AFPM ’14: Perstorp CEO targets return to profitable growth

01 April 2014 16:07 Source:ICIS News

Interview article by Franco Capaldo

SAN ANTONIO, Texas (ICIS)--Perstorp’s CEO Jan Secher plans to place the Sweden-headquartered chemicals company back on path of profitable growth, with investment being focused on growth in its plasticizers, caprolactones and feed businesses.

“I want to put the company back on a profitable growth path. We have had rather steady volumes and declining earnings over the past three years and I very much see it as my task to break that trend and bring us back to profitable growth,” said Secher on the sidelines of the International Petrochemical Conference (IPC).

“With the new management team I formed and going through the plans that we have, I know exactly what the steps we need to take to make that happen.

“I also want to see a company more market-orientated, agile and nimble to respond to the requests and demands we see in the market. We have an inherent advantage not being that big. We should be able to adjust and respond better than many others,” he added.

Secher became president and CEO of Perstorp in September last year. He said he had been well prepared before taking on the role.

"I had a very good transparent process when I joined, a lot of information was made available to me to give me a chance to form an opinion… I see it as my task to execute on those and make sure we benefit from that strategic direction that has been set,” he said.

In January, Perstorp announced a raft of restructuring measures, including cost-cutting measures, the appointment of several new management team members, and the planned redundancies of 111 employees.

Citing deteriorating financial performance and eroding margins, Secher said at the time that the company’s operations would be realigned into two units: intermediates and derivatives, and specialties and solutions. The move was driven by a “clear difference” in the behaviour of intermediates customers and specialties customers.

“We are making quite a few changes in the organisation. There are two drivers really behind the changes we are making. The first is that we have sufficient focus and attention on where the markets are going and letting the customers drive what we do as a company. There is always a risk and a tendency in the chemical arena to become inside-out driven rather than outside-in.

“The other is pure efficiency, and making sure we are cost-competitive along every step across our entire value chain. That includes procurement all the way through our inbound supply chain, our manufacturing, logistics, etc. We have gone through and redesigned the whole value chain to increase the efficiency in order to improve our competitiveness,” Secher said.

"We are not looking at an acquisition strategy. I would not rule out smaller bolt-on acquisitions, particularly in technology. There might be an area geographically, particularly for our feed business, acquisition might be looked at in order to get a head start in market coverage. But the ambition that we have for the next four to five years will be mainly fulfilled through organic growth," he added.

Perstorp is focusing on a number of platforms it expects to see future growth.

One area in which the group is investing is its plasticizers business. The company is constructing a new di-propyl heptyl phthalate (DPHP) plant at its site in Stenungsund, Sweden. Secher said Perstorp is at present pre-marketing its DPHP and the plant will help double its volume. the The CEO said the plant is expected to be started up in the first quarter of next year.

“Besides the focus on the DPHP we are also in the early phases of introducing an additional plastiziser in the market, called Pevalen. This is a phthalate free product which is a further derivative in our new plant in Stenungsund,” he added.

A second area of growth for Perstorp is caprolactones, a versatile organic chemical compound that is produced in the form of monomers and polymers. In 2010, the company made an investment to double the caprolactone capacity at its plant in Warrington, the UK.

“We are very much focused on filling that in a sensible way - we are not just flooding the market - making sure we work closely with potential customers in different sectors, Secher said.

In addition, last September, Perstorp’s built a pemto-glycol plant in Zibo, China, to meet the growing demand for powder coatings in China. The plant is currently running at 80% capacity.

"We see growth in these areas. There is a rather careful effort and conscious plan to focus our attention in terms of R&D and product development towards [the entire Specialty & Solutions platform],” Secher said.

The common denominator in many of the products where the company sees above average growth is environmental concern, he added.

“You have it on the coatings side - a strive towards water-borne products rather than solvent based, you certainly have it in the plastics field, where there is growing demand for bio-degradable products, such as bio degradable plastic bags as a result of using our newly launched Capa Thermoplastic.

Because of health concerns over phthalate plasticizers, dioctyl phthalate (DOP) plasticizers are facing restrictions in Europe, and many plasticizers manufacturers are creating formulations to replace the phthalates. Demand for environmentally-friendly plasticizers like DPHP is estimated to grow.

"We used to be a DOP producer, we stopped that in 2012, and we believe there is an unmet demand for [environmentally-friendly] plasticizers in the market and we decided to invest around Swedish kronor (SKr) 1bn ($140bn-150bn).

As far as risks the company faces in 2014, Secher said safety was the company’s number one priority

“It is something we are focusing on. Looking at the statistics of our safety record it is improving but it is not where I want it to be. We want to absolutely make a safe environment for our people in our plant,” Secher said.

With regard to risks to business performance, the CEO said potential negative macroeconomic or political factors would be the biggest concern and “could relatively easily turn a fragile improvement in the world economy today into a different direction, which could  impact our growth ambitions”.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC continues through Tuesday.

($1 = SKr6.47)

By Franco Capaldo