Hexpol sees increase in sales, profit despite supply chain headaches

MALMO, Sweden—Hexpol A.B. has seen its first-quarter sales and profits increase year-on-year amid major challenges in the raw materials supply chain and a substantial hike in costs.

Over the three months ending March 31, sales were up 36 percent at $424 million (SEK 5.1 billion), while earnings (EBIT) rose 10 percent to $80 million, Hexpol reported April 28.

EBIT margin, however fell by 3.5 percentage points to 15 percent over the three months due to factors including the need to "constantly adapt production to changing demand from customers."

According to president and CEO Georg Brunstam, non-optimized recipes due to raw material shortages and price increases for raw materials and energy also affected gross margin negatively.

"Despite major challenges in the supply chain with raw material shortages, transport problems and increased prices on both raw materials and energy costs, we delivered a strong quarter," he said.

Sales, continued Brunstam, were good in all markets and all product areas, while Americas showed a "particularly strong development."

In terms of disruptions in the quarter, the CEO said the frequent stop and start of production by car makers due to component shortages had "a clear negative impact" on the customers who supply to the automotive industry.

Furthermore, the group itself also experienced disruptions in the supply chain related to raw materials, due to both availability and transport issues.

In addition to the challenges of uneven demand and supply issues, the group noted continued price increases for raw materials and energy.

Nevertheless, Brunstam expects strong customer focus and large geographical coverage with local manufacturing capabilities to help Hexpol through an uncertain environment, compounded by the war in Ukraine.

In particular, the Hexpol leader said the company was "flexible and ready to meet the expected increase in vehicle production."

A "strong business model in combination with a clear M&A agenda and strong financial position give us good conditions for continued growth and acquisitions," he added.

During the quarter, Hexpol acquired German recycled engineered polymer compounder Almaak International GmbH as part of its strategy to increase sustainability.

According to Brunstam, Hexpol reduced its carbon footprint by 20 percent over the course of last year and targets a 75-percent cut by 2025.

"We are also launching new compounds with bio-based and recycled materials," he pointed out.