Hexpol cuts jobs as market remains weak

ERJ staff report (RD)

Malmö, Sweden - Europe's largest rubber compounder, Hexpol AB, has cut more jobs as part of its cost reduction plans, the company announced 23 July during a presentation of its six-month interim results via telephone conference.

“We have continued to reduce our cost and we have made further personnel reductions in quarter two,” said Hexpol ceo, Georg Brunstam, adding that most of the 182 overall job losses in Q2 had been in the company's struggling Engineered Products business. “Since summer last year we have taken out nearly 31 percent of our workforce, so I think we have been quick and swift and strong in reducing our costs.”

“I think it is extremely important for me to say that we have reduced cost and direct labour in a very tough way but we are certainly keeping every engineer and every chemist in our company, that is the key for us to take new business and be competitive. We are selling on chemistry and technology.”

Sales in Engineered Products were down from SEK 198 million (Euro 18.6 million) in 2008 to SEK 140 million with operating profit falling to SEK 5 million from SEK 25 million in the same period last year. “An extensive action programme was initiated during the first quarter that included reduction of the workforce, and during the quarter, new management was appointed in the US,” the company said. Capacity adjustments were made at plants in Gislaved, Sweden and Sri Lanka because of new workforce reductions, Hexpol said. “We are still struggling with some problems, price pressures and volumes and capacity adaptation in the Engineered Products area,” Brunstam said.

In spite of low volumes, Brunstam said the company had good results in its Compounding business in Q2, commenting that the company had improved its operating margins to 10.5 percent, compared to Q1. The closure of the company's production plant in Canada is in its final phase and will be completed in Q3 with production volumes gradually being transferred to other plants in NAFTA, the company added. Brunstam said it was not a specific customer moving south from Canada that prompted the closure but a gradual move of the Canadian automotive industry to the US and Mexico. “We have seen lower volumes for the last three years,” he added.

In the Compounding business, sales were down by 28 percent to SEK 467 million compared with SEK 648 million in the same period last year, whilst operating profit fell from SEK 63 million in 2008 to SEK 49 million. Demand in Europe was weak in Q2 although some improvement was noted from automotive-related customers in Europe towards the end of the quarter, the company said. Hexpol also reported “favourable volume trends” at its plant in China.

In terms of the market eventually "normalising", Brunstam said, “we will be very flexible to do that, we opened up a new plant in Mexico quite recently and doubled the capacity there last year.” The Hexpol ceo added that the company does not see any problems with an upturn in the market, and indeed welcomes it.

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Q2 Interim results from Hexpol AB