Chief Executive Officer, Volex
"Invest in Türkiye email 📧 [email protected]
Join us in this episode of "Invest in Türkiye
Talks".
, featuring Volex Executive Chairman
Nathaniel Rothschild, as we discuss strategic acquisitions, market competitiveness, and ambitious growth targets that are shaping the future of business in Türkiye.🇹🇷
About Nat Rothschild
In a July 2024 episode of the "Invest in Türkiye Talks" podcast, Nathaniel Rothschild, Executive Chairman of Volex, discussed the company's growth and operations in Turkey. He stated that when he took over, Volex had around $300 million in revenue and nine sites, and that the company now runs at a revenue rate of approximately $1 billion a year following 14 acquisitions, with around a third of revenues generated from Turkey. Rothschild described Turkey as having a "plentiful source of labor" and low costs, and said the government had done a "fantastic job" attracting foreign investors. He also noted that the underlying economy has issues, including high interest rates and a foreign reserve deficit that has led to a new economic policy strengthening the currency and increasing costs, requiring efficiencies elsewhere. Rothschild also addressed Volex's sustainability efforts, saying the company had decreased its carbon intensity by 28% since 2019 and had over 80% LED lighting adoption across its sites. He stated that Volex was recognized by the Financial Times in 2024 as one of the world's climate leaders, and that 40% of its sites had zero lost time accidents in the last financial year. Rothschild said he believes in sustainability and that customers now care about it, describing this as a change in the last two to three years.
Transcript (24 segments)
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Host0:05
Hi everyone, welcome to another episode of Invest in Toia Talks. I'm your host Fnan Hun, and I'm excited to be here. If you're joining us for the first time, this podcast series is dedicated to exploring Toia's dynamic investment ecosystem, foreign direct investments, and why Toia stands as a resilient partner for investors around the globe. Each episode will feature distinguished guests who bring a wealth of knowledge to the table, including government officials, industry professionals, academics, seasoned investors, and entrepreneurs. Who better to speak with today? We are honored to host the executive chairman of Volex, Nathaniel Rothchild. Thank you so much for being with us today on this podcast series. I know you haven't been to — you have rather been to Istanbul before, but it is a city that takes your breath away every single time you come. How you feeling being here again?
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Nat Rothschild1:00
It's one of my favorite cities in the world. I've been coming here for almost 30 years on a regular basis, and you're right, it does take my breath away every time I arrive in this wonderful city.
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Host1:17
I want to start a bit on a personal note. When talking about your business ventures, how would you describe your personal journey in the business world, reflecting on where you've come today?
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Nat Rothschild1:34
So my story is unique, like everyone else's. I started out as a historian. I read history at Oxford University. I went up to Oxford in 1990, so many years ago now. I then graduated and in England you have a concept of a liberal education where you don't study business, you study something that you're interested in, and then you move on to business if that's the course you decide to pursue. So then I went to New York in 1994, I got a job as an investment banker, and then I was an early entrant into the alternative asset management or hedge fund business in 1995, and I pursued that career until 2009.
And then I took a different course. I had a number of ventures, also with another Turkish company called Gel Energy, which was an oil business, where I'm still a shareholder. And then in 2014, I had owned a dominant stake in VX. The business got into financial difficulties. I wanted a new project, and despite having little or no experience in manufacturing, I became the senior executive of VX in 2015, and I've been on this particular journey since then, so almost a decade. It'll be a decade next year that I've been managing the VX business.
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Host3:29
Let's talk about that a bit. So it's going to be almost a decade, a very big milestone for you and for VX as well. What motivated you to get into that venture and take on that role in manufacturing, having little to no experience as you just mentioned?
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Nat Rothschild3:46
To be honest, because it was a mismanaged business. It was rudderless. I had a significant investment in it, I didn't want to lose my money, and I thought this is a challenge, it would be a new experience, something I can learn from. And it's exceeded all of my expectations. It's a — as I like to say, I'm not a kind of huge businessman, I'm a small to medium-sized enterprise practitioner of small to medium-sized enterprises. But for me, this was an important thing to do. I felt I had a sort of debt of responsibility to the employees of the business. I think when I took over, we had about 7,000 employees, the business made no money, had no strategy. And so it's been a terrific experience.
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Host4:27
A lot has changed for Volex since 2015. Talk to us a bit about the changes that VX has experienced since you took on that senior executive role.
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Nat Rothschild4:50
Okay, well, I could talk for hours about it because it's been something of a — it's been a full-time audit, let me put it that way. But the business, when I took over, we were doing around $300 million of revenue, we made no money, we had nine sites, we had no vertical integration, so we would outsource much of our production. And today, we're running at a revenue rate of around a billion dollars a year. We've made 14 acquisitions. We have pursued wherever possible vertical integration, and importantly, our largest acquisition today has been in Turkey. And we generate now around a third of our revenues from Turkey. And we've actually made two acquisitions in Turkey, but the biggest one, the most recent one, brought our overall exposure up to about a third of our revenues.
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Host6:04
Right. And speaking of those investments that you've made here in Turkey, just talk to us a bit about what they're focused on and what impact you're aiming to achieve in this space.
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Nat Rothschild6:19
So I think the first point is that customers today, global customers — and I'm not really allowed to mention who my customers are — but global customers want a supplier that mimics their own footprint. So I think one of the things that's changed in our industry over the last 10 years is that the kind of era of mom and pops is over. So we are a global company. We have production not just in Turkey, but in Mexico, China, Southeast Asia, Central Europe. And the businesses that we've acquired in Turkey have been family-owned businesses, very kind of Turkish-centric, but have great customers. So what we've tried to do is essentially adopt those customers that the Turkish entrepreneurs had built up over a period of time, and then cross-sell those customers in other regions around the world. That's been a very successful strategy, because Turkey is historically, and I hope in the future, has been a terrifically good place to manufacture, because it has a plentiful source of labor, low costs comparatively to other jurisdictions. I don't know if I answered your question.
