Risk - Sensitivity to economic trends
The Group is involved in worldwide operations that are primarily geared toward the market for polymer compounds, gaskets for plate heat exchangers and wheels for the forklift industry. These markets, and thus also HEXPOL, depend on both the general economic trend and the political situation in the world and conditions that are unique for certain countries or regions in which HEXPOL or HEXPOL’s customers produce or sell their products.
As is the case for nearly all business operations, the general economic climate affects volumes among HEXPOL’s existing and potential customers. Accordingly, a weak economic trend throughout or in parts of the world could entail lower-than-expected market growth. Developments in HEXPOL’s customer segments constitute one of the principal risks related to the business environment. This results in stringent demands in terms of understanding the current and future demands, requirements and wishes of both direct and end customers.
Risk management
HEXPOL’s operations are widely spread geographically, with a broad global customer base within numerous market segments, providing a favourable risk diversification. Possible negative effects of a downturn in one market can therefore be partially offset by increased sales in another market.
HEXPOL has a flexible production that can adapt to changed customer requirements.
Risk - Competition and price pressure
HEXPOL’s operations are conducted in sectors subject to competition and are thus affected by, for example, severe price pressure, which is in turn driving demand for cost-efficient solutions. Through improvements to their technology and production expertise, competing companies may begin to produce at low cost and thus increase competition with HEXPOL’s products.
HEXPOL’s future competitive capacity is dependent on its ability to utilize the Group’s leading-edge expertise in polymer compounds and rubber and plastic products and to transform this into attractive products and customized solutions at a competitive price. Increased competition and price pressure in the markets in which HEXPOL is active could have an adverse impact on the Group’s operations.
Risk management
Focus on product development is one of HEXPOL’s operation strategies in order to maintain long-term profitability and sustainable competitiveness. The Group possesses in-depth and wide-ranging polymer and applications expertise. Most of the plants are relatively new and well-invested with high technology level. Overall, approximately five percent of HEXPOL Compounding’s employees are engaged in development work and many of them are highly qualified engineers.
Risk - Acquisitions and integration
HEXPOL works on the basis of an active acquisition strategy, which has resulted in a series of successful acquisitions. Strategic acquisitions will also be a part of the growth strategy in the future. However, it cannot be guaranteed that HEXPOL will be able to find suitable acquisition targets; nor can it be guaranteed that the necessary financing for future acquisition targets can be obtained on terms that are acceptable for the Group. This could result in reduced or declining growth for HEXPOL.
The completion of acquisitions also entails risks. In addition to the company specific risks, the acquired company’s relations with customers, suppliers and key individuals could be affected negatively. There is also a risk that integration processes could prove more costly or take more time than estimated and that anticipated synergies in full or in part fail to materialize.
Risk management
HEXPOL evaluate a large number of companies to find acquisitions that can strengthen the Group’s product portfolio or geographical position, and that supports the Group’s strategic plan. An analysis of the entire company, a so-called due diligence is done to assess any potential risks before decision is taken. HEXPOL has a strong balance sheet that provides a financial platform for future acquisitions.
Based on extensive experience of acquisitions and integrations of these, combined with clear strategies and objectives, HEXPOL has good potential to successfully continue the active acquisition strategy.
Risk - Supply chain disruptions
There was greater focus on the supply chain in 2022 than in previous years, partly as a result of global supply disruptions and supply constraints due to the coronavirus pandemic and the war in Ukraine.
Risk management
HEXPOL has well-established tools that ensure parallel supply and evaluates and balances purchases between local and global suppliers, limiting disruption.
Risk - Global crises
HEXPOL's global operations entail a risk that the company may be affected by events around the world outside its direct control, for example in the event of a global pandemic or changed geopolitical situations. Exercising contractual rights and enforcing contractual obligations can be difficult in global crises.
Risk management
Monitoring events around the world is high on the agenda of both the management and the Board in order to be able to respond quickly to situations that could have a significant impact on HEXPOL. The Covid-19 outbreak led to global challenges with lower demand from customers and difficul-ties for suppliers in delivering raw materials and compo-nents. HEXPOL handled the turbulent situation caused by the pandemic well, with only limited disruption to the business overall. HEXPOL does not have any business connections affected by the war in Ukraine.