An analysis of the recently merged group plans to export European quality to all of its emerging logistics markets.
Given the perilous state of the Italian economy and its automotive industry, you might assume an Italian-based logistics company rooted in services to the Fiat Group, and which owns a portfolio of warehouse, truck and rail equipment in Europe, would be bunkering down on costs and selling assets as it struggled for survival.
But the Argol Villanova Group is healthy and poised for expansion and even acquisitions this year, according to Liviana Forza, corporate business development director.
Despite drops in in Italy, which accounts for 55% of its business, the group was profitable in 2012 and made significant investments elsewhere, including in trucks and warehouses in Brazil. Revenue grew 9% in 2011 and 1% in 2012 to €404m ($525m), while Forza says Argol Villanova expects an increase of around 15% in 2013, driven mainly by international markets such as Brazil, China and Mexico. Debt levels are sustainable too, as the company holds a positive ratio between its net book value and net financial position.
The group is the product of the merger last year of Argol and Villanova, two companies that already shared the same owner – Italy’s Bonzano family – but were previously managed separately. The merger married Villanova’s considerable logistics business in automotive and other sectors to Argol, which operates mainly in the energy, industrial and aerospace, and also engineers and manufactures packaging.
Very global for a middleweight
Given its size, Argol Villanova’s global reach and services make it something of an anomaly among third party logistics providers. While it is certainly no padroncini – Italy’s small, i owner-operator trucking companies – neither is it a giant like DHL, Panalpina, Kuehne + Nagel or Ceva Logistics. Yet, Argol Villanova’s international activities and investments rival those of companies with several times its revenue.
In automotive, which makes up 35% of the group’s business, it has significant activity across Europe, Eastern Europe, South America and North Africa, as well as burgeoning operations in North America, China and India. A map colouring in the flows of CKDs and parts that Argol Villanova manages – the group’s signature automotive service – would leave almost no region of the world untouched.
The company’s r a nge of services also defies those typical of other 3PLs in the segment, thanks in part to the merger. The group handles inbound, factory and outbound logistics, freight forwarding, as well as packaging engineering and production. It also balances services in factories or subcontracted equipment with a large share of owned assets.
Forza joined the company last year with more than 20 years of experience in the industrial and automotive sectors (including Fiat and it’s agricultural equipment arm, CNH). She credits the group’s flexibility in strategy and investment to it being family-owned – the group’s president and main shareholder, Piero Carlo Bonzano, is the son of the company’s founder – but also recognises the need for scale in the logistics industry. “Flexibility and quick-decision making are a strength for our company thanks to our organisation and our shareholders,” Forza says. “On the other side, we do need scale, which is why we put the two companies together.”
Growing far from home
Argol Villanova’s logistics roots grew with Fiat in the 1970s and spread globally with the carmaker from Italy to Poland, Brazil, China and Mexico, investing in assets or companies along the way. A recent example can be found in Brazil, where it bought a fleet to run full truckloads of automotive parts from ports at Rio de Janeiro and Sao Paulo to assembly plants.
Although Forza emphasises that Argol Villanova does not consider itself a “transportation company,” it owns more than 200 trucks and also has a heavy road transport fleet through a minority ownership in a specialist provider, TCT. Automotive has been the main driver of these investments, representing more than 50% of the company’s transport activity, based mainly in Italy, Eastern Europe and Brazil. The company also owns internal rail connections and manages rail freight, including automotive parts, between Italy and Poland. But investment outside Europe has accelerated and Forza anticipates that Italy’s share of the group’s business will fall to 50% by 2015, and to around 40% within five years.
Brazil, China and North America
Brazil and South America look set to be the main engines of that diversification, as Forza expects the group’s revenue in the country to double in 2013 following its fleet investments, but aside from transport, the group also expects important growth for Brazil in core areas of CKD and factory logistics.
More growth is expected in China, where the group has a CKD operation in Nanjing with Iveco. “We would like to grow the business [in China] and work with other manufacturing customers,” says Forza. “The numbers are not so significant at the moment but the potential is great.”
North America represents another important region. The group already has a presence here, working with CNH and Chrysler (through Fiat) in the US and Mexico on imported CKD and part flows. Forza suggests that Argol Villanova is currently finalising “partnerships and acquisitions” in North America that will help it to grow further there.
The company is also involved in other global operations. As well as imported parts and CKDs to India, it works for Maruti Suzuki, the country’s largest carmaker, as a kind of outsourced purchasing department for European supplier management. “We manage all the activities of supplier management and goods collection into our complex in Villanova [a city outside Turin ] for onward delivery to India,” says Forza.
CKD and just-in-time delivery make up about half of Argol Villanova’s automotive business. The group has three major sites in Italy, as well as one each in Poland, Brazil and China. According to Luca Raule, head of corporate business development, the transit time between the goods arriving and leaving the centre is contracted to be 48 hours or less.
Forza expects considerable growth in this segment. While she acknowledges that OEMs are localising their supply bases, she says the supply chain is also lengthening for parts that are less complex or single-sourced across global platforms.
More fundamentally to Argol Villanova’s business, Fiat’s CKD flows are expected to rise over the coming years. Forza also points to the growth of production and global platforms in South America, Mexico and Thailand. “Others may pick up in the near future and increase their logistics requirements, such as India,” she adds.
Within these CKD flows, the group is also designing and supplying a considerable amount of packaging, including racks, metal containers and wooden packaging. Across Europe, Argol Villanova manages the flow of returnable collapsible metal containers, tracing its locations through transit or warehouses. The percentage of returnable containers used is currently around 60%, says Raule. “At the moment we are not providing this service for metallic racks going to overseas destinations,” he says. “This is mainly the decision of our customer, who manages this activity by itself.”
The group is also expanding services to meet manufacturers’ total transport needs, including freight forwarding. “We already had sea and air freight forwarding, but we believe that the cooperation between automotive and freight forwarding will help with managing the return flows for CKD,” says Forza. “It is also part of what we hear from our customers, and their desire to have a ‘one-stop shop’ for logistics.”
Putting money where your business is
With growing production, increasing CKD flows and a rising need among many manufacturers to handle more intercontinental freight, Argol Villanova appears well positioned to grow. Its expansion in the Americas and Asia could serve as a prescient example for struggling logistics companies in southern Europe.
However, global expansion is rarely as simple as setting up a regional sales office and waiting for the business to arrive. Such expansion can suffer if firms bring only their logos, subcontracting all the logistics to local providers. OEMs often complain that they don’t get the same service from providers in different markets – a point Forza stresses Argol Villanova appreciates. “Our challenge is to provide the same level of services wherever we go,” she says. “We do not have a different approach between Europe and our other markets, for example, although asset investments are a matter of opportunity.”
While subcontractors and local partners will also play an important role, Argol Villanova’s fleet and warehouse investments are essential to its global growth strategy and more seems likely to come. Acquisition could be the next step for growth in North America, while Forza indicates there could be room for expansion closer to home – in particular, Germany. “We are building new activities in Germany, which we can reveal in the coming months, that we hope will increase our presence in the market,” she says.
