InterviewUS Nexeo to expand China chemical distribution

20 June 2013 16:31  [Source: ICIS news]

Nexeo CEO David Bradley and Nexeo Plaschem general manager Yang ZhigangNEW YORK (ICIS)--US-based chemical distributor Nexeo Solutions plans to expand its footprint in China by building on its majority-owned joint venture to achieve multiples of China’s GDP growth, its chief executive said on Thursday.

“Our China joint venture is performing very well, even as the macro environment is challenging profitability,” said David Bradley, president and CEO of Nexeo Solutions.

“We continue to demonstrate a solid growth rate in China by capturing specified, tailored business, and believe we can achieve multiples of expected annual GDP growth of 7-10% in the coming years,” he added.

Nexeo Solutions completed its chemical distribution joint venture called Nexeo Plaschem, with partner Beijing Plaschem in November 2012, marking a key part of its global expansion strategy.

Nexeo currently owns around 60% of the venture, and expects to own 100% within two years, as part of the agreement.

The Nexeo Plaschem joint venture comprises all of Nexeo’s business in China, including distribution of polymers such as nylon, polycarbonate (PC), polystyrene (PS) as well as chemicals and composites.

The China business makes up the vast majority of Nexeo’s Asia sales, noted Bradley. In 2013, it opened three new offices – in Qingdao, Wuhan and Chongqing.

Nexeo’s overall sales in 2012 totalled around $4.1bn (€3.1bn), with 85% in North America; 13.6% in Europe, Middle East and Africa; and just 1.3% in Asia. However, with the China joint venture, Asia will become a larger component.

High expectations for growth rates in China are pinned on the venture’s strategy of capturing what Bradley calls “specified business”.

That entails bringing technology to the market by working with customers to provide technical solutions. It then works with suppliers – both multinational companies and local producers – to meet those product specifications, said Bradley.

End markets are as diverse as wind energy, personal care, automotive and agriculture.

Nexeo Solutions was launched in April 2011 after global private equity firm TPG Capital’s acquisition of Ashland’s chemical distribution business.

In early 2013, Nexeo raised additional capital by refinancing its loan structure, allowing it to be more aggressive on mergers and acquisitions (M&A).

“Because of the progress we’ve made in our core business, now we want to accelerate our strategy – both with organic investments and targeted opportunities in acquisitions,” said Bradley.

“M&A will be a more significant part going forward. We run a centralised business so we will look at acquisitions that we can integrate into our business model and value proposition,” he added.

Attractive end markets for Nexeo’s core chemicals, plastics and composites distribution business include healthcare, personal care, automotive and energy, noted Bradley.

($1 = €0.75)

By: Joseph Chang
+1 713 525 2653

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