Earlier this week I saw an investor video discussing growth stock performance. It included all of the usual suspects – Amazon, Alphabet (Google), Tesla, and other household technology names. This was on a day I was busy analyzing the global warehouse automation market. I had just reviewed KION Group’s financials that showed the Supply Chain Solutions segment (Dematic) grew by 44 percent in 2021. Similarly, a Honeywell investor presentation stated that its Intelligrated business grew by approximately 50 percent in 2021. There are many other similar growth examples in warehouse automation. Granted, there are some less impressive statistics as well. But in all, I suspect the market’s growth was well in excess of 20 percent in 2021. It makes me wonder, are professional investors aware of this growth? Do they have reason to believe it has run its course? I know that private equity firms have invested plenty. I just wonder what I am missing, or what the big publicly available mutual funds are missing.
Anyway, I digress. My research process at ARC includes the review and analysis of publicly available information, as well as interviews with corporate executives and market participants to obtain additional “color”. Below are a few interesting tid bits from the publicly available information I have reviewed so far in my analysis of the global warehouse automation market.
Dematic, or the KION Supply Chain Solutions segment, grew by 44.5 percent to 3.79 billion EUR in 2021, mostly attributed to strong growth in the long-term project business. Regionally, growth in North America and western Europe was most pronounced. From an end-user industry perspective, major e-commerce companies, as well as grocery, textile, and general merchandise accounted for strength in Dematic’s business.
Daifuku doesn’t explicitly break out warehouse automation, but it does report on its intralogistics business (including manufacturing material handling). It also breaks out end-user industries. The intralogistics business grew by 8 – 9 percent, but that includes the manufacturing automation business as well as warehouse automation. Looking at non-manufacturing industries (the combination of commerce, retail and transport), warehousing grew by 35 percent in the year ending in March 2022. So I expect Daifuku’s warehouse automation business, by ARC’s definition, grew within a reasonable range of 20%.
Honeywell includes Intelligrated within its Safety and Productivity Solutions (SPS) segment. Intelligrated revenues are not formally identified in earnings reports but are frequently mentioned in discussions and analysis. As I noted previously, Intelligrated revenues grew by approximately 50 percent in 2021. However, Honeywell expects Intelligrated revenues to be flat in 2022 as the company shifts its focus toward efficiency improvements and profitability increases. Interestingly, the company did mention some resource constraints negatively affected projects over the year. The company expects revenues to return to growth in 2023 and beyond.
Kardex is a mid-sized warehouse automation provider that publicly traded on a Swiss exchange, and therefore shares its periodic financials. The Kardex Mlog division offers integrated materials handling systems and automated high bay warehouses. Kardex Mlog operates almost exclusively in Europe, and experienced numerous project postponements by customers and supply shortages but managed to achieve 21 percent revenue growth. Supply and resource constraints did hold back growth for Kardex.
Symbotic is the warehouse automation provider to most recently go public. Symbotic’s systems are primarily focused on case handling – the breakdown of pallets to cases, cases to a buffering structure, and case assembly into pallets. The system utilizes depalletizing robots, a scan tunnel, a high-density buffering storage area, a collection of lifts, a fleet of autonomous mobile goods handling robots, and palletizing robots. These subsystems are supported by a proprietary software application. Perhaps most notable is Symbotic’s reported $5.4 billion of order backlog as of September 2021 and an additional $6.1 billion of backlog from an amended agreement with Walmart. Symbotic’s revenue grew from $92 million in the fiscal year ending in September 2020 to $252 million in the year ending September 2021. I certainly don’t expect Symbotic to continue growing at 170 percent per year. But this is surely impressive growth.
There are additional warehouse automation providers that publish their financial information, with Swisslog and Berkshire Grey being two that immediately come to mind. Publicly reported financial information is far from enough to comprehensively evaluate the global market and its growth prospects. However, this data set does serve as a valuable anchor to the broader research process. I suspect resource limitations may be a binding constraint on the global warehouse automation market’s growth going forward. A few companies mentioned resource constraints and customer postponements in 2021. Anecdotally, it appears that customer postponements were more pronounced in Europe than in North America. Stay tuned for more updates on this dynamic market.