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Engcon: Global Market Leader in Tiltrotators
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Over the past decade, Engcon has remarkably grown its revenue and EBIT at an around 15% and 24% compounded annual growth rate (CAGR). This, while maintaining an impressively high return on invested capital (ROIC), with an average of about 45% during the last four years. The company was founded 33 years ago, and has since secured almost half of the global market of its niche. Let’s explore this global niche market leader in a bit more detail.
Key Insights
Strong growth: Engcon has grown consistently over the last decade and has significant market share in the tiltrotator niche.
Engcon’s tiltrotators: The company specializes in tiltrotators, enhancing excavator functionality and efficiency.
Global reach: Despite its strong market hold, with 85% market penetration in the Nordics and significant shares in other regions, tiltrotators are still underutilized globally.
Insider ownership: Following its IPO in 2022, insiders still hold a significant portion of Engcon’s shares, aligning themselves with other shareholders.
The King of a Growing Niche market
Founded 33 years ago, Engcon has as of January 2024 secured almost half of the global niche market it operates in – tiltrotators and associated attachments designed to enhance the functionality of excavators. You can think of its products like 360-degree wrists attached to excavator arms. As of Q3 2023, the company operates in 16 markets and employs over 400 people.
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The tiltrotator systems are significant innovations, allowing excavators to function as versatile tool carriers, capable of replacing multiple other machines. The systems include not only the actual tiltrotators, but also encompass quick couplers, hydraulic and mechanical tools, as well as control and safety systems, all tailored to optimize excavator performance. However – despite Engcon controlling around half of the global market for them – there seems to be a long runway left, as tiltrotators are still only being used in not more than 2% of all digging globally.
Double-clicking on the market penetration for a second, Engcon’s numbers look like this: 85% in the Nordic region (92% domestically in Sweden), 6% across Europe, and 2% in the Americas. And beneficially for Engcon is that the tiltrotator market itself is actually estimated to grow at a 19% CAGR through 2021-2026, or 28% outside the Nordics.
Why Tiltrotators?
According to Engcon, a tiltrotator can increase the productivity of an excavator by around 25% on average, and depending on its size, save up to 6,000 liters of diesel per year – increasing efficiency while decreasing the negative environmental impact.
The significantly higher penetration rates in the Nordics compared to other regions is often attributed to some countries’ legal requirements, mandating the use of tiltrotators because of the aforementioned two main benefits.
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Skin in the Game
Despite having its IPO in 2022, the vast majority of Engcon’s shares outstanding are still owned by insiders. As of January 2024, the founder Stig Engström, holds 35% of the capital (equivalent to about $460 million), and Monica Engström, his ex-wife, owns 32%. Additionally, Krister Blomgren, the company’s CEO since 2011, owns roughly 1% of the company (equivalent to about $10 million).
In Conclusion
With its 33-year history, Engcon has carved out a dominant position in a niche yet expanding market, commanding nearly half of the global market share. The company’s tiltrotator systems, essentially acting as 360-degree wrists for excavator arms, have revolutionized the excavator industry, not only by increasing the versatility and efficiency of them, but also contributing to environmental sustainability. The substantial insider ownership, particularly by founder Stig Engström and his ex-wife Monica Engström, alongside CEO Krister Blomgren, demonstrates a strong alignment of interests with the company’s long-term success.
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