Zotefoams Plc (LON:ZTF) Chief Executive Officer David Stirling caught up with DirectorsTalk for an exclusive interview to discuss their preliminary results for the year ended 31st December 2017
Q1: First off, congratulations on delivering a record performance for 2017 in terms of sales and pre-tax profits. David, what’s driven this growth?
A1: It was really a combination of areas that we’ve been investing in for quite a while, we have a very strong portfolio of products and we’ve actually managed to grow very strong in all of our business units. So, across the foams business, across the high-performance business and in our MuCell technology licencing.
Q2: You’re investing heavily in increasing your capacity both in the UK and in the US, could you explain the background behind this?
A2: Yes, well obviously this is a growth-driven investment, we are a global business, foams are typically sold in a local environment so if you look at the European business, it’s supplied from a UK factory and in the North American business, it’s supplied out of our Kentucky factory.
Investment in the Kentucky factory is really to put capacity there for the North American market but in reality, it’s all about global capacity management. We see the business growing in the next few years and we need capacity for that.
The investment in the UK is specifically for some of our high-performance products and these are typically higher value, higher margin products. They have grown very strongly over the past few years and grew it over 30% this year so that investment in the UK is specifically for that.
Q3: How are you performing in international markets and do you expect this to develop further?
A3: For us, Zotefoams are predominantly a UK asset and people-based business but our sales are only 18% in the UK, our business is very global, 37% sequencing to Europe, 30% in North America and 15% in the Rest of the World. The Rest of the World business doubled in the last year pretty much and we have seen growth in all the regions so I’m very pleased about that.
As the business develops across different industries and served by different products that we have, we see that geographical spread probably further growth in the Rest of the World and Asia faster than the other regions but all in all, a very balanced portfolio across the world.
Q4: Is current trading performing to your expectations?
A4: Yes, we started the first quarter, if we look at the order book in the first quarter, it’s really a continuation of what we saw in 2017; good volume growth, we see the high-performance business growing faster than the rest and we’re looking at mix and margin enhancement coming from that. So, a really good start in the first quarter.
Q5: Finally, what’s the outlook for Zotefoams for the rest of the year and beyond?
A5: Certainly, the bigger picture trend-wise, we feel that we’ve invested strongly in the past in developing products and markets. We feel that the key drivers in our business, the demographics are changing, people’s lifestyles are spending more on sports equipment, they’re living longer, requiring more medical care and intervention. With safety regulation, you’re looking at fire retardant foams, you’re looking at lightweighting for vehicles and impact tests and things like that, environmental emissions and just environmental generally, the whole reason of the foams is performance at lightweight, so we can provide foams that are lighter weight, can provide foams that insulate, it’s a good place to be.
So, a strong portfolio, we’re riding on the back of some quite strong global growth drivers and I think we feel quite positive about the business outlook.