Strategy and growth
Shift to growth
Demand for our products is driven by a number of factors, including the rising global need for energy and the shift towards fossil-free technologies. We foresee a continued demand for oil and gas, which will continue to be profitable segments. We have identified key segments where we can see a favorable growth potential, such as the industrial heating, medical and renewable energy segments.
Many industries have started the transformation to fossil-free production and in many cases, electrification of heating processes is key to enabling this transformation. Kanthal® is our brand for products and services in the area of sustainable industrial heating technology and resistance materials. Having the technology, expertise and global presence, Kanthal is partnering with energy-intensive industries, such as steel and aluminum, to help reduce their carbon footprint. In addition to CO2 and NOx reductions, our electric solutions provide energy-efficient, safe and controllable heat.
We also produce advanced materials for the medical segment which is fast-growing and profitable. We see an opportunity to grow, particularly within the wire-forming and coating area. We also see opportunities with forward integration in the value chain and by adding complementary capabilities. In 2020, our medical business unit opened a site in Arizona, US, enabling us to respond to the growing demand for our products and to come closer to our customers.
Renewables and their share of global power generation are expected to grow substantially, supported by large governmental investments. We will continue to explore and develop business opportunities in renewable energy sources, such as solar, geothermal and biomass, and take a leading position within materials technology for system enablers by primarily focusing on hydrogen and batteries.
We are evolving and advancing together with our customers when it comes to digitalization. One example is the Sandvik Mobile Service Solutions container. It supplies coiled tubing solutions to customers on site, using a digitally connected system to straighten and cut tubing to match customer specifications. This significantly reduces waste compared to delivering a standard tube size, leading to substantial material, time and cost savings. The fully mobile container can be manned in person or steered remotely for everything from administrative details, such as certification and invoicing, to technological processes like the straightening and cutting of tubing.
Digital developments were accelerated due to the Covid-19 pandemic, as we needed to find new ways of working and communicating. In India, we developed a method to carry out inspections and testing activities remotely instead of sending engineers to the customer. Everything is digital, from inspection all the way to verification and approval. Remote inspection is highly appreciated by customers and has provided new business opportunities.
Within our tube production facility in Werther, Germany, we quickly adapted to a digitalized set-up. The site had been at the forefront of production development, including integrated digital systems, but the pandemic forced a full-scale pilot. During the pandemic, the site went fully digital. Programmers and automation engineers were connected to all the machines via a network and controlled and supported the functions of the machines from the safety of their homes.
Agile through cycle
A culture of continuous improvements, flexibility and efficiency are key prerequisites to managing our volatile business. With the downturn during 2020, we acted quickly with mitigating measures to protect our profitability despite a severe drop in order intake. To adjust our cost base to the new demand situation, we took several actions, including reducing work hours and reducing the number of consultants, staff layoffs and postponing investments. Overall, we have protected our margins well in the downturn. By postponing investments and successfully managing our inventory and accounts receivables, we secured a strong cash flow throughout the year.
We are continuously working with our footprint, both to bring it closer to customers, but also from a cost-efficiency perspective. In 2020, we finalized the closure of our site in Arnprior, Canada and moved the production to Scranton in the US. We also continued moving a production unit from our site in Sandviken, Sweden to Chomutov, in the Czech Republic. During the third quarter, our Tube division announced a reorganization that will result in exiting our site in Charost, France, following the decrease in demand within the aerospace segment.