ICIS Top 100 Chemical Distributors: Nexeo Solutions to expand China distribution business

12 July 2013 09:44  [Source: ICB]

US-based chemical distributor Nexeo Solutions plans to expand its footprint in China by building on its majority-owned joint venture.

"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

Nexeo Solutions CEO David Bradley and Nexeo Plaschem general manager Yang Zhigang celebrate the formation of the joint venture

Nexeo Solutions finalised its chemical distribution joint venture, Nexeo Plaschem, with partner Beijing Plaschem in November 2012, a key part of its global expansion strategy. Nexeo owns around 60% of the venture, set to grow to 100% within two years as part of the deal.

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, with 85% in North America; 13.6% in Europe, the 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 - multinational companies and local producers - to meet product specifications, said Bradley.

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

PROGRESS SINCE LAUNCH

Launched in April 2011 after private equity firm TPG Capital's acquisition of Ashland's chemical distribution business, Nexeo Solutions focused on defining its culture - including around safety and compliance - and building supplier and customer relationships, said the CEO.

"We also made significant investments in talented people, bringing on over 200 employees - most on the commercial side that are market-facing," Bradley said. "We continue to invest in our go-to-market strategy, improving supplier relationships and customer intimacy. This is an integral part of our plan that we have solidified - building our foundation as a company and as a global brand." Nexeo currently has around 2,300 employees.

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 we can integrate into our business model and value proposition."

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

Unlike other chemical distributors that have delved into manufacturing, Nexeo will continue to be a pure-play distributor, he said.

"We will focus on being a world-class distributor rather than going in different directions such as production," said Bradley.

In June, the company announced its move into a new consolidated headquarters in The Woodlands, Texas, US.

"We chose the location because of its proximity to our industry and the available talent pool," said Bradley. "Consolidating our three former corporate locations allows us to accelerate cultural assimilation and improve productivity as we continue to recruit world-class talent."


By: Joseph Chang
+1 713 525 2653



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