Despite 11% Increase, Hempel Results Disappoint

Despite a new volume record in 2003 and an 11 percent improvement of net profits before extraordinary items, Hempel's CEO Ditlev Engel is not fully satisfied with the Group result. The major fall in the dollar is the reason that the Group was unable to live up to its own expectations for greater progress. Hempel is now to focus even more on a new balanced strategy. Hempel set a new volume record in 2003 with a total paint sales of 191 million liters. But an unexpected fall in the dollar meant that the Group's turnover fell to 536 million euro, a six percent reduction on the year before. However, post tax profits came to 41 million euro before extraordinary items, an 11% improvement. "Despite the fact that Hempel had a good increase in net profits in 2003, I am disappointed that we were so hard hit by the fall in the dollar. The dollar depreciation reduced our top line with 64 million euro and EBIT with 24 million euro. So I am not completely satisfied with our efforts last year. The company's potential is much greater," said Group President & CEO Ditlev Engel. He says that Hempel would have achieved top line growth of four percent and the best result in the last six years if the dollar had maintained its value against the euro in 2003. Unfortunately the fall in the dollar came quicker than the Group was able to accommodate for. "Our group structure does have the necessary balance yet, and we felt the consequences in 2003. We are focusing our efforts towards creating a more balanced business structure, which - at least partly - will protect us from external fluctuations like the dollar," said Ditlev Engel. It was already clear a couple of years ago that it was necessary to change Hempel's basic structure in order to better prepare the Group for the change in the markets that globalization has brought with it. The goal is to change the entire company from a country-based, product-oriented organization into a client-focused, service oriented 'One Company' organization with better balance between and within the various business areas. Hempel's 2003 accounts have therefore reserved some 4.4 million euro for extraordinary restructuring costs in order to achieve a better balance in the Group. The largest individual item is in relation to the decision to close production in Pinneberg in Germany, which is Hempel's second largest factory in Europe. At the same time a large number of product lines have been changed in order to ensure that Group production capacity is exploited better. These initiatives are expected to give positive results by this year. "The keyword is a global, functional organization in which the geographical borders are removed and working methods are challenged. Our many business units must agree on Hempel's identity, business philosophy, processes and company culture. Costs must be reduced while customers must enjoy the same high quality and even better service,' says Ditlev Engel. "Our organizational changes are not just about how to move boxes around in an organizational diagram. It's a question of how we work together in Hempel as a team. This is the pre-requisite for us in achieving our target of being 'simply the best' in the eyes of our customers," he says.