Hexpol AB
STO:HPOL B
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
97.6689
131.0192
|
| Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Hexpol AB
You don't have any saved screeners yet
Hi, everyone. Now it's time to talk, and welcome all of you to HEXPOL's Quarter 2 Report Update. You have on the line from HEXPOL, myself, Mikael Fryklund, and Karin Gunnarsson. [Operator Instructions]
[Foreign Language]
First, I will do an introduction of HEXPOL and then we will present the quarter 2 results. And finally, Q&A session. So let's move into Slide 3. HEXPOL is a world-leading polymers group with strong global positions in advanced polymer compounds, gaskets for plate heat exchangers and wheels. Slide 4, HEXPOL's vision is to be the market leader, #1 or #2, in selected segments to generate profit, growth and shareholder value. And then Slide 5, we have strong global market positions; global leading position for rubber compounding; strong European position in Thermoplastic Elastomeric Compounding, TP; and a strong U.S. position for reinforced Polypropylene Compounding; and then a global leading position in gaskets for plate heat exchangers; and a global market coverage in wheels for forklift trucks and castor wheels. And we have a global presence with operations in 10 countries, and 97% of our sales is outside of Sweden.On Slide 6, you will find the listing of all our locations, and we have added 28 units since 2010, including the 2 recent ones in 2017. And on Slide 7, you will see the strong growth we have had over the years, driven by high pace of acquisitions. On Slide 8, you will see our industrial agenda for growth. It's a combination of organic growth, new segments and existing segments, but with new innovations. And as mentioned, growth through acquisitions.And on Slide 9, you will see where we are in the value chain and our business model. We have a global approach of supply locally, and we focus on the critical part of polymer products material, which is instrumental for the properties or the products, which our clients manufacture. So there is a lot of knowhow in what we offer. The market, as such, is fragmented with a few global players and many local.On Slide 10, at the top, you will see a stable organization. We have 2 business areas: 93% of the sales in Compounding and 7% in Engineered Products. And the bottom, you have the sales distribution with 60% of the sales in NAFTA region, 34% in Europe and 6% in Asia. On Slide 11, you will see the customer segments we are active in. Automotive has always been significant, and it's 38% [indiscernible]. It means we have business in many other segments, as for example, engineering and general industry, building and construction over to customer, consumer industries and medtech. So a good split on many different segments.And then on Slide 8 (sic) [ Slide 12 ], you have the growth story and operating model development over the years with the significant growth and the strong margins.Slide 13 shows the depreciations and investment over the years. And as you can see, investments are in line with depreciations or slightly lower. And then over to the financials on Slide 14. It's a strong quarter. We increased sales by 7% to SEK 3.46 billion and an increased EBIT by 9% to SEK 561 million, and it's highest quarterly operating profit so far in the company. Operating margin improved to 16.2% versus 16% the previous year and profit after tax increased to SEK 426 million, driven by increased operating profit and the new U.S. tax reform. And accordingly, earnings per share increased by 17% to SEK 1.24. Let's now move into Slide 15 where we have further comments on the drivers of the P&L. As said, sales increased by 7% to SEK 3.46 billion, and the sales were driven by positive volume development, high sales due to increased raw material and then we had slightly positive currency effect driven by stronger euro. In NAFTA, increased sales by 4%. Stable sales for automotive and building and construction, and improved sales to engineering and general industry and also improved sales to oil and gas and mining from lower levels. In Europe, increased sales by 10% with a stable sales for automotive and building and construction, and improved sales in engineering and general industry and also improved sales for plate heat exchangers and forklifts manufacturers. And in Asia, sales increased by 32%, mainly to automotive-related customers in China. And operating profit increased to SEK 561 million and operating margin increased to 16.2%, as mentioned. Then I hand over the word to Karin for further comments on the financials.
