Hexpol results dip on slow automotive, construction demand

Malmo, Sweden – Hexpol Group’s first quarter results have come in lower than last year, due in part to slow demand from the automotive and construction industries.

For the three months to 31 March, the compounding group posted a 4% year-on-year decline in earnings (EBIT) to SEK905 million (€18.4 million) on 11% lower sales of SEK5.3 billion.

Sales were negatively affected by a SEK5 million currency impact, while the acquisition of Star ThermoPlastics helped improve sales by 1%, Hexpol reported 26 April.

The Swedish group’s biggest operation Hexpol Compounding reported a 12% decline in sales to SEK4.9 billion.

Sales to automotive-related customers were sequentially “stable” but were “down slightly” compared to first quarter 2023.

Hexpol linked the decline to “a lower production rate in the automotive industry in the markets where we are active.”

A “similar picture” emerged from sales to customers in the building & construction sector, though with “significantly lower” first quarter sales compared to a year ago.

Sales to consumer-related end customer segments also fell year-on-year, driven by generally lower demand, added Hexpol.

Segment earnings decreased by 4% during the quarter to SEK837 billion, but operating margin improved from 15.5% to 16.9% on “better product- and price-mix”.

At Hexpol Engineered Products, segment sales during the first quarter came in on par with those of the corresponding period in 2023.

The operations in America and Asia “developed positively” during the quarter, Hexpol said without further details.

Hexpol Engineered Products also benefited from increased demand from forklift truck applications, though gaskets and other product areas showed slightly lower sales.

Earnings at the unit dropped by nearly 7% to SEK68 million, with margins declining from 19.6% to 18.2%.

Group-wide, Hexpol increased sales in Asia by 5% year-on-year, while revenue in Americas and Europe fell 13% and 11% respectively.

Commenting on the results, acting chief executive and CFO Peter Rosen said demand from customers remained on the same level as the second half of 2023, while sales prices were stable.

Another part of the business model, noted Hexpol's interim leader, is to “continuously assess” production efficiency and cost levels.

As a result, Rosen said Hexpol had decided to consolidate its operations in California: closing one of its two factories there and transferring production to the remaining unit.

“That work is progressing according to plan and is expected to be completed after the summer of 2024,” he said, without offering further details. 

Going forward, Rosen said uncertainty ‘remained high’ in terms of development of inflation, interest rates, Russia’s invasion of Ukraine as well as the situation in the Middle East.

However, he said, Hexpol expects its strong customer focus and geographical closeness to customers to enable it deal with the disruptions and further strengthen market position.

HEXPOL Compounding

HEXPOL Engineered Products