MALMO, Sweden—Hexpol A.B.'s operating profit for the first three months of the year remained flat at about $57 million, on 10 percent higher year-on-year sales of around $416 million, the Swedish group said in a recent report.
The polymer group also delivered a 49 percent higher operating cash flow of $535 million, driven by improved working capital.
Peter Rosen, acting CEO and chief financial officer, said the group saw limited impact from COVID-19 pandemic during the two first months in the quarter.
"However, during the month of March, the impact became more evident as, for example, the automotive industry largely shut down its production, not least in Europe and the U.S.," he added.
Hexpol Compounding, which contributes 94 percent of total group sales, saw a 10 percent increase in revenue to $396 million, mainly due to the acquisition of Preferred Compounding.
The acquisition contributed with 16 percent improvement in sales while currency fluctuation had a 4 percent positive impact. Organic sales, in the meantime, fell 10 percent, partly due to the COVID-19 pandemic and lower automotive demand.
In addition, the volumes for tire and toll—products that Hexpol temporarily produces to meet customers' immediate, short-term needs—were lower compared with the same period in the previous year.
Segment operating profit remained flat at $56 million, while the operating margin fell to 14.2 percent—a difference 1.4 percent from 2019—due to lower organic volumes.
Sales within Hexpol Engineered Products remained stable at around $27 million, while operating profit was flat at $3.4 million.
Looking ahead, Rosen expects the pandemic to have "a major negative impact" on demand in the coming months, particularly during the second quarter of 2020.
According to the official, all Hexpol plants are open and it is experiencing "no significant problems" with either supplies of raw materials or deliveries of goods to customers.
"However, we see considerably lower demand, not least when the production of several of our customers is standing still," he added.
To address the issue, the Swedish group has introduced "short-term work" at many of its units in accordance with local guidelines.