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he distinguishing feature of our defence customers is that they are always governmental institutions and organizations. For political reasons, these customers naturally primarily wish to place orders with their own national defence contractors. As soon as a contract is to be concluded with a foreign company, an offset requirement is raised. This is where the term ‘offset management’ comes into it,” explains Joost van Gemert, head of Corporate Offset Management at Rheinmetall Defence in Düsseldorf. Offset is a term used to describe a compensation business that is generally carried out on a foreign market. What may sound simple by definition is in fact highly complicated when it comes to the practical fulfilment of related obligations. Offset has many different facets. “Fundamentally, our foreign business partners want 100% offset. This can be achieved by purchasing from local suppliers in the country of the customer, by relocating production capacities or by transferring technological know-how,” explains van Gemert. Newsline By experience, the Dutch expert on offset has distinguished the following characteristics: “Different priorities are evident, depending on the country of origin of the partner. Whereas business transactions in Western Europe are considered purely from a political standpoint, the relocation of production capacities and hence the creation of local jobs are of prime importance in Eastern and Southern Europe. In the Middle East, offset is used to di- versify the local industry, for instance, by way of technology transfer.” The offset manager’s job is to secure the best possible advantage from offset transactions for his own company in negotiations that can be quite tough. Frequently negotiations will bring a commercial benefit to both parties. To give an example: in 2002 the Greek government placed a contract with the consortium consisting of Rheinmetall boosts first-quarter sales and earnings Howaldtswerke-Deutsche Werft AG (HDW) and Ferrostaal AG to modernize three type 209 submarines of the Hellenic Navy. The Greeks wanted a major part of the work with components supplied by HDW to be performed by the Hellenic Shipyards in Attica. While involving and strengthening the local industry (and thus securing jobs), this also meant that HDW was spared the relatively expensive return of the submarines to Offset management with focus on compensation 6 Germany – in other words, both parties benefited from the deal. It is not always easy to arrive at such results in an offset agreement, but old hands like Joost van Gemert know exactly what to do. Commenting on some of the key requirements for a successful offset manager, the man from Nimwegen says: “Apart from commercial skills and knowledge in financial management, experience is vital in this business.” Off to a sound start in fiscal 2007 Düsseldorf. Düsseldorf-based Rheinmetall AG got off to a good start in 2007 with first-quarter sales and earnings clearly increased. The 7-percent sales advance resulted in a definite EBIT improvement. As confirmed by Rheinmetall’s CEO Klaus Eberhardt at the annual stockholders’ meeting in Berlin, both corporate sectors, Automotive and Defence, achieved an appreciable expansion in business volume. For all of 2007, Rheinmetall expects continued growth and rising earnings. Eberhardt: “As expected, this fiscal year is off to a good start and so we are optimistic regarding the months ahead and look forward to solid growth and rising earnings at Automotive and Defence.” In the first three months of 2007, Rheinmetall generated seven percent added sales, up from € 852 million in the first quarter of 2006 to € 912 million. This resurgence in business was all the more evident in terms of order intake which soared 35 percent to € 1.1 billion (up from € 843 million). As a consequence, order backlog for the group at just under € 3.4 billion is 17 percent higher than a year ago (€ 2.9 billion). The group’s EBIT for the first quarter hiked from € 34 million to € 44 million; the EBIT margin improved accordingly from 4.0 to 4.8 percent. EBT leaped from € 23 million to € 31 million while net income advanced by € 5 million to € 22 million. Earnings per share (EpS) after minority interests of € 1 million climbed from € 0.45 to € 0.60. The Automotive sector continued on the path of growth in the first three months of this year. Despite ongoing price pressure and unfavorable exchange rates, sales mounted three percent to € 583 million, again outpacing stagnant world auto production (down 0.2 percent in the quarter). Automotive’s EBIT for the first quarter rose six percent to € 34 million. The chief reasons for this growth were the profit contributions from added sales. The EBIT margin inched up from 5.7 to 5.8 percent. At € 328 million, the Defence sector reported its highest-ever sales in the first quarter, the year-earlier volume being exceeded by 15 percent. Above all, sharp gains were recorded by the Land Systems and Weapon Munition divisions. Order intake in the first three months of 2007 reached € 550 million, almost double that of the previous year’s € 282 million. The largest contributor was the Air Defence division which booked orders for just under € 300 million in the first quarter of 2007. With sales up to this extent, Rheinmetall Defence’s EBIT in what is a normally weak quarter, showed a significant gain of € 3 million to € 11 million. The EBIT margin rose commensurately from 1.0 to 3.4 percent. Assuming a stable global automotive climate and a constant development in defence expenditures, the Rheinmetall group is sticking to its target of an average annual growth rate of at least five percent. Based on sustained solid operating performance by its two sectors, Automotive and Defence, Rheinmetall expects to close fiscal 2007 with broadly improved earnings.
Newsline Joost van Gemert heads Corporate Offset Management at Rheinmetall Defence Allowing for offset requirements Düsseldorf. As head of Corporate Offset Management, Joost van Gemert is breaking new ground in the Rheinmetall group. Not only did the 45 yearold Dutchman take on a new post with the Düsseldorf-based group at the beginning of 2007, but the function which reports directly to the board member Helmut Merch was only recently created to take into account the growing importance of offset management. “Exports are gaining in significance as a source of growth for Rheinmetall Defence. To secure our success on foreign markets, we need to look after the needs of our customers. Our business partners abroad should have a central contact within the group for all their concerns,” says van Gemert. In the past, offset management was the sole responsibility of the respectivebusiness unit managers. “In creating the central function of a Corporate Offset Manager we have now closed the gap: I consider myself as a sort of liaison and coordination officer for my colleagues from the various Defence activities (Susanne Heemsath, Simona Vöge, Karl-Heinz Platzke, Thilo Sachau, Dirk tho Seeth, Wolfgang Wunsch, Peter Tömp, Regina Beyer, Raphael Jespers, Bo Larsson and Gerda Schalch-Bolliger), and as a first contact for our customers,” notes van Gemert, adding: “It is not without reason that offset management is on a par with aspects like financing and legal issues; after all, offset is hugely important for a defence contractor.” Joost van Gemert, father of four sons, is a teamworker. “Offset management will not be transformed into a one-man-show simply because the new function has been created at Rheinmetall. I will always try to find the best possible solution in close cooperation with my colleagues at Rheinmetall Defence.” The Dutchman is enthusiastic about the working conditions and excellent organization at Rheinmetall – and praises traditional German values in this connection. “Generally speaking the Germans are well organized and this is especially true for Rheinmetall where competencies are clearly distributed, people work with a clear target in mind, and communication lines are short and effective. Besides, I am granted direct access to the responsible executive management and given sufficient freedom to do my job.” He adds: “To be honest, I actually prefer working in Germany to the Netherlands.” Coordination function: Joost van Gemert, head of Corporate Offset Management. And he knows what he is talking about: Joost van Gemert spent ten years working as global sales manager for Lucent Technologies in Hilversum, a global manufacturer of communication technology. In the course of his work there he not only got to know the ins and outs of business life in Asia, North and South America, Europe and South Africa but also established a network of good contacts. “Only about 600 persons are involved in offset management worldwide so I suppose you could compare them to a 7 big family. I know more than half of them personally. Since trust is crucial in our business, a good personal relationship with colleagues from our business partners is invaluable.” Joost van Gemert who takes an interest in old-timers and is an avid sailor and tennis-player in his spare time, finds his job at Rheinmetall particularly challenging – also because he sees the group as becoming Europe’s leading supplier of technology for the ground forces. Looking ahead, the experienced manager is convinced that the company with its strong tradition will be successful: “In a few years time, Rheinmetall should be able to achieve in the land systems and defence electronics sector what EADS has already achieved in the military aeronautical field. The preconditions for this are excellent: Rheinmetall has the technologies, the resources and the support of the governmentalinstitutions, and it is ambitious enough to attain these targets,” says the experienced manager. Joost van Gemert intends to play his part in making this success a reali- Photo: Danetzki + Weidner ty, and he has already developed clear ideas for the future: “I aim to improve coordination between our Automotive and Defence sectors for offset deals in future. Formerly, offset business in these two sectors was largely planned independently. I will do my best to find solutions on group-level in future.” The offset manager with an MBA from Rotterdam University is currently working on a new offset guideline for the group, and is actively involved in the fulfilment of offset obligations in Scandinavia, the Netherlands, Greece and the Middle East. Bernhard Schenk
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