Perstorp annual and sustainability report 2017
We move into 2018 with the momentum of a record-setting year behind us. With an increased focus on leadership, we certainly opened the door to new potential in 2017 – achieving an all-time high result (EBITDA). Together we have created a more efficient and profitable company, better serving our customers’ needs, and clearly becoming more outside-in driven compared to four years ago. With this as our springboard, we have promising plans and clearly defined drivers for our growth going forward.
2017 saw us reaching an extraordinary milestone: 2,133 m SEK in EBITDA, a 20% growth compared to the previous year. We also had above-average, organic, volume-based sales growth of 10% and continued solid generation of cash flow. Altogether, placing Perstorp strong at both the top and bottom lines.
We conducted a successful refinancing of our balance sheet in November, giving us a substantially lower interest rate on the floating rate notes. Given our strong financial performance, with continued profitable growth, our ambition is to receive a more favorable corporate credit rating in the coming year.
2017 showed overall solid demand and harmony between the markets in Americas, Europe and Asia. Pure economic facts indicate the regions found equilibrium within their different situations, despite some geopolitical uncertainty. The supply/demand balance was tight over the year for some products; however, we saw a stabilization in the last quarter. Increasing raw material prices put continued focus on proactive pricing, enabling us to defend and build margins.
Focused innovation is one of our core values and we saw a number of exciting results last year from our innovation capabilities. I’d especially like to mention the following initiatives:
Launch of the world’s first portfolio of pro-environment polyols: Voxtar™ (partly renewable Penta), Evyron™ (partly renewable TMP) and Neeture™ (partly renewable Neo)
Significant steps forward in formulating our non-phthalate plasticizer Pevalen™ in close collaboration with customers
Partnership with 3D4Makers to develop a new-generation filament enabling applications previously unobtainable with other 3D printing materials
Synthetic Lubricant developments to measure exact fire and pour points, two very important aspects for our customers
Major Feed & Food innovations enabling exciting new products in 2017 and the years to come
The foundation for all our strategy and tactics is our core beliefs, vision and values as a company. We put significant focus into evolving these during 2017 and translating them into concrete initiatives. One important example is our Care 365 program: putting health and safety first in everything we do, every day, 365 days a year. It is integral to living our values to “Do right” (Responsibility), “Keep the promise” (Reliability) and “If it matters, make it better” (Focused innovation).
Our performance in 2017 took a slightly positive direction with 20% fewer accidents and incidents than the previous year, bearing in mind this is a somewhat lagging indicator. I am very pleased to see the enthusiasm and engagement for Care 365 throughout our organization. We know it’s not about statistics – although these are our best way to tangibly see improvement. It’s about life. It’s the people, the activities, the careers, the ambitions, and the daily joys that matter. Every little effort can make a huge difference. We took bold first steps in 2017, and more will come.
After extensive work within a cross-functional Digital Transformation Team, Perstorp now has an envisioned digital future, with a full picture developed for how digital transformation can enable us to work smarter and use our existing systems and processes more efficiently. During 2017 we identified our first couple of concrete projects and ideas within Operations and Supply Chain where we will run pilot projects in 2018. We also took the decision to start the implementation of a new CRM system which will enable us to work in new ways both internally as well as with our customers.
We’ve also become an Associated Member of Combient – a joint venture between large Swedish and Finnish companies in traditional industries – where the key question is how to secure competitiveness by being at the forefront of digitization.
Sustainability is close to our hearts at Perstorp as we look to lead change towards chemistry that advances everyday life for the better. 2017 was the year we took a clear and progressive stand by defining our ambition to become “Finite Material Neutral”. In short, we should reach a state of operation where we do not take more out of Mother Nature than we give back. This is a highly ambitious and significant level of ambition, and I encourage you to read more about our concrete milestones and action plans in our Sustainability Report.
Continuous Profitable Growth is our headline moving forward, we have set ambitious and challenging goals for ourselves including outgrowing the market and reaching a new sustainable earnings level.
Yet beyond hard numbers, we've set clear targets for further developing our caring culture, and I am convinced this is the fuel for our success. We've identified four drivers for future profitable growth: Care 365, Customer centricity, Product and market leadership and Leverage integrated platforms. Leadership in how we encourage our people and work together cross functionally will be key to further achievements. It boils down to this: we are building one strong culture comprising both the hard financial performance and the softer value that fuels growth. That symbiosis between performance and caring is the magic formula we're after.
