Semperit plans sell-off of medical business

VIENNA, Austria—Semperit A.G. Holding has plans in the works to sell its medical goods operation, Sempermed, and transform Semperit into a company focused solely on its expanding industrial rubber products businesses.

There is no fixed deadline for the sale of the medical unit, a company spokeswoman said. "Our clear priority is to find the best possible owner and create perspectives for the Sempermed employees."

CEO Martin Fuellenbach called the plan the "biggest strategic landmark decision" Semperit has made in the last few decades, and said the move will ensure the viability and higher profitability for the company in the future.

Sempermed produces products at four plants, three of which could be involved in a transaction involving the sale of the operation. The business makes surgical gloves at Semperit's main facility in Wimpassing, Austria; surgical glove packaging at its Sopron, Hungary, site; examination and protection gloves at its Kamunting, Malaysia, plant; and porcelain molds for glove production at its Nilai, Malaysia, factory.

All Sempermed employees, about 3,000, will be impacted once it is sold, according to the spokeswoman.

While the plant in Hungary and the two factories in Malaysia could be included in a sale, the site in Austria likely will not be part of any deal, the company said.

Although the Wimpassing facility makes surgical gloves, it primarily produces goods for Semperit's Semperform and Semperflex businesses, which are both part of the industrial segment. It also houses key company-wide departments such as research and development and mixing.

Semperseal makes profiles and rubber sheeting while Semperform manufactures handrails, sheaves and bull wheel liners for ropeways, ski foils and engineered solutions. The industrial operation also includes Sempertrans, a manufacturer of conveyor belts, and Semperflex, which produces hydraulic and industrial hoses.

"Our main site in Wimpassing will unquestionably remain a part of the Semperit Group," according to Fuellenbach. In fact, he said, the firm wants to give the production plant higher relevance.

Fuellenbach said "the future of Semperit is clearly in the industrial sector. Despite our clear improvement of the operating performance indicators at Sempermed from the second quarter of 2019 on, we are faced with drastically intensified competitive dynamics in the medical sector. The capacity-based gap between us and the market leaders is growing.

"This is why we are firmly convinced that our medical business can be better continued and developed by different owners," he said.

A number of different alternatives were considered by the company's executive board before the decision was reached to sell the business as a whole or in parts, the spokeswoman said. To keep the operation, high investments would be required because some competitors invest up to 20 percent of their revenues in capacity expansions and automation, she added.

Vienna-based Semperit noted that the highly competitive environment of the sector eventually led to the realization that it could be hit with a loss of more than $51 million by Sept. 30.

On the other hand, the firm's executive board anticipates higher earnings and profitability potential if the company has a stronger focus on the industrial side rather than continuing to concentrate on both the industrial and medical operations. In 2018, the group generated revenues of $968.3 million.

"There is a clear prioritization of selling the medical business as a whole, which we will evaluate thoroughly and in detail," according to Fuellenbach. "In accordance with the very established culture in Semperit's almost 200-year long corporate history, we will start talks with employee representatives in a timely manner in this context."

Building up industrial

Semperit's industrial operation has gone through a major restructuring program, he noted, and a new strategic plan—transforming the company into an industrial rubber product specialist with an emphasis on serving existing and future markets faster and more effectively—has been developed during the last year.

That process has been very successful thus far and increased the profitability of the four businesses that make up the segment, the company said.

Included in the strategic plan is a move toward regional development of non-European markets with the addition of a manufacturing site and a regional sales organization in North America.

Fuellenbach said the company wants greater proximity to its customers and the expansion will be a pilot program for local production and regional market development.

In addition, in an effort to identify and develop new growth regions, industries and applications and, in particular, cross-segment sales opportunities, a new organizational unit called Customer Excellence Center has been created.

CEC is concentrating on underdeveloped industries, the digitalization of the company's product portfolio and the analysis of possible future applications for the firm's product range.

Semperit, which was founded in 1824 and today sells goods in more than 100 countries, said it intends to concentrate more heavily on the firm's application knowledge in the future.

Fundamental chemical and process-oriented expertise that has been available for many decades in the company will be used more substantially for the development of new products in the future, Semperit said, adding that the focus will be on innovation and digitalization.

"Rubber as our material has to face the requirements of Industry 4.0 and deliver digital functionalities as well," Fuellenbach said.

With its new strategic plan, he said the rubber product maker, which has 14 manufacturing plants and employs about 7,100 globally, expects to experience higher revenues through organic growth—and possibly acquisitions or mergers—through 2024, when Semperit turns 200.