Hexpol in expansion mode after robust 2019 results

Malmo, Sweden – Hexpol AB is in a strong financial position and “well equipped for further expansion" president and CEO Mikael Fryklund said in an announcement of 2019 annual results. 

Targets for the Swedish rubber company include North America, where it acquired rubber compounder Preferred Compounding, with six production facilities across the US and Mexico, in July 2019.

The acquisition, said a 30 Jan results statement, strengthened Hexpol in terms of advanced polymer compounds, supply-chain expertise in polymer materials and knowledge of applications.

With Preferred Compound “we will be able to continue to develop our compounding business in America,” said CEO Fryklund.

According to Fryklund, following the integration of Preferred Compounding, Hexpol’s US operations underwent a restructuring project to optimise efficiency and extract cost synergies.

This included the closure of two production units in the US in the final quarter of 2019, the company boss added, without giving further details. 

Hexpol registered growth for annual sales and operating profit in 2019, despite lower organic volume-growth.

Sales increased 13% year-on-year to SEK15.5 billion (€1.45 billion), while operating profit excluding non-recurring items, grew 4% to SEK2.2 billion, Hexpol announced 30 Jan. 

Acquisitions and currency factors helped increase sales by 16% and 6% respectively during 2019, the company reported. 

Organically, however, Hexpol said it witnessed a 9% negative sales development throughout the year, due mainly to “a continued softening in demand.” 

Market demand, the Swedish rubber company added, was further impacted by increased “insourcing” of basic compounds at some rubber-compounding customers. 

“When sales at customers with own mixing capacity drop, they tend to insource some more,” explained Hexpol’s statement. 

The company also saw “a sharp decline in ‘tire & toll volumes’” compared to the previous year.

‘Tire & toll’ refers to volumes that Hexpol temporarily produces to support customer needs. 

Also impacting demand at the yearend were “longer-than-usual” Christmas holidays among customers, Hexpol added.