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Hempel Catalogs 2016 Challenges in Report

Wednesday, April 12, 2017

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After what Hempel Group described as a “landmark” year financially in 2015, the Kongens Lyngby, Denmark-based global coatings company announced a plan to accelerate its “Journey to Excellence” strategy despite a slight downturn in 2016 earnings.

Hempel, which released its annual report April 5, cited uncertain macro-economic conditions in several industries—marine and oil/gas among them—as revenue of 1.42 billion euros (about $1.6 billion) represented a sales dip of 4.5 percent last year.

Hempel Annual Report
Images: Hempel

Hempel, which released its annual report April 5, cited uncertain macro-economic conditions in several industries as it reported a sales dip of 4.5 percent last year.

Countering the company’s earnings decline was EBITDA growth of 13.2 percent, and cash flow and working capital in 2016 that Hempel lauded as “its best in more than 10 years.”

Hempel Group President and CEO Henrik Andersen, who joined the company in 2016, praised the firm’s economic showing.

“Our strategy plan has been fully endorsed by the new executive management board and board of directors,” Andersen said. “Our goal remains to grow faster than the market and maintain profitability in line with peers by improving customer focus. To achieve this, we are strengthening the foundation of Hempel to accelerate growth in the coming years.

“We remained loyal to our operational priorities as set out in the beginning of the year: To increase cash generation from our operations; to keep and increase profitability; and to invest in the foundation of Hempel’s future growth.”

2016 Highlights

The 2016 annual report features these highlights:

  • Revenue was 1.42 billion euros (about $1.5 billion) in 2016, down from a record-high 1.56 billion euros (about $1.7 billion) in 2015.
     
  • EBITDA margin was up 13.2 percent, despite negative organic growth of 4.5 percent.
     
  • Cash conversion of 162 percent almost doubled the 2015 rate and was the strongest in 10 years, which led to a reduction in net debt of 56 percent (119 million euros, or about $126 million, by year’s end).
Henrik Andersen

Hempel Group President and CEO Henrik Andersen, who joined the company in 2016, praised the firm’s economic showing for the year.

Hempel reports that the marine and protective segments both faced challenges due to industry downturns in marine newbuilding and maintenance and the oil and gas industry, respectively. The company did not report specific revenue numbers for each business segment in its annual report.

The firm, which operates in three global regions—EMEA (Europe, Middle East and Africa), Asia-Pacific and Americas—reported slight decreases in revenues in all geographic regions.

Compliance issues                                                                                           

Compliance issues involving inappropriate practices were uncovered in August in Hempel’s office in Germany, when some staff stood accused of alleged bribes involving ship managers and ship owners. Hempel admitted internal rules were circumvented, and noncompliant practices occurred. The company called it “a direct attack on the integrity of Hempel’s customers, culture, values and employees.”

Hempel said it halted the inappropriate practices, held an internal investigation, and dismissed seven employees in Germany for gross negligence. German authorities also are investigating.

“Besides the seven employees in Germany, we have also had to reorganize in other jurisdictions, and three senior executives have left Hempel due to gross negligence,” Andersen said. “Any such behavior is in conflict with Hempel’s values and culture. … The integrity of the business must always come first.”

Hull painting

Compliance issues involving inappropriate practices were uncovered in August in Hempel’s office in Germany, when some staff stood accused of alleged bribes involving ship managers and ship owners.

Hempel listed an expenditure of 40 million euros (about $42.4 million) in its 2016 financial statements for the investigation, and vowed to make substantial investments to prevent future compliance issues. An internal auditor was appointed, and the company upgraded its internal audit resources. Hempel’s whistleblower system was upgraded to an externally operated system that is open for reporting by employees, customers, suppliers and other stakeholders.

“I would like to take this opportunity to give my heartfelt thanks to the employees for having maintained momentum,” Andersen said. “I am proud of the strong performances that have been put in and of the fact that we have succeeded in producing such good results in a very challenging year.

“I would also like to thank our customers and business partners for the sympathy and trust that they have shown.”

About Hempel

Hempel, with staff in 80 countries and 27 factories worldwide, supplies coatings in the protective, marine, container and yacht segments. The company also manufactures decorative paints with distribution in China, the Middle East, and Europe. The company has more than 5,500 employees.

   

Tagged categories: Annual report; Asia Pacific; Coatings manufacturers; Decorative coatings; EMEA (Europe, Middle East and Africa); Ethics; Finance; Hempel; Latin America; Marine Coatings; North America; Program/Project Management; Protective Coatings

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