Analysis: Hexpol signals more expansions after strong Q2

Stockholm –  Hexpol AB is still in expansion mode, new president and CEO Mikael Fryklund has signalled, following a strong set of interim financial results.

The Swedish group posted an 11% year-on-year increase in operating profit to SEK517 million, on second quarter sales 23% higher at SEK3,230 million (€338 million).

Higher volumes helped sales to grow 6% in the quarter, after adjustments for currency and acquisitions. Raw materials were slightly above the prior-year quarter levels, while price-pressure “continued strong” on all markets, Hexpol reported 19 July.

Commenting in his first interim report as head of Hexpol, Fryklund said: “During the quarter, the prices on our main raw materials have been stable and the price pressure continued strong on all markets.”

The first half-year was also strong, with sales up 18% and earnings per share 9% higher, Fryklund adding: “Our financial position remains strong and we are well equipped for further expansion.”

Fryklund went on to highlight Hexpol’s recent acquisitions, including Trelleborg’s rubber compounding unit in the Czech Republic, and US rubber compounder Valley Processing.

In the second quarter, Hexpol’s Compounding business area’s sales increased 24% to SEK2,999 million, while operating profit rose 12% to SEK487 million. The operating margin was down to 16.2% from 18.0% a year ago, reflecting price pressure and lower margins in acquired units.

Sales in Europe, including Berwin Group, acquired in June 2016, and Trelleborg Material & Mixing Lesina, acquired in March 2017, increased 29% compared to the corresponding year earlier period.

In NAFTA, second quarter sales, including Valley Processing, acquired in April 2017, increased 20% and in Asia 20%, on the prior-year second quarter.

Adjusted for acquired units, sales were higher in both Europe and NAFTA compared to the same three months of last year.