Hexpol earnings up 11% in third quarter, despite lower sales

Malmo, Sweden – Compounds group Hexpol AB has posted increased earnings and margins for the third quarter, despite a decline in sales during the three-month period.

Over the quarter to end of September, Hexpol reported an 11% year-on-year increase in earnings (EBIT) to SEK930 million (€79 million), with margins at 17.0% up from 14.2% a year ago.

Sales, however, dipped by nearly 8% to SEK5.4 billion, on “lower prices on main raw materials”, acting CEO and CFO Peter Rosen stated 27 Oct.

Hexpol noted a SEK247 million positive effect of currency on revenue as well as a 2% contribution from the acquisition of US-based compounder McCann on overall sales.

The Hexpol Compounding business unit reported an 8% decline in sales to SEK5.1 billion with exchange rate factors contributing SEK234 million.

Sales to automotive-related customers ‘showed an improvement but still varied from market to market,’ according to Rosen.

“The ongoing automotive industry strike in the US affects parts of the business negatively but for the group as a whole it has no material negative impact in the quarter,” he commented.

Demand within building and construction was “significantly lower” compared to last year “in virtually all markets”, due to lower activity levels.

“We also see lower sales to consumer-related, end-customer segments, driven by generally lower demand,” the group added.

Compared to last year, Hexpol said raw material prices had decreased but noted that the declining cost trend was “flattening out”.

Sales within the Hexpol Engineered Products also declined marginally to SEK362 million, despite positive developments in America and Asia.

In geographical terms, group sales increased in Asia by 6% year-on-year, while America and Europe saw declines of 5% and 14% respectively.

Summarising the results, Rosen linked Hexpol's “best third quarter to date” to the group’s business model, customer-focus, geographical coverage and price management.

“Our strong financial position and low debt ratios support our continued acquisition agenda,” the acting CEO added.

According to Rosen, Hexpol has set itself a sustainability goal of reducing its carbon footprint by 75% by the end of 2025, against a 2019 baseline.

The group’s sustainability strategy includes a “significant shift” towards the use of recycled materials, including acquisition of companies leading in this area.

“Interest in recycled products is increasing sharply, not least in the automotive industry and we have many ongoing projects,” Hexpol's interim leader added.

Near-term, Rosen said uncertainty “remains high” in terms of developments around inflation, interest rates, Russia’s invasion of Ukraine as well as the unrest in the Middle East.