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Host7:55
No, no, it's great. I mean, your acquisitions in Turkey do add to your global strategic objectives, don't they?
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Nat Rothschild8:06
They do, they do. But we mustn't be complacent as an organization or indeed as a region. Capital and also customers, they can move, right? So we always have to be on our toes and vigilant that we remain competitive in a particular region.
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Host8:35
Well, Turkey is growing in terms of attracting FDI. As an international investor here in Turkey, how would you assess investment opportunities in the country based on your experience, particularly with VX in Deca and Murti Jaret?
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Nat Rothschild8:54
So, look, I think that on balance, first of all, customers want to manufacture here, so there's an extremely embedded customer base. Secondly, there's a supply chain, so you can buy the raw materials that you need here. I think the government has done a fantastic job over many years attracting foreign investors, and you know that I'm evidence of that. I think that obviously the underlying economy today has got issues: you have interest rates that are incredibly high, you have a foreign reserve deficit that's resulted in a kind of new economic policy that has been brought in, which has in turn strengthened the currency, which has increased costs, and therefore you have to find efficiencies elsewhere in the business. And these are issues that every country around the world is facing. If you look at Mexico, for example, we've had 20% increases in labor rates year on year. When I started a decade ago, the labor rate in dollars was around $2 an hour, it's now around $8 an hour. So these are not kind of new things.
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Host10:38
Are you currently evaluating new investment opportunities here in Turkey? And does VX have any additional plans in the acquisition space for the medium term? I do know that VX does want to reach 1.2 billion in revenue by 2027. So do you have any plans in that space for Turkey?
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Nat Rothschild11:03
We do, we're always looking. And we came very close to one transaction in the last six months, and we ended up sort of passing on it. We're looking at investments all the time. We've just opened an extension of our Indonesia site, for example. We just did three extensions there. I was in Indonesia last week with the president-elect of Indonesia opening that site. We've just bought land in southern Mexico where we're expanding. We have a new site expansion in the east of Turkey which will come online. So our business is about continually pruning, expanding, adjusting our footprint.
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Host11:54
What about in different sectors? So I do know that you work in the fields of electronics and cables, with electric vehicles, aviation. But are you planning on moving away from that into a very different field moving forward?
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Nat Rothschild12:11
So we have five verticals. We have consumer electronics or consumer electricals, I should say. We have electric vehicles. We have complex industrial technology. We have off-highway. And of course, I can't remember the last one, it'll come to me in a second. And the honest answer is that is enough for us. I want to try and keep this a very specialized business. Medical is the last one, right? Where we are leaders in interconnect solutions for medical companies. So we make cable assemblies, electromechanical subassemblies, box builds, we assemble some printed circuit boards. So it's a very specialized business, because once you start creeping away from your core strategy, you become less competitive and the business becomes harder to manage.
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Host13:18
Of course. Invest in Turkey does have an initiative called Twin Transformation, where it focuses on digitalization and sustainability in the business world. Talk to us a bit about how VX has an approach to not just digitalization but more promptly on sustainability, and how they're working towards creating a more sustainable environment.
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Nat Rothschild13:42
Um, there's too much to talk about on sustainability because sustainability has gone from nothing to being an absolutely key part of our business. So I've written a few notes because I think it's interesting for you and your viewers to hear this. So first of all, the first point I wanted to make is that we have decreased our carbon intensity, defined as tons of carbon per million dollars of revenue, by 28% across our business since 2019. And we have over 80% LED lighting adoption across all of our sites worldwide, and we'll be increasing this further. So that's point number one. The second point is that as it relates to use of renewables, 75% of our operational emissions come from our use of electricity, and our main goal is either to generate onsite solar energy where it is viable or buy green energy where it's available in the market. So we've increased our use of renewables by 172% in our last financial year. And these efforts are part of our broader strategy to optimize the use of renewable energy and reduce our reliance on fossil fuels and reduce our operational carbon emissions to zero by 2035.
So I can carry on. That's got quite interesting. Some of this stuff, I mean, we are in terms of our factories, we encourage them to be safe, sustainable, and operationally excellent manufacturing sites. And 60% of our sites are already zero waste to landfill, and we've achieved a global recycling rate of 82% with much more work to do. We've improved our water use intensity by 35% since 2022. And 83% of our workforce are in sites with a certified environmental management system. Safety is our number one priority, and our challenge is to achieve zero injuries. 40% of our sites had zero lost time accidents in our last financial year. And then I think I also just mentioned that we were recognized by the FT 2024 as one of the top climate leaders in the world. And look, I believe in sustainability, I believe in all of these things, but I think what's important to know is that customers today really care about it. Customers now come to you and say, 'What is your sustainability plan?' So on one hand, I'm doing it because I believe in it, so it's a very interesting dynamic that's changed in the last two to three years, a very new thing.
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Host16:40
Of course, one of your goals that stood out to me is the 2035 mark of coming down to zero emissions, which is very important for our environment and a very good goal to eventually achieve in the long term. Nathaniel Rothchild, thank you so much for being with us here on this podcast series. It was an absolute pleasure, and I wish you the best in your future ventures.
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Nat Rothschild17:03
Great, thank you very much. It's very kind of you.