MALMO, Sweden—Hexpol A.B. is poised to build on its financially strong 2019, and is looking to grow that success in the coming months.
The greatest growth potential, the Swedish rubber company said, is in North America, where in July it acquired Preferred Compounding and its six production facilities across the U.S. and Mexico. The acquisition, according to a Jan. 30 statement, strengthened Hexpol in terms of advanced polymer compounds, supply chain expertise in polymer materials and knowledge of applications throughout the region.
"We are very pleased with the acquisition of Preferred Compounding, and together we will be able to continue to develop our compounding business in America," CEO Mikael Fryklund said, noting that the company saw an increase in sales and earnings per share in 2019.
"Our financial position," he added, "remains strong and we are well equipped for further expansion."
With the integration of Preferred Compounding, Hexpol's U.S. operations underwent a restructuring project to optimize efficiency and extract cost synergies. This included the closure of two production units in the U.S. in the final quarter of 2019, Fryklund said.
Hexpol didn't release details of the closures in its financial report, but it earlier was revealed that one unit to be closed was the former Kardoes Rubber Co. site in LaFayette, Ala., according to a Worker Adjustment and Retraining Notification list issued by the U.S. Department of Labor.
Hexpol registered growth for annual sales and operating profit in 2019, despite lower organic volume growth.
Sales increased 13 percent year-on-year to about $1.6 billion, while operating profit excluding non-recurring items, grew 4 percent to $228 million, Hexpol said in its financial results. Acquisitions and currency factors helped increase sales by 16 percent and 6 percent, respectively, during 2019.
Organically, however, Hexpol said it witnessed a 9 percent slide in sales for the year, mainly caused by "a continued softening in demand."
Market demand, the Swedish rubber company added, further was impacted by increased "in-sourcing" of basic compounds at some rubber compounding customers.
"When sales at customers with (their) own mixing capacity drop, they tend to in-source some more," Hexpol's statement read.
The company also saw "a sharp decline in tire and toll volumes" compared to the previous year. Tire and toll refers to volumes that Hexpol temporarily produces to support customer needs.
Also impacting demand at the end of the year were "longer-than-usual" Christmas holidays among customers, Hexpol added.