Born out of an enthusiasm for chemistry, gases and the scientific approach of its forefathers, the SIAD Group sits proudly at the heart of the European gas & equipment market, over eight decades later.
Now under its fourth generation of family leadership with Dr Bernardo Sestini at the helm as Managing Director, independent Tier 2 player SIAD is steadily developing its business operations in Europe and beyond.
Although based in Bergamo, northeast Italy, SIAD has nurtured a network of operations, agents and after-sales service across different corners of the globe. These are primarily operating under the company’s ever-expanding engineering business, while SIAD’s gas activity continues consolidating in its native Italy.
And it’s the synergies between the ‘two different worlds’ of gases and engineering that SIAD is focusing on right now.
Synergies and opportunities
Having traversed from our UK office to SIAD’s Bergamo base, gasworld was keen to find out what’s driving the Sestini family enterprise at the moment – and whether the company’s priorities have changed since our last interview in July 2005.
Five years ago, the company was keen to point out that it may be interested in opportunities arising in those countries that it did not yet have a presence in. This is a policy SIAD is still observing all these years later, as the company cautiously evaluates all the opportunities on the table before it.
Two such opportunities have presented themselves recently and true to its word, SIAD followed-up on its interest in these emerging markets. Our upbeat interviewee Dr Sestini explains, “Two years ago we opened new subsidiaries of SIAD; one was in Russia, in Moscow, the other was in Kiev (Ukraine).”
“The scope of these two companies is a little different from each other, because in this case the Russian company and the Ukraine company are involved in different businesses – in the gas business and the engineering business.”
“And so in answer to your question,” he adds, “from 2005 we have entered two new countries. For the gases business, in Russia and Ukraine we are still evaluating some opportunities that are on the table. But in the meantime, our engineering company SIAD MI has already been active in Russia for a long time with guidance of the people we now have in Moscow.”
So what else has changed since 2005? While SIAD still evaluates the opportunities that are available, Sestini informs us that there is also a greater focus on leveraging the synergies that already exist between its two key business lines, gases and engineering.
The financial and economic climate has also taken a turn for the worse in that time, with the recent recession prompting SIAD to review its internal processes and again, capture the synergy between gases and engineering – described by Sestini as ‘two different worlds’.
“I think we have to divide SIAD gas and SIAD engineering, they are like two different worlds; also from a geographic point of view, the gas business is local and the engineering business is worldwide.”
“We are always looking around us for new opportunities that may exist or arise, on both the engineering side and for the gases business.”
“We are always looking at opportunities to work to optimise and integrate the two sides of the group. SIAD continues to implement the knowledge and the experience between the engineering and the gases business, because we recognise that we can leverage a lot of opportunities between them both.”
Strange though it might sound, one of the bigger opportunities that arose recently was actually born out of the recession and it’s unavoidable consequences. Just like the majority of its industrial gas & equipment peers, SIAD has been tightening its belt and reaping the rewards of increased productivity.
Rather than see this as a backward step, SIAD and the Sestini family saw this as a positive development and a time to reflect on its operations.
Sestini said, “SIAD has always been a good and positive company but last year, with the very high recession, we again made a check-up and reviewed our operations – it was very good because in the end, we increased our productivity and efficiency as a result.”
“This was the major opportunity that the recession afforded us. Also, when the company runs very well, maybe you don’t take quite so much care with some costs and you are more focused on growth. When the economies are slipping however, you re-evaluate and take a closer look.”
“I’d like to point out that SIAD always paid close attention to cost. But in 2009, the opportunity arose to re-check all of our internal processes and we were able to implement even greater efficiency and productivity in our group. The total consolidated turnover in 2009 was €415m.”
Best of both worlds
Just as SIAD is currently maximising the potential that lies in the relationship between the two different spectrums of gases and engineering, it’s also garnering the best of both worlds from another perspective too; it’s relationship with industrial gas major Praxair Inc.
Linked since 1987, SIAD and Praxair have a mutually beneficial understanding that allows the former to package the support, knowledge and expertise of a major player with its own inimitable spirit of the entrepreneur.
With Praxair active in Western Europe and the SIAD enterprise operating with a healthy presence in Central & Eastern Europe, the venture works well for both parties. It’s a situation which, despite prompting questions over autonomy from time-to-time, allows a family-owned company like SIAD to flourish and learn from the approach of a respected major like Praxair.
