Danish Hempel, which supplies paints and coatings for, among other things, oil rigs and wind turbines, reaped a bounty last year after taking over German J.W. Ostendorf and French Renaulac, says Hempel Chief Executive Lars Petersson in a press release on the company's freshly published annual financial statement.
"This is the first full annual report since the acquisition, and we're extremely pleased with the integration that has taken place. Things have gone quickly, both regarding growth and back-office, but also concerning [company,-ed.] culture. On the business side, we achieved more synergies than expected," Petersson tells EnergyWatch.
Hempel exited 2019 with a 4.8 percent organic growth in revenue booked in H2'19. For the full year, organic growth landed at 2.5 percent, while Hempel grew by 14 percent in absolute figures.
Total sales increased from EUR 1.36 billion to EUR 1.53 billion, while the net result climbed from EUR 48 million to EUR 50 million.
"Very satisfying," Petersson says.
We're extremely active in working on new acquisitions
Less strong than forecast
In terms of the acquisition of J.W. Ostendorf, one of Germany's largest household paint producers, the process has not been without its difficulties for Hempel.
This is attributable to the European market for building paint having been particularly tough, the CEO notes, adding that the period has been a "year of learning".
"We knew the risk upon making the purchase. But we at Hempel are planning for the very long term, and we thought this was a fine strategic match. However, especially the retail market has been very competitive, and the associated risks manifested and led to business being less strong than we had expected," he says and continues:
"But that's okay, because we have a strong team, and we have set things up so we can grow in the future. Our long-term aim for this acquisition remains the same. It has been an important step for Hempel to expand our presence in Europe within the decorative segment."
Have these challenges impacted your will to conduct additional acquisitions here and now?
"Not at all. We're extremely active in working on new acquisitions. Unfortunately, there's nothing new I can tell you today, but we're working in a very active way. Our target is to become twice as large. We must grow, and we'll do so together with our customers. That's why we must carry out further acquisitions – both to become larger, but also in order to find new solutions for our customers," Petersson says.
"So no, that hasn't altered our appetite for new acquisitions. Quite the contrary, because we have seen that we can integrate a company very rapidly, and we are able to quickly derive advantages. That's why we also feel completely ready to take the next step," he adds.
Ready with more money
Petersson's predecessor, Henrik Andersen, said something similar shortly before leaving his position in early 2019 to become CEO of Vestas. At the time, Andersen stated that Hempel was ready to spend DKK 7.5 billion (approximately EUR 1 billion) on new purchases.
Since then, though, Hempel has not disclosed any new M&A activities. Nonetheless, Petersson underscores that last year's plan remains the same, only that the company now has more capital for such aims, should the right opportunities present themselves.
"There haven't been any changes to strategy, and regarding the [M&A budget, -ed.], we have a bit more money in our accounts to use on acquisitions. We have also renegotiated our credit facility with the bank and thereby have larger sum ready today," he recounts.
It's hard to say exactly when something will happen in that regard, the CEO admits but guarantees that something will happen.
Hempel is both looking for acquisition targets to scale up but is also exploring options to bolster itself in specific regions or countries. Furthermore, the Danish paint supplier is searching for enterprises that can contribute external technology and innovation, the CEO says.
Asia is tough – but exciting
Hempel has operations in 80 countries and as such takes a broad view when looking for new acquisition opportunities, ranging from North and South America, Western and Eastern Europe, the Middle East to Asia.
Namely in Asia, Hempel hopes to expand its presence and partake in the growth potential there.
"We’re here for the long haul. So, regardless what short-term challenges may be present, we expect growth to continue, going forward. That’s why our focus is to ensure we have the best team and the best solutions available to our customers in Asia. We definitely think that growth will be better than the average growth in global GDP, and we want to be part of that development," Petersson says.
As the CEO indicates, Hempel ran into short-term challenges in the region last year. During 2019, the company was forced to close one of its factories in China, which was tied to authorities in the Kunshan province forcing more than 1,000 factories to close following several explosions at facilities in the vicinity.
The initiative entailed that Hempel’s factory shut down from April to November – a "major disruption," Hempel writes in its annual report. The closing impacted logistical costs, as the company was forced to import from sister factories, increase manpower elsewhere and outsource parts of its production.
Still, the Asia-Pacific region became something of a growth driver for Hempel last year, as the region saw organic sales growth of 21.9 percent during the second half of the year.
In other words, the region stands as a sort of promised land for the hungry firm.
English Edit: Daniel Frank Christensen & Jonas Sahl Jørgensen