President's comments

We move into 2018 with the momentum of a record-setting year behind us. With an increased focus on leadership, we certainly opened the door to new potential in 2017 – achieving an all-time high result (EBITDA). Together we have created a more efficient and profitable company, better serving our customers’ needs, and clearly becoming more outside-in driven compared to four years ago. With this as our springboard, we have promising plans and clearly defined drivers for our growth going forward.

A record year

2017 saw us reaching an extraordinary milestone: 2,133 m SEK in EBITDA, a 20% growth compared to the previous year. We also had above-average, organic, volume-based sales growth of 10% and continued solid generation of cash flow. Altogether, placing Perstorp strong at both the top and bottom lines.

We conducted a successful refinancing of our balance sheet in November, giving us a substantially lower interest rate on the floating rate notes. Given our strong financial performance, with continued profitable growth, our ambition is to receive a more favorable corporate credit rating in the coming year.

Sound markets with solid demand

2017 showed overall solid demand and harmony between the markets in Americas, Europe and Asia. Pure economic facts indicate the regions found equilibrium within their different situations, despite some geopolitical uncertainty. The supply/demand balance was tight over the year for some products; however, we saw a stabilization in the last quarter. Increasing raw material prices put continued focus on proactive pricing, enabling us to defend and build margins.

If it matters, make it better

Focused innovation is one of our core values and we saw a number of exciting results last year from our innovation capabilities. I’d especially like to mention the following initiatives:

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  Launch of the world’s first portfolio of pro-environment polyols: Voxtar™ (partly renewable Penta), Evyron™ (partly renewable TMP) and Neeture™ (partly renewable Neo)

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  Significant steps forward in formulating our non-phthalate plasticizer Pevalen™ in close collaboration with customers

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  Partnership with 3D4Makers to develop a new-generation filament enabling applications previously unobtainable with other 3D printing materials

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  Synthetic Lubricant developments to measure exact fire and pour points, two very important aspects for our customers

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  Major Feed & Food innovations enabling exciting new products in 2017 and the years to come

Care 365

The foundation for all our strategy and tactics is our core beliefs, vision and values as a company. We put significant focus into evolving these during 2017 and translating them into concrete initiatives. One important example is our Care 365 program: putting health and safety first in everything we do, every day, 365 days a year. It is integral to living our values to “Do right” (Responsibility), “Keep the promise” (Reliability) and “If it matters, make it better” (Focused innovation).

Our performance in 2017 took a slightly positive direction with 20% fewer accidents and incidents than the previous year, bearing in mind this is a somewhat lagging indicator. I am very pleased to see the enthusiasm and engagement for Care 365 throughout our organization. We know it’s not about statistics – although these are our best way to tangibly see improvