INSIGHT: Perstorp speculates to accumulate

09 April 2008 16:52  [Source: ICIS news]

By Lucy Craymer

 

LONDON (ICIS news)--Sold in 2005 to French equity firm PAI Partners, Perstorp looked set to remain a smaller player in the chemical market but within three years its sales have nearly doubled and it's now pushing for a place in the top 100.

 

The sale had been the end of a dream – it had previously been bought along with Neste Chemicals and Dyno in 2000 by Industri Kapital as part of the venture capitalist’s plan to create a chemical giant - a nordic-conglomerate able to compete with the likes of BASF.

 

But three years on and things have gone full circle. It's now Perstorp alone that is pursuing a strategy of growth with a policy of “aggressive acquisition”.

 

Perstorp’s executive vice president for business Mats Persson said its expansion policy was being driven by the company’s controlling partner.

 

Just three months after PAI took a controlling share in Perstorp, the company began to implement its acquisition plans. First Perstorp purchased a 49% stake held by Hansol Chemicals in the two companies' trimethyl propane (TMP) joint venture Hansol Perstorp Co.

 

Today the growth, both organic and through mergers and acquisitions, continues while other companies batten down the hatches, restructure and specialise in the hopes of riding out the economic slow down.

 

The company announced in mid-March that it was in exclusive negotiations to buy LyondellBasell and Rhodia’s specialty chemicals businesses, including the former’s aromatic isocyanates business.

 

This in turn came on the back of the acquisition of Solvay Group’s caprolactam business in February – the company now plans to double production capacity at the UK plant.

 

It also bought out two neopentyl glycol manufacturing businesses from  joint venture partner, Chinese firm Zibo Linzi Yongliu Chemical Industry in January and then purchased bio-oil business TallOil in October.

 

And it has made moves into the middle-eastern markets – it has begun building a Penta plant in Al-Jubail, Saudi Arabia in association with Chemanol.

 

Asia, particularly China, continues to interest the European company.

 

In 2007 it made big steps into the region, signing a joint venture agreement between Perstorp and the Shandong Fufeng Chemical Co. The contract gave them 51% of shares in the Zibo Fufeng Tongsheng Chemical Co. Ltd. and a state-of-the-art trimethylolpropane (TMP) plant located in the Qilu Chemical Industrial Park in Zibo City, China.

 

The company aims to achieve sales of SKr1bn ($167m) in the Chinese market by 2010.

 

Perstorp then went on to acquire a purified isophtalic acid (PTA) plant in Singapore from the Lonza Group in mid-2007.

 

Persson said the Asian market was attractive because many of its customers were moving out there and it was a high growth region.

 

And while Persson was tight-lipped about what was next on the company’s wish list, it was likely to be within the resins and coatings sector.

 

“We are open to opportunities,” he said, adding that any future acquisition would have to be a fit for specialty chemical products the company already produces.

 

Perstorp's 2007 year-end report shows it expended close to Skr1.3bn in 2007 on the acquisition of net assets and tangible and intangible fixed assets – it’s growth is evident in the company’s pro forma yearly results.

 

For 2007 pro forma sales results were up 20% to Skr10bn year-on-year while its pro forma 2007 earnings before interest and tax (EBIT) more than doubled to SKr1bn year-on-year.

 

While a global economic slowdown is evident, Persson said the company’s performance for the first quarter had been satisfactory and its outlook for the remainder of 2008 continued to be positive.

 

The weakening US dollar will have a negative impact because much of the company’s products are made in euro-related countries and when the products are sold they are worth less in dollars. Companies who produce in US dollars are also more competitive in European markets, he explained.

 

The weak dollar looks likely to remain a challenge for Perstorp. However, for this company which is dedicated to growth and expansion at a significant rate, there are internal challenges to be faced as the new businesses are integrated.

 

Perstorp, which traces its history back 130 years, now looks set on its path to become one of the leaders in the specialty chemicals sector.

 

($1=SKr5.9)

By: Lucy Craymer
+44 20 8652 3214

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