in breweries and yeast manufacture and, later, distilleries, wine producers, and other foodstuff industries came to appreciate their virtues. One successful Swedish competitor, Rosenblads Patenter, was taken over by ABS in 1962. ABS dominated the market for PHEs in the chemical and marine sectors while the strength of its U.K. competitor, the Aluminium Plant and Vessel Company (APV), lay in the food and beverage sectors. APV is the same size as Alfa-Laval in this sector. ABS’s major competitor in Europe was the family-owned company Westfalia AG in Oelde, Germany, and in the U.S. the Sharpies Separator Company of Philadelphia. Westfalia and APV combined forces against ABS.

Production of separators began in Nevers, France, in 1947, and the U.K. manufacture of milking machines was moved to Cwmbron in Wales in 1949. A year later, the Italian subsidiary acquired plant and storage facilities in Muggio/Monza near Milan, and a subsidiary was established in Brussels in 1952. ABS formed new subsidiaries in Switzerland in 1960; in Bombay in 1961, and in Sao Paulo and Lima in 1962. In the same year, Turbinbolaget in the United States was sold to Lehrman Brothers. In 1963, ABS (AB Separator) changed its name to Alfa-Laval AB. Further subsidiaries were formed in Santiago de Chile and Mexico City, and in the United States Lavalco acquired G & H Products, Jay-Ro Services, and Hercules Filter. In 1966, the Spanish company Touron y Cia (Tycosa), Madrid, became a wholly owned company. A new Alfa-Laval subsidiary was formed in Amsterdam and took over industrial sales from the agent, Koopman & Company, in 1967. At the same time, a new subsidiary was formed in Zürich after Alfa-Laval’s takeover of its agent, Wenger. In 1968, Bergedorfer Eisenwerk merged with STAL Refrigeration AB of Norrköping, Sweden. The new company was known as Stal-Astra GmbH. In Melbourne, H. Hamilton Pty, Ltd. was acquired and the name changed to Alfa-Laval Separation A/S. Lavalco acquired two new subsidiaries, American Tool & Machinery, and Contherm Corporation. In the same year a subsidiary was formed in Kuala Lumpur, and a minority interest was acquired in the Japanese firm Kurose. In 1970 a subsidiary was formed in Algeria, and new office and storage facilities were built in Dublin and Melbourne. The Spanish subsidiary purchased property near Madrid, and constructed workshops, warehousing, and office facilities there. In 1974, property and buildings were purchased in Lidcombe, near Sydney. Alfa-Laval Engineering was formed in Tokyo and another subsidiary established in Caracas. In Leewarden, the Netherlands, Tebel Maschinefabrieken was acquired for the manufacturing of machines for cheesemaking. In 1975 a subsidiary was formed in Iran in connection with the delivery of two large dairy facilities. In 1976, an office was opened in Moscow, and Lavalco established production facilities in Branchbury, New Jersey, also building workshops and offices for its spray-dryer department. In the same year, Sullivan Systems of the United States, a producer of refining systems for vegetable oil, was acquired. In 1977, a subsidiary was formed in Athens; the West German subsidiary acquired Atmos Lebensmitteltechnik, a manufacturer of machines for the meat industry; STAL Refrigeration formed a subsidiary in the United States; De Laval Company (U.K.) purchased the Ibex Engineering Company, Hastings; and the OTEC project for the utilization of temperature differences in tropical oceans was initiated. In 1979 the U.S. company changed its name to Alfa-Laval Inc. and the Canadian company became Alfa-Laval Lté. In 1980, Alfa-Laval Company (U.K.) bought Dairy Supplies Hereford. A subsidiary was formed in Harare, Zimbabwe. In 1981, the West German company Bran & Lübbe, Norderstedt, a producer of dosing pumps and system and measurement instruments for the food industry, was acquired. This company has subsidiaries in a number of countries. The French Alfa-Laval company bought the firm Jean Pagées et Fils of Lyon, office and service center facilities were built in Singapore, a subsidiary was formed in Nairobi, and the Peruvian subsidiary constructed offices and warehouses. In the same period, Alfa-Laval increased its interest in the Japanese firm of Nagase-Alfa to 70% and Alfa-Laval Service was established in Japan as a wholly owned company for the sale of spare parts to the industrial sector. Alfa-Laval Contracting was formed in the United Kingdom, and in West Germany Alfa-Laval acquired 26% of the shares in G. Riedel Kälte- und Klimatechnik. In 1983 offices were opened in Cairo and Damascus to service the Middle Eastern market.

In early 1985, Alfa-Laval established a subsidiary in Portugal and an office was opened in Peking. In the same year, 100% of the free-floating shares of the Swiss company Chemap and its subsidiaries were acquired. Chemap is one of the world’s largest manufacturers of fermenters. Haven Automation International, Hong Kong, along with its subsidiaries, was purchased. The company serves the marine and offshore markets in Southeast Asia. In Australia, Heat Transfer Pty. Ltd., a manufacturer of a specific type of tube heat exchanger, was acquired and a majority holding was taken in Bioter S.A., one of the market leaders in fish feed in Spain. In New Zealand, Alfa-Laval purchased the company Manus Nu-Pulse.