Citing the venture as a significant strength, Sestini is in a reflective mood as we ponder our next question: what sets SIAD apart from its fellow Tier 2 players?
“SIAD is a particular case I think because it is a family company, but in the meantime we have link to a major, that is Praxair, and the entrepreneur approach of the business is intact. In the meantime, we have the opportunity to be linked with Praxair and absorb all the good things and the positive things that a multinational company can develop – and we can take and learn from that.”
“I think there are two different approaches, the entrepreneur approach and the market manager approach. One is good and the other is equally good; I think SIAD is in a situation that has both, and we are working to lead this mentally and take the best of both mentalities, and I think this is something that is unique with a joint venture.”
And any disadvantages, gasworld asks?
“I would not say that there is no disadvantage, because the disadvantage is that if you are a family company it means you are alone. In our case however, we are not alone because while we are a family company and we still own the majority of our company, we are also with a multinational. Therefore, I don’t see disadvantages at present.”
Turning to the geographical muscle of the venture in Europe, Sestini adds, “I think with the SIAD-Praxair relationship that started in 1987, it’s still a very good relationship and we continue to implement our mutual strategy in terms of optimisation of the company.”
“It is very clear that in our joint venture with Praxair, we have two different scopes (geographically). SIAD takes care of the Eastern Europe market, and Praxair for sure has the business in Western Europe.”
With such a strong foothold throughout Europe, we could perhaps be forgiven for thinking that the company has this region sewn-up and may be targeting expansion elsewhere.
We’ve already learned during our interview that there’s a focus towards the potential existing opportunities between gases & engineering, but does SIAD harbour any other aspirations? Geographical expansion perhaps?
For the gases business, we’re told, SIAD is keen to consolidate its presence in Italy. “I think the priority for the gases business is to consolidate our presence in the countries where we are, notably Italy and Central & Eastern Europe.”
“And for our other big business, engineering, it is to develop our position in the cryogenic plants and compressor markets.”
“In the gases business,” Sestini emphasises, “We are already present in this country (Italy), that is already a big geography. For the engineering business we have opened a company in China, we have already started to begin work in China, and we are evaluating some other plans where we can expand our engineering presence.”
“But in the gases business, we do not think it is all about geographical expansion.”
Evidently not. As we speak with Dr Sestini it’s clear that any major geographical expansion is likely to come under the guise of SIAD’s equipment/engineering business. To that end, the company already has a budding network of offices, agents and after-sales service teams around the world, from Fiji to China.
SIAD Macchine Impianti (MI) plays a huge role in this global outreach. As Sestini explains, SIAD MI is one of the key engineering arms of the SIAD Group and is involved in two key areas, notably ASU plants and compressor production.
The division is an international company with 250 employees and a turnover of around €105m in 2009, designing, producing and installing compressors and systems for the production of industrial gases all over the world.
Its product range includes API618 Reciprocating Compressors, Standard Compressors (PET), ASUs, and Welding Cutting & Handling Technologies. Our interviewee elucidates, “SIAD MI is a part of the SIAD Group, it’s a company that’s involved in two major sectors, notably ASU plants, cryogenic ASU plants, and compressor production. Compressor production is the value two line.”
“Our compressors are mainly for the mineral water company, for blow-moulding machines to create the bottles, and I think that SIAD MI is one of the leaders of the market in this field. And the other big line of the compressor business is the process compressor. When I say process compressors, that is a compressor for the gases industry, for the chemical business and the petrochemicals industry.”
“The network of the compressor line is worldwide,” he adds, “because we have agents and after-sales service all over the world to cover all of the customers that we have. For example, we have a compressor on Fiji island, for Fiji Water, and our after-sales service can take care of this part of our business.”
“In the past ten years, we have developed the network of our presence all around the world.”
In closing our interview, Sestini indicates that it isn’t all doom & gloom in the equipment market. The company’s engineering business is clearly performing well around the world and there is still reason to be positive as 2010 unfolds.
An expected upswing in demand for gases and equipment is already showing signs of materialising for some companies and regions across the globe.
He concludes, “The equipment business was still good, we still have a very good backlog. I think we have a strong order backlog until the end of 2011. Sure, the cryogenic plant orders in 2009, was less than 2008. But in 2009 SIAD MI was able to catch orders in the field of plants, and for sure in the compressor line.”
“The opportunities were obviously limited when compared to 2008, but we were able to implement our backlog in our future to grow.”