Zotefoams plc (LON:ZTF) Chief Executive Officer David Stirling caught up with DirectorsTalk for an exclusive interview to discuss their interim results and confidence in meeting expectations for the year.
Q1: First off, congratulations on another record performance at Zotefoams, can you talk us through the highlights for the first half of the year?
A1: The company have a strategy of basically organic growth with mixed enrichment through differentiated products and that strategy started some years ago.
I think particularly pleasing in the first half was what we call our High Performance Products which are faster growing, higher margin, and sales were up 40%. We have four product lines within that business unit and they actually grew which was particularly pleasing. The segment is quite heavily associated with footwear, we have an exclusive deal with Nike and the footwear was very strongly up at 47% growth.
We also had 33% growth in our aviation business, 50% growth in our insulation business and, as I said, overall, the segment was up 40% in purely organic growth which is very pleasing.
Q2: The company remains on schedule with three major capital projects to expand capacity, do you have an update on that?
A2: Everything is running to schedule and to budget.
The first one which is due to come on stream would be in the UK where we’ve been investing about £12 million in our factory there to allow us to accommodate the High Performance Product sales growth.
In USA, we’ve invested $10 million on our factory in Kentucky to add about 20% to group capacity.
Finally, we have our third completely new site opening in Poland in mid-2020 which we’re investing about 23 million, again about a 20% uplift in production capacity for the group and a logistics hub.
So, all at the moment to schedule and to budget.
Q3: The company has potential new projects in MuCell and High Performance Products to really help you push towards sales of £100 million and beyond. Can you explain more about this for us?
A3: MuCell, actually we licence technology, we have developed some new additional ideas that we are launching to the market probably in September this year, we applied for the patents in May. It looks very interesting so I’m afraid you’re going to have to wait a month or so for that but I would definitely watch the news for that.
In High Performance Products, I think it’s continued growth. In the second half, this year, we should see a bit of a flattening in footwear which runs on a 2-year cycle but from 2020/2021, we see a resumption of very strong growth in footwear and really continued trends in aviation and the insulation products.
I think, for the first time, one of our other products, nylon foams which we’ll start to see coming in, contributing to the growth at the back end of 2020 and then perhaps a bit more strongly, we hope, in 2021.
So, really across the portfolio, we’re seeing positive movement in getting us beyond that £100 million sales target.
Q4: Just looking at the second half of the year, do you remain confident in Zotefoams meeting expectations for the year?
A4: We do at the moment. The markets are rather mixed, I’ve got to say, certainly in a polyolefin foams where more GDP related, and we expect Q3 of the year sales probably to be down quite a bit.
The momentum in the other things should carry us through, we are looking at very good momentum in aviation and insulation in particular and in some of polyolefin foam markets in North America where the market dynamics are a bit different.
So, sales in the second half should be higher than the first half by a decent amount and at this point, we do see meeting market expectations but there’s a lot of time to go yet to the year-end so we are quite mindful of what happens in the wider markets.