Medical Metal

Thomas Kroyer, Klingel’s Chief Financial Officer since April 2014, lists three reasons for repositioning the company in the market by changing its name and revamping its corporate identity: "Helmut Klingel, who had founded the company in 1986 with two employees, has not been with the firm for several years. Also, our operations are no longer characterized by simple contract manufacturing on CNC machines. And about two-thirds of our business already comes from clients in medical technology."

With some 300 employees and revenue approaching EUR 30 million in 2014, Klingel is one of the EU’s major suppliers of complex precision components manufactured from high-strength materials such as high-alloy stainless steels and titanium. "We supply the components, our customers provide the systems and their customers deliver complete solutions," says Kroyer. One example comes from the healthcare industry: Klingel supplies mechanical component assemblies to a global leader in surgical tables, and that company in turn provides systems for operating rooms.

Klingel is a certified manufacturer of medical devices under ISO 13485, among other standards. Meeting ISO requirements also benefits other customers, for example from the measurement and control industries. In practice, however, customers from all sectors push quality higher and higher, e.g. in terms of the cleanliness of the final product. "Today we're already below 300 µ for metallic particles on finished products. We're currently working with a customer to reduce the size of residual particles to less than 100 µ", says Kroyer. Requirements such as this one arise from client applications: if a customer plans to weld a metal diaphragm to a component, metallic particles exceeding the size limit would press through the diaphragm and make the component unfit for the intended purpose.

The new company logo, a symbol representing metal being machined with a sharp tool, doesn't stand for a vision to be achieved long-term. On the contrary –There were no organisational changes or upgrades of production to fill out Klingel’s new identity. "We're already on our way to becoming a 'clean factory' in terms of organisation, cleanliness, production equipment and even clothing. Now, our corporate identity communicates to the outside what is actually happening within", says Kroyer.

Does a clear focus on medical technology carry any risk? Kroyer doesn't see it as being detrimental to business: "Customers in industries other than med-tech aren't coming to us with any old job. They need highly sophisticated components and component assemblies – we're talking about complex shapes manufactured with materials that are difficult to work on. These companies can identify completely with the implications of 'medical metal'." People who think concentrating on medical technology poses a risk should probably think again as this is a large growth industry with products ranging from dental implants to surgical tables. While there are some major players such as Johnson & Johnson, a multi-national company based in the U.S., the European market is home to many small and medium-sized specialist firms. At the end of the day, customer concentration at Klingel is low as the three largest clients represent some 25% of revenue.

Klingel's new corporate identity is part of the company's growth strategy. If "medical metal" is taken as a category, it fits with historical organic growth – in 2010, Klingel's revenue topped EUR 20 million for the first time – which is expected to continue in the years to come. An acquisition would also be in line with the new identity, says Kroyer. "Our industry has become highly dynamic, especially since U.S. companies began looking for investment opportunities in Europe. At the same time, it is becoming increasingly difficult for smaller companies – i.e. those generating less revenue than we are, and there are a lot of them – to keep up with more and more regulation. That's why we have an ear to the ground, though we'd only acquire a company focused on medical technology."

Other aspects of the strategy address customer retention and added value. "Design to manufacture" is the name of the game: Klingel has already been involved in research and development at some major clients – right at the heart of where ideas are transformed into product design. During the R&D process, plans for new functionality and features are analysed to ascertain technical and financial feasibility until there is a solution or a prototype. In addition, several outsourced processes are being brought back in-house for more added value and customer service: in 2014, the company added laser welding to its portfolio. In 2015, Klingel will offer electro-polishing and for 2016, anodising is under consideration.

Other basics for future growth are in place as well. While short-term growth can be realized on current premises, Klingel will need to expand both production and logistics to grow further. At present, the options of building and leasing are both on the table, but Kroyer is not ready to commit to one or the other: "Working with different partners, we can draw on either option at our location."

In any case, objectives are set. "Over the coming years, the company plans to increase revenue at a double-digit rate and profit should rise right alongside it," says Kroyer. Driven – mainly – by precision in metal for medical technology.