Two companies in Sweden and one in the Netherlands, the Tebel Pneumatiek, were sold during 1985. The total number of Alfa-Laval’s employees decreased by 636 to 15,394; 5,239 new employees were appointed in Sweden and 10,155 abroad. In 1986 Alfa-Laval established a finance company, Alfinal, in Belgium. Finance companies were also formed in Denmark and West Germany, and a leasing company was started in Spain.

After a long period at the helm of Alfa-Laval, since 1922, Axel Wästfelt had retired as managing director in 1946 and was replaced by the English-born Harry G. Faulkner. Faulkner had been an auditor in the U.K. subsidiary of accounting company Price Waterhouse & Company and went on in the 1930s to become managing director of Electrolux. During Faulkner’s leadership Alfa-Laval grew at a rapid pace in all traditional areas, particularly overseas. He led the company aggressively in industrial marketing, in sharp contrast with the preceding decades. In 1960, the 36-year-old Hans Stahle took over as managing director.

A principal feature of the change lay in the transfers of companies, which were carried out during the merger-happy 1960s, in consultation with Jacob Wallenberg, chairman of the board from 1960 to 1970. The factory manufacturing industrial separators was moved from the Stockholm center to Tumba, 25 kilometers southwest of the city, and in 1964 the head office followed. In 1980 Hans Stahle became chairman and was succeeded as managing director by Harry Faulkner, son of Harry G. Faulkner. During the 1980s, a large number of divisions within manufacturing and administration were formed into affiliates responsible for their own accounting. In 1989 Harry Faulkner was replaced by Lars V. Kylberg, who joined Alfa-Laval in May 1989. In October of the same year, Hans Stahle died while still executive chairman and was succeeded by Peder Bonde.

It was during the directorship of Harry Faulkner that Alfa-Laval bought the Sharpies Separator Company, at the end of 1988. Sharpies was until 1988 the world’s largest manufacturer of decanter centrifuges, with a very strong position in the U.S. domestic market. It was the same company that had already in 1883-1884 cooperated with Alfa-Laval in the U.S. market, and since 1887 had turned out to be one of the Swedish company’s most aggressive competitors, particularly in the United States. Harry Faulkner pointed out that of the 20 acquisitions made between 1986 and 1988 by Alfa-Laval, Sharpies was the largest. The acquisition of Sharpies was of strategic importance since it greatly strengthened the separator business which forms the core of Alfa-Laval’s operations. The Sharpies group has subsidiaries in some ten countries and production facilities in both the United States and Europe. The group’s annual sales are approximately US$100 million. Koppens Machinenfabriek in the Netherlands and Kramer & Grebe in West Germany were also integrated into the Alfa-Laval group in 1989. During the first half of 1990, Alfa-Laval acquired TW Kutter in the United States, an engineering company and food processing equipment distributor. In the heat exchanger sector, Alfa-Laval purchased the Italian company Artec. Furthermore, joint-owned sales companies were formed in Hungary and Poland and negotiations were in progress in 1990 for the establishment of subsidiaries in other former Eastern bloc countries. Between 1985 and 1989, the number of employees in the original Alfa-Laval group was reduced by 4,000 as a result of rationalization, restructuring of production, and the sale of peripheral operations, and a total of 7,500 new employees joined the group as a result of acquisitions. The total number of employees during 1989 increased by 2,561, from 17,156 in 1988 to 19,717 in 1989. In 1989 new managing director Lars V. Kylberg pointed out that “in recent years our sales have doubled in North America. In the booming Pacific Basin, we are firmly rooted in Singapore and the Asian countries. Our overall strategy for the coming years is to grow within our core business.”

Principal Subsidiaries

Alfa-Laval SA (Argentina); Alfa-Laval Equipamentos Ltda. (Brazil); Alfa-Laval Ltd. (Canada); Alfa-Laval SA de CV (Mexico); Alfa-Laval, Inc. (U.S.A.); Alfa-Laval (Hong Kong) Ltd.; Alfa-Laval (India) Ltd.; Alfa-Laval KK (Japan); Alfa-Laval South East Asia Pte Ltd. (Singapore); AG Alfa-Laval (Austria); Alfa-Laval Flow Equipment (Belgium); Alfa-Laval Industri A/S (Denmark); Alfa-Laval Industri OY (Finland); Alfa-Laval SA (France); Alfa-Laval Industrie GmbH (Germany); Alfa-Laval SPA (Italy); Alfa-Laval Nederland NV (Netherlands); Alfa-Laval Industri AS (Norway); Alfa-Laval Industriegesellschaft AG (Switzerland); Alfa-Laval Company Ltd. (United Kingdom); Alfa-Laval (Australia) Pty Ltd.; Alfa-Laval (NZ) Ltd. (New Zealand); Alfa-Laval Agrar GmbH (Germany); Bran & Lübbe GmbH (Germany); Alfa-Laval Agri International AB; Alfa-Laval Food Engineering AB; Sattcontrol AB; Alfa-Laval Separation AB; Alfa-Laval Thermal AB.