So if we go to Page 16, we can see that the sales growth was 7%, and yesterday, it was 6%. This is the best sales quarter so far. We had minor currency effect in the second quarter, only 1% and 2% if we look at the adjusted figure. Organic growth was 6% during the quarter and 5% year-to-date. As we acquired Lesina early last year, that had an impact to the first quarter this year, but it's comparable quarter 2 to quarter 2. If we then go to the next page, Page 17, we improved sales and earnings compared to second quarter last year, but also if we compare to the first quarter. We improved the cash flow to SEK 522 million. We have a net cash position of SEK 56 million, even though we paid dividend during the quarter of SEK 671 million. We have strong a balance sheet with an equity asset ratio of 67%, which provides growth for continued expansion. If we then go to the next slide, 18, you can see the sales and operating profit split between the 2 business areas: HEXPOL Compounding, which is 93% of the group; and Engineered Products is 7% of the group. We increased sales, operating profit and margin in both business areas compared with the second quarter last year. And we also increased sales and profit if we compare with the first quarter this year. If we then go to Slide 19, HEXPOL Compounding.We increased sales with 7%. The sales were positively affected by higher sales prices due to increased raw material prices, and we had positive volume development. We increased the operating profit with 8%, and we increased -- we improved the operating margin to 16.4%. And in the chart, you can see the development per quarter during the last 5 years. If we then go to Page 20, HEXPOL Compounding NAFTA. We increased our sales. It was stable sales to automotive-related customers and building and construction, and the sales improved to engineering and general industry and also to oil and gas and mining, however, from low levels. If we look at HEXPOL Compounding Europe, we have stable sales to automotive-related customers here as well and also to building and construction, while we improved the safety engineering and general industry. For HEXPOL Compounding Asia, we had significantly increased sales, mainly to automotive-related customers. For TPE, we also had significantly increased sales. And TP compounding, we increased sales significantly, and this is also mainly due to automotive-related customers. If we then go to Page 21, HEXPOL Engineered Products. We had a strong quarter. We increased sales with 10%, and we -- and sales improved for gaskets, sales improved to product-related business. And for wheels, we had increased sales to customers within material handling. And the operating profit, we increased with 17%, and operating margin improved to 13.8%. If we then go to next slide, 22. Here, we have January to June 2018 figures. We had a strong first half of 2018. We increased our sales with 6%. The organic growth adjusted for currency and acquisition was 5%. We increased operating profit with 5% and earnings per share was increased by 13%, and that was, of course, because we had higher operating profit, but also as a result of a reduction of the tax rate in U.S. And we paid dividend after the AGM in May. Then I hand over to Mikael to summarize the second.
Yes. Let's then go into Slide 24 (sic) [ Slide 23 ], which is the summary of the quarter. As said, a strong quarter. We increased sales by 7% and increased operating profit by 9%, and thereby, the highest operating profit in the quarter so far of SEK 561 million. We had also a strong operating cash flow in the quarter of SEK 522 million versus SEK 423 million previous year. And increased earnings per share by 17%, driven by increased operating profit and the new U.S. tax reform, as mentioned. So let's then open up for questions, and please state your name, company and question. Thank you.
[Foreign Language]
Mikael and Karin, Johan Dahl at SEB. Can you hear me?
Yes.
Okay, Mikael, just a couple of questions. Could you just -- Karin, I saw your presentation there on organic growth. Is it correct that there is no sort of acquisition effect in the second quarter? I thought you consolidated some companies into the second quarter last year?
No, no, that's right. We -- so we -- last year, all the acquisitions were done. So the sales and, well, the P&L was consolidated from 1st of April 2017.
So that refers both to Valley and to the Trelleborg unit.
Yes, [ Lesina ]. Yes, that's right.
Okay. Would you be able to say whether organic growth, i.e., excluding currencies, did organic growth in volumes, was it better or worse compared to the first quarter?
Well, the organic growth is a combination of positive volume development and also price and mix.
Yes. But the question is the organic volume growth, was that better or worse compared to Q1 if you look on it from a year-on-year perspective?
Do you mean the volume as such -- you mean the sequence of change between quarter 1 to quarter 2?
No, what I'm asking is if you look on volumes in the group and if you compare the organic growth in volumes in the first quarter compared to the organic growth in volumes in the second quarter year-on-year, was it better or worse in the second quarter compared to the first quarter? Did you have higher growth in Q2 versus Q1 or lower?
The volume development is slightly better in the second quarter, but it's not a major difference.
Okay. Was it positive? Were you able to say that?
Yes, yes.
Yes.
Yes, the volume development was positive during the second quarter.
Got you. You referred in the previous reports that the market balance has sort of improved in the compounding market. You saw some -- a little bit better pricing power. Do you -- is it your understanding that, that trend has continued? Or has it changed in any way?
This continued in a similar way as in quarter 1.
And what is driving this at the moment in your understanding?
Let's say the general market sentiment is good, and it continues in a similar way.
Okay. Final question on -- I'm just obviously surprised to see that your European automotive volumes, I think you referred to it as being stable. I guess that market grew quite a bit in the second quarter. Do you have any sort of further insights there why it didn't grow more strongly?
I would let them comment this, let's say, stably. It doesn't mean that it was, let's say, negative in a sense, but rather small single-digit growth.
Okay. So still some growth to European automotive clients then?
Yes.
All right. In your appreciation, did you take or gain market share in the second quarter?
Let's say, according -- our view, there is no -- let's say, we have not seen any major changes when it comes to the market share in the quarter. However, if you compare sequentially with the first quarter, we had anyhow an organic growth adjusted for acquisition and currency effects of 6% in the quarter and then 4% in quarter 1. So sequentially, a better growth compared with the first quarter.
Okay. Just finally, can you say anything regarding raw material trends? Is that continuing to trend upwards as we look ahead now, Q3, Q4? Is it stabilizing or going down?
Yes. It comes -- there were high price increases in quarter 1 and then it continued up in quarter 2 slightly, but not at the same level as in the first quarter.
Mattias Holmberg from DNB here.
Yes.
