The glowing order book and healthy profits of the company Peter Harrisson took over in January last year was all that a new chief executive could have wanted.
But while last week his company, specialist machinery group Molins, showed turnover up 7.3% to £306.2m, and profits up 7.5% to £34.4m, the figures hid a significant weakening of orders in tobacco and corrugated cardboard machinery. Harrisson, though, is excited by the challenge this presents.
Molins is the classic engineering company: it built up hundreds of millions of pounds of turnover on a machine that was faster and more exciting than anyone else’s. It made its name as a manufacturer of tobacco machinery, the equipment that wrapped fine filter papers around tobacco. Its Flexible Manufacturing Systems were at the forefront of the high-speed manufacture of different shapes and brands of cigarettes.
After years of successfully selling lots of tobacco machinery, and a small volume of packaging and corrugated cardboard equipment, Molins is starting to change shape under Harrisson’s stewardship.
The purchase of Canadian packaging machinery manufacturer HJ Langen for £23m last November is diverting the company’s 78% dependence on tobacco, and pushing it into new industrial territoryHarrisson has closed unsuitable factories in Britain and the US, and is committed to re-energising the company’s tradition of technical innovation into new markets.
`Molins has got a long, long history of excellence in engineering,’ says Harrisson. `The strategy to date has been to continue to leverage those engineering skills, but to go outside the traditional area of tobacco, and develop areas of food packaging.’
A notable success in this area is the new pyramid-shaped teabag being introduced by PG-Tips. `Unilever [the parent company] wanted to make a teabag in a way it hadn’t achieved before,’ says Harrisson. `It was looking for a company that was skilled in handling delicate materials at very high speed, and had the know-how of being able to carton and package it.’
The multi-million pound project was under development for years before Harrisson joined, but the partnership policy is one he wants to pursue with vigour.
Crucial to this, he believes, is the relationship between the firm and its customers. Molins invested a considerable sum, and shared the risks with Unilever. It signed up researchers from Imperial College to help with the design.
`We were willing to work with Unilever; to take on board some of the risks and some of the benefits,’ says Harrisson. `From that point of view Molins was unique.’
He describes his customer-centred strategy as a creative process of mutual interpretation. `We’re trying to have foresight, but not actually second guess what our customers want. We want to work out what’s driving their industry five, 10 years down the line, and work with them on new concepts based on emerging technologies.’
Talk of customer focus from Harrisson is hardly surprising. Four years after joining TI Group (when it was Tube Investments) as a mechanical engineering graduate, he jumped ship to marketing. `It had to do with a fascination with what customers want and how they want it,’ says Harrisson.
Since then he has been on the management fast track. He took charge of companies at BTR and Davy Corporation, before finding himself at the head of Linread, a small company in the West Midlands.
At the time Harrisson joined, the £14m turnover engineering company was losing £2.5m. Two years later he had converted it to a £4m profit.
The secret was to employ young people in their 20s who felt themselves stifled by large employers. `We brought a number of very young capable individuals who didn’t know how to fail. It was an immense performance by some really quite inexperienced but capable young managers. What that taught me was that young people given the right responsibilities early enough can deliver and really surprise all of us,’ say Harrisson.
He was so impressed with one manager at Linread he has appointed him operations director at Molins.
For someone with such a love affair with youth, Harrisson is coy about his age: `About 50.’
One of the big issues for Harrisson in the coming months will be the market in China. With economic growth comes a consumer culture and a demand for more sophisticated cigarettes. The Chinese are turning from the hand-rolled-in-the-street variety to smooth Marlboro in packets, the original manufacture of which made Molins’ name.
The market is potentially huge, and despite Molins’ current leading position, Harrisson now has to consider spending some of his £11m R&D budget on faster machines, to keep up with the opposition.
Again, relationship building is central to his philosophy: `The Chinese market is something you don’t enter into for short-term gain. The Chinese, like ourselves, are anxious to develop long-term relationships and they want you to be committed to their market, to develop products their market wants, and also to invest in the market.’
To this end, Molins is investing £1.5m in a joint venture to rebuild machines and make spare parts in China. It will also solve one of Harrisson’s recurring headaches: counterfeit spare parts. `Pirates flourish best when there’s a poor supply chain from the original equipment manufacturers,’ he says.
Another headache is a rumbling patents dispute over the Flexible Manufacturing System Molins claimed it invented in the 1950s. Despite much legal wrangling in the 1980s to establish Molins as the originator, the case resurfaced four years ago when a US judge rejected a Molins patent infringement suit, arguing that the company withheld information about commercial use of the system prior to the original patent registration.
Several years and several successful cases later, there remains a single dispute, with Caterpillar Inc. After paying Molins £2m in fees to manufacture FMS under licence, it now wants it back, with interest. Molins expects to win, but has put £6m aside for the cost of its defence.
`Business is a way of life, in a way, and management is about bringing together a whole array of experiences,’ Harrisson says.
But despite everything, he’s also a great believer in luck. No doubt he hopes luck will be with him in the American courts.