Axel Schweitzer

Headed Back for the Black

alba_laif
Alba, trying to clean up the mess.
  • Why it matters

    Why it matters

    Waste-management company Alba is in the midst of negotiations with Chinese and German investors to sell off portions of its business.

  • Facts

    Facts

    • Alba is a family-owned company run by two brothers, Axel and Eric Schweitzer, and had 2014 sales of €2.5 billion, or .
    • The volume of waste in China is expected to double within the next decade.
    • Relatively few waste-disposal and recycling technologies are currently in use within the Chinese market.
  • Audio

    Audio

  • Pdf

Axel Schweitzer had just stepped off the plane from Hong Kong, his second home, before sitting down with us for this interview. He is the co-chief executive of Berlin waste-management company Alba, which he runs jointly with his brother Eric Schweitzer, who is also president of the Association of German Chambers of Commerce and Industry (DIHK).

We spot the breathing mask in his luggage, which he uses to cope with the smog in China. Axel Schweitzer also brought along another surprise.

 

Handelsblatt: Mr. Schweitzer, ten months ago you announced that you intended to sell a minority share in your family-owned company to an investor. What became of that?

Mr. Schweitzer: Our talks with Asian investors are pretty far along. But we have learned that it makes sense not to choose only one partner for the Alba Group.

So now you are seeking multiple investors?

That’s right. We have decided to choose an Asian partner for our business in China and a domestic partner for our second major growth business, the service business in Europe.

Does that mean that you are already negotiating with German investors?

No, the process for the service company will only begin in the next few months.

This sounds as if the Asians, with whom you have been in negotiations for a few months, are only interested in the China business.

The main objective in China is to dispose of waste and recycle it. In Europe, however, we are much further along. Here we want an investor to support us with our Four R strategy: Reduce, Reuse, Recycle and Rethink. For instance, we offer to take back reusable transport packaging to prevent it from becoming waste in the first place. These are completely different technical solutions.

Our goal is not to find an investor as quickly as possible, but the right investor.

But why is that an argument against only one investor?

Because two investors, with their different core competencies, can provide us with better qualitative support to enable us to achieve our growth objectives in both the service business and the China business.

How far along are the talks for the China business?

We are in advanced talks with several Asian investors in China. A declaration of intent was already signed with one of them.

With whom?

Unfortunately I can’t tell you the name, because we are deliberately keeping the selling process open. It’s possible that we will come to an agreement with him, but we may also end up coming to terms with another investor. We plan to sign an agreement this summer.

Isn’t that very late? You had originally planned to announce a co-partner in the spring.

Our goal is not to find an investor as quickly as possible, but the right investor.

How many candidates are still in the running?

About a handful.

What will you do with the money from the two investors you will have soon? Have your plans changed in any way?

No. We want to use the additional partnership capital to grow in China and in the European service market. At the same time, we also want to improve our balance sheet ratios.

How much capital do you expect from the investors?

I can’t tell you exactly how much at this point. That will be the outcome of the bidding process and the negotiations.

You initially planned to sell up to 49 percent of shares to outside partners. Are you sticking to that?

It’s possible that we will sell more than 50 percent in China. As far as the service goes, I can’t tell you how much at this point. As I mentioned, we are just beginning that process.

This sounds as if you were preparing to split the company.

No, on the contrary. We are opening up the Chinese and service business to new capital so that we can continue reducing our debt and financing growth. And we intend to completely retain our Waste and Metals core area, which is the disposal business, mainly in Germany and Poland.

 

125 Alba-WTB resume

 

Nevertheless, you could certainly lose control over the China business. Can you imagine the same thing happening with the service business?

I don’t want to rule anything out at this point. The question is how you define control. Our goal is to help shape the most interesting growth businesses. Approaching the capital market may also make sense at some point.

So an IPO?

For example. But the underlying conditions for that don’t exist at this point.

An Alba China or Alba Services business doesn’t even exist yet. Will you establish intermediate holding companies for the purpose of a partial spinoff?

The two activities are made up of many individual companies within the group. Various technical configurations are possible, depending on specific investor interests.

Are the potential Asian partners demanding that you invest all the money in the China business?

No, no. We will further reduce our debt in any case.

If we correctly understand older statements you have made, it amounts to €500 million ($542 million) in interest-bearing loans. To what level do you want it to be reduced to?

Please understand that I cannot comment on exact figures. However, we did significantly reduce our debt in 2015.

Does that mean the Alba Group made it back into the black in 2015?

We cannot comment on the figures for 2015 yet. I can say this much, however: Our results were on target or ahead of target in 2015 in all of our business segments, except in the Steel and Metal division. There the entire industry faced an uphill battle because of price reductions.

So you are apparently not in the black overall yet.

As we have announced, the plan is to have the entire group back in the black for 2017.

What role does the China business play in this endeavor?

An important one. We have already made more progress than we had hoped. We have adapted several technologies from our portfolio in China, including automobile recycling in the southern Chinese city of Tongling. In Hong Kong, where we prevailed in a bidding war against 20 international competitors, we broke ground last week for an electronic waste recycling plant.

What makes China so attractive to Alba?

China is the world’s largest producer of waste. And the volume will double in the next 10 years. Few technologies are in use there, so that there is a great demand for know-how.

If you sell a majority stake in your business there, won’t you be depriving yourself of growth opportunities?

We believe that we can achieve our growth objectives more effectively in partnerships.

If there is a majority sale, you will have to deconsolidate your China business. How much of your revenue, currently €2.45 billion, will you lose in the process?

We anticipate about €500 million in revenue for China.

What do the banks say to that?

We are in talks with our banks, and they also support our approach. We are better able to achieve our three goals – to grow in Europe and in China, as well as to improve our balance sheet ratios – with more than one partner. If we were to pursue all three goals in succession, we could end up being too late in many markets.

Lawmakers could soon eliminate growth in your German service division. On Friday, the Bundesrat (the upper house of the German parliament) proposed that the responsibility for packaging waste be returned to local authorities.

We feel very much at ease with the proposed legislation, because we don’t see a need for a resource act in Germany. More than a third of all German households already have a recycling bin, without requiring a new law for that.

You can only feel at ease with the situation if the Bundesrat proposal results in the planned resource law being shelved. But what happens if the Bundesrat prevails with its call for re-municipalization?

I seriously doubt that will happen. The environment ministry is not about to enthusiastically implement the Bundesrat’s motion in this legislative period.

Mr. Schweitzer, thank you for this interview.

 

The interview was conducted by Grischa Brower-Rabinowitsch and Christoph Schlautmann. To get in touch with them: brower@handelsblatt.com and schlautmann@handelsblatt.com

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