So I have 2 questions. One is related to the NAFTA automotive-related customers that you have. You both say and write that the continued -- or the sales continued to be stable towards these customers. And given that, we have both the price component and the volume component. I'm a bit curious as to if the volume that you deliver to these customers have changed, either up or down? Or if this is also stable?
Well, as we see it, the -- our sales is quite stable, both in volume and in figures.
Okay. And my second question is related to China in particular and the Asia region where we've seen very strong growth now for quite many, many quarters, and it's starting to become -- even though it's still relatively small part of your business. But my question is how are you in terms of capacity in Asia? How much longer of this very rapid growth will you be able to stand before you need to make some kind of investments or expansions to be able to meet the demand that you're seeing?
Yes. We have still room to improve the capacity and the volume in China given the investments that we have made earlier on. .
Okay. And you think that...
We don't totally foresee -- let's say, we don't sort of foresee any major investments, let's say, in the next coming months or so.
Johan Dahl here. I have a question, Mikael and Karin. What's your read on the sort of M&A landscape right now or deals, not referring particularly to HEXPOL's pipeline, but more sort of in general? How do you read your competitors competing for acquisition candidates? And what sort of trends are you seeing out there?
I can see there have been some larger deals, not in the rubber, but in -- from a plastic [ sense ]. And there is, in general, a lot of activity. However, though with the higher multiples, that's what's basically what we see. And as communicated earlier, we are continuously working on a pipeline on different prospects in the same way as always.
In your view, is activity higher compared to the same period last year?
I would say, in general, it is about the same, same level.
So this improved market balance hasn't really sort of made much change in that sense.
In our particular field, we can't see any major, major changes. There have been some large deals done in the beginning of this year. And -- otherwise, there are no major changes, maybe a little bit more activity in the U.S.
This is Emmi Östlund from ABG. I have a question regarding working capital. I think we've seen sort of a slight buildup over the 2 -- last 2 quarters. Now I was just wondering if you could give us a little bit more color about this. Is it any sort of bottleneck situation? Or what should we read into this?
I think you should more read that the business is much higher with higher sales, higher activities. Unfortunately, we have somewhat higher working capital. But this is still a focus area. As you know, we always have focused a lot on working capital.
Yes. And...
It's more that the business is [ ours ].
So there's not really any change there per se in terms of -- okay. Well, got you. And next question. In terms of the margin within Compounding, it was down, I mean, a little bit in -- quarter-over-quarter. And I was just thinking, is this due to sort of the raw material prices? Or is there something else here?
It's due to -- let's say, more or less, it's a slight decrease, and it's due to slight mix changes. And looking into the group, it is very -- minor changes. And looking into the group in total for year-to-date numbers, we are still in the same operating margin, 16.3%. Now you have to compound, but...
It's Riccardo Romiati from One Investments. I have one question on the 2 acquisitions you did last year and the benefit from the integration. Did you see a benefit on the EBIT line from the -- from integrating these 2 companies? Using [indiscernible], can you please quantify that, please?
Well, the 2 acquisitions we've made last year, they are fully integrated into our organization. And it was 2 companies that were profitable when we bought them, and they're still profitable.
Yes. I was -- I remember that you were talking about achieving some cost savings that would impact the margin positively. Was that -- is that the case? Or am I remembering wrong?
No, that's correct and that's also what we have been achieving over this time.
Okay. And would you say that this integration process is completed now?
Yes.
Johan here with a quick follow-up. Could you just talk us briefly again regarding the effect of tariffs in the U.S. I think you touched on the subject previously. But what impacts do you see on the market dynamics pulled from these issues?
Yes. So far, we have not seen any impact. And of course, a lot have been announced and so on, but not, let's say -- really, let's say, the full impact is not seen yet. But anyhow, at this point in time, as it looks, it seems to be rather minor. You should know that our business is, in general, very local or regional. However, let's say, of course, even if you are not directly impacted, it might be impacted in future, depending on our customers or customers' customers being impacted. But that's not anything that we can have an overview over right now, actually.
All right.
Any further questions?
Yes, this is Max Fryden from Danske. I just want to follow up on the last one regarding the tariffs. Do you have any discussions with customers today, sort of securing volumes for the longer term or the mid-term? I know this is contrary to your normally business agenda. But has the customer patterns or discussions changed in a way due to the potential pending tariffs on automotive sector?
We've actually not seen any changes. This is something that we cautiously look into what might happen to us on, but they've not seen any major changes actually or any changes verified to mention actually. So far, very limited effects. And in general, and I talk about in general, as I said, our business is very local or regional. And this goes for both, let's say, the customer side but also for the sourcing. So I think that's also one of the reasons why we have not seen so much of changes and so on, and we have not heard any of the information from customers that they plan to change their sourcing or so, not up to now.
Okay. And not from a competitive point of view either, but it sort of try to lock in volumes short term or mid-term.
No, we have not seen any such changes at the moment in the market. Any further questions? Okay, if not any further questions, then thanks a lot for this call.
Thank you. [indiscernible]