Earnings hit, but Genan responds to energy crisis with greater efficiency

Despite its turnover increasing 4.6 per cent to more than 62 million euros in 2022 – a new record for the company – tyre recycler Genan Holding A/S reports that decreasing steel prices and significantly higher energy and freight costs more than halved its year-on-year earnings to less than 1.5 million euros.

Poul Steen Rasmussen, the Danish firm’s chief executive officer, notes that “2022 turned out to be a most challenging year” for Genan and many other companies. With the price of electricity sharply rising at extremely short notice, the company found its monthly electricity bill rising from under 800,000 euros to around 2.2 million euros during the third quarter of the year. At the same time, freight rates rose considerably, making Genan “less competitive in the many export markets to which we supply.”

Understandably Genan is, as Rasmussen notes, “not satisfied with the fact that earnings have dropped this much” due to “extraordinary events which we have been in no position to change.” The company is nonetheless “pleased to have achieved our all-time highest turnover in 2022.” The CEO adds that Genan’s response to increasing energy costs has been “prompt at all plants.”

Preventing “staggering” costs

Genan operates facilities in Denmark, Germany, Portugal and the USA, with a total capacity to recycle more than 400,000 tonnes of end-of-life tyres annually. Specific measures deployed during the energy crisis include the installation of fully automatic on/off systems that shut down production equipment when the price of electricity reaches a certain level. Genan explains that without this equipment, production would have continued at a “staggering cost level” that “neither the energy surcharge nor price increases could have outweighed.”

Management and employees also agreed on flexible working procedures, such as working on Sundays when electricity prices are lower. “All our employees showed a great deal of initiative and flexibility when the energy crisis peaked, and I owe everyone a heartfelt thank you for this adaptability,” comments Rasmussen.

Accelerating energy-saving measures

Even though electricity prices have receded from last year’s peaks, current price levels are still high. Genan’s facilities remain relatively energy intensive despite the energy-saving measures implemented in recent years, and the company is now speeding up its ongoing work to invest in renewable energy sources.

Solar cell panels for producing green energy are “in the pipeline” at Genan locations, and the company aims to contract for the delivery of green energy for its production equipment through several Power Purchase Agreements (PPA).

2023 outlook

Rasmussen reports that Genan anticipates “an increase in both turnover and earnings” in 2023. He adds that the company’s ability “quickly and efficiently” to adjust its activities in a dynamic market remains “crucial” when it comes to tackling external factors such as the price development of steel, energy and shipping.