Flat chemical prices to increase in coming quarters; volumes booming – US HB Fuller

SAO PAULO (ICIS)–Most chemical prices have stabilized, and a few are posting small rises, a trend which should strengthen in coming quarters as global manufacturing picks up, executives at US-headquartered adhesives producer HB Fuller said on Thursday.

Celeste Mastin, CEO at the company, said sales volumes in Q2 had posted a “strong performance” and came higher than initially expected, with regions such as Europe also improving and some sectors in China “growing like crazy”.

The improvement in manufacturing prospects globally prompted HB Fuller to increase its 2024 financial guidance earlier this week after it published its Q2 financial results, which showed sales rose by 2%, year on year, and earnings by 10.1%.

As an adhesives producer, HB Fuller’s raw materials include tackifying resins, polymers, synthetic rubber, plasticizers and vinyl acetate monomer (VAM). The company’s fiscal year starts on 1 December; its fiscal Q2 covers March-May.

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According to Mastin, the notable improvement in Q2 foresees a healthier second half of the year, with the improvement across all the company’s divisions and regions it operates in.

“We have had a strong volume performance and, actually, we were planning volume growth in the mid-single digits for the second half, but we are already seing that, which explains Q2 [performance],” she said, speaking to reporters and chemical equity analysts.

“We track the prices of 4,000 raw materials – 80% they are flat or increasing slightly. We think from Q3 onward the trend will be for increases over time.”

HB Fuller’s upbeat assessment contrasts with what the company issued after its fiscal Q1. At the time, Mastin said sales volumes were still weak and, if that situation persisted, prices of specialty chemicals, which had so far held up reasonably well, could also fall.

The improvement as of late has prompted the company to also raise its selling prices forecast – from an initially expected negative pricing impact of 2-3%, the company now forecasts a negative impact of 1-2%.

Those pricing negative effects, however, will be overcome by growth in sales volumes, the CEO said.

Mastin went on to say the automotive sector is one where HB Fuller is “aggressively” trying to gain market share, adding the strategy is paying off with sales volumes up between 20% and 30% compared with last year.

“In China, we have a very strong position in automotive. But we are seeing healthy performance in other sectors as well, such glass, aerospace, or electronics – the latter is growing like crazy there. Equally, we are also seeing strong growth in India,” said Mastin.

HB Fuller’s CFO, John Corkrean, also present at the press conference, added that, after a poor Q1, even the beleaguered European economy – under pressure since Russia’s invasion of Ukraine and the consequent energy prices shock – also showed some positive signs in Q2.

“We have seen a return to volume growth in all market segments. Some spots such as hygiene remain a weak spot, but we have also seen there an improvement from Q1 and we expect to see further improvement in the next two quarters,” said Corkrean.

“Europe was slow in Q1 but that improved in Q2 in , for example, the construction-related businesses. These are positive signs we expect will continue in coming quarters.”

Front page picture shows glue being applied
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