To become even better as leaders in the ever-changing environment we are operating in, we have embarked on a development journey as an organization. We call it Leading Change. From record-high EBITDA to groundbreaking innovation and so much more, our people have achieved the extraordinary during the past year. However, to be able to follow our strategy and reach our new targets in the coming years, we need to continue to seek the full potential in ourselves. Leadership and continuous development of our leaders will be the key to make a step change going forward.
I am very proud to lead this company, and it would be easy to lean back now and be satisfied. But it is in our DNA to always look for improvements, to take things to the next level, saying: “Wow, we did it! What more can we do?” Whether in business development, innovation, customer service or safety, we take what we’ve learned and use it to drive that next competitive edge – for ourselves and our customers. Again and again.
Malmö, April 2018
President and CEO
% of net sales
Organic volume-based sales growth
Net sales by market segments
32% - Coatings
24% - Complementary
16% - Plastic materials
15% - Fuels
7% - Synthetic lubricants
6% - Feed
Net sales by geography
60% - EMEA
20% - Americas
20% - APAC
SEK m unless otherwise stated
|Operating earnings before depreciations (EBITDA)||2,096||1,716|
|% of net sales||15.4||15.5|
|EBITDA, excluding non-recurring items||2,133||1,781|
|% of net sales||15.7||16.1|
|Operating earnings (EBIT)||1,369||1,129|
|% of net sales||10.1||10.7|
|Free cash flow||1,275||1,300|
|Net debt excluding parent company loan and pension liabilities||12,056||12,964|
SEK m unless otherwise stated
|Net debt excl. parent comp loan and pension liab||12,056||12,964|
countries with Perstorp sales presence, represented in many more
m SEK EDITDA excluding non-recurring items
main market segments where we operate
sub market segments where we operate
world leader in 50% of the segments we operate in
of our sales goes to the Coatings and Resins segment
founded in Perstorp, Sweden in 1881
headquarters in Malmö, Sweden since 2014
1. Divested production site in Gent, Belgium
In March 2017, Perstorp announced the divestment of our additives business, based at our facility in Gent, Belgium, (Perstorp Oxo Belgium AB) to Synthomer plc. Perstorp Belgium manufactured a range of performance additives to a global customer base across a number of end markets including paints, coatings and plastics. The sale of Perstorp Belgium was a natural step in our strategy of focusing on growing our core technology platforms.
2. A new molecule serving the feed market
The global need to reduce the usage of antibiotics in animal husbandry fuels the search for alternatives. In May 2017 at the ESPN symposium in Spain, Perstorp launched ProPhorce™ Valerins, the first new organic acid to be introduced in decades, ProPhorce™ has shown promising results in order to further improve animal gut health and performance.
3. Launched flagship store at Alibaba’s 1688.com
In May 2017, Perstorp was the first company within our industry to launch a flagship store on Alibaba’s domestic B2B platform, 1688.com. The platform has more than 200 billion transactions yearly, and reaches all of China with 250-300 million visits per day.
To understand the potential of this platform, we decided to start small and focus on our offering of building blocks for the Coatings and Resins industry, and especially for low-VOC solutions, since we know the demand for these products is strong in China.
4. Acquired a production plant in Vercelli, Italy
In July 2017, Perstorp acquired Polialcoli S.r.l. from Polioli SPA. The business consisted of Neo, TMP and TMPDE as well as the associated Formate businesses located at the Vercelli site in Italy. Included in the transaction were also technology, know-how and equipment. The transaction was fully in line with the strategy to further strengthen our position in the Polyols market. TMP and Neo are both key products in our Polyol portfolio, which is a core business within Perstorp.
5. Using waste liquid as raw material
During 2017, we made investments for increased sustainability in our Penta plant in Toledo, which allows us to purify and utilize the waste liquid from the Penta production and re-use it as a raw material. Instead of ending up for disposal, the waste stream has found a new purpose. With the added investment, we are decreasing the amount of chemicals sent from the Penta plant to the sewer by 65%. Our intention is to even further increase that percentage in the near future.
6. Ambition Level - Finite Material Neutral
Perstorp’s new Ambition Level for sustainability - to become Finite Material Neutral - was communicated externally for the first time at China Coat in Shanghai in November.
Finite materials are resources that either cannot be created or produced, once the original stores are depleted, or those that are used up at a greater rate than nature can replenish. For Perstorp to become Finite Material Neutral would mean switching to alternative resources that are abundant and/or renewable, or to close the loops in order to recycle or reuse those that are finite.
7. First ISCC certified and renewable polyols ever launched
During 2017, Perstorp announced that all three essential polyols – Penta, TMP and Neo – now available in renewable and part-renewable options. With these products, we are supporting circular economy and the shift towards raw material derived from renewable and waste sources. For example, instead of using fossil-derived natural gas as a raw material for Evyron™ and Neeture™ we are using locally produced biogas from waste. Evyron™ and Neeture™ reduces the carbon footprint by 40-60%. All our pro-environment polyols – Evyron™, Neeture™, Voxtar™ – are certified by third-party ISCC (International Sustainability & Carbon Certification) and come with a Proof of Sustainability, which confirms our customers’ contribution to sustainable sourcing according to a mass balance system.
Due to a successful last year, Perstorp has successfully refinanced its floating rate notes amounting to EUR 250 m. This transaction will reduce our overall interest expense and improve our cash flow. It’s an important milestone and signal that the capital markets acknowledge our recent strong financial performance. With a reduced interest expense, we as a company will have a greater operational flexibility going forward.
9. Renewable electricity
As a chemical company, Perstorp consumes a significant amount of electricity in our production processes. With this in mind, we made a decision in 2017 to only use renewable electricity in all our Swedish production plants. This means a vast majority of all our European production will be run by hydropower. Hydropower is derived from the energy of falling or fast-running water. This shift is an important step in reducing our environmental impact as well as supporting sustainable electricity production. It’s a clear step towards our ambition to become Finite Material Neutral.
Launching world's first renewable portfolio of essential polyols; Penta, TMP and Neo
journalists attended our press conference at China Coat, Shanghai, China
Launching booster for Cationic UV Curing, speeding up reactivity up to 15 times
Skateboard wheels with CapaTM inside rolls twice as long
Carbon footprint reduction with renewable VoxtarTM compared to fossil alternatives
By switching from fossil to renewable polyols, equal to 300,000 return flights Copenhagen – New York is saved in terms of carbon footprint
A plastic bag based on CapaTM could biodegrade in 40 days
"When only the best is good enough” - Did you know that luxury hand bags uses Perstorp’s true phthalate free Plasticizer PevalenTM
Adding ProPhorceTM SR to your feed you can get the same daily growth of broiler chickens with 2% less feed
Our upgraded Penta production allows us to decrease the amount of chemicals from the Penta production, sent to the sewer by 65%
Jan Secher, Perstorp President and CEO, reviews the year of 2017 in short, by highlighting some of the central achievements of the year.
Jan Secher, Perstorp President and CEO, highlights central achievements during 2017 within Focused Innovation – a core value for Perstorp.
Jan Secher, Perstorp President and CEO, describes how Perstorp has been transforming to be outside-in driven and closer to our customers. This has also been the case for 2017.
Jan Secher, Perstorp President and CEO, touches upon the strategy for Perstorp going forward. Profitable Growth is a headline for the path forward, and will be guided by four clear growth drivers.
Sustainability is a core element for Perstorp, as a company working in the chemical field. Jan Secher, Perstorp President and CEO, explains how Perstorp works with sustainability and our commitment to become Finite Material Neutral.
We say safety first in everything we do! Looking back at 2017 we can ask ourselves how well did we do? Jan Secher, Perstorp President and CEO, discuss our performance in 2017 and our Care 365 program – our commitment to a healthy and safe Perstorp.
Responsibility, Reliability and Focused Innovation are our core values. Jan Secher, Perstorp President and CEO, explains how we live and lead by our core values, to drive a caring culture and at the same time create a competitive edge for our customers.
Where are Perstorp in the terms of digital transformation? Jan Secher, Perstorp President and CEO, outlines our digital transformation both as an industry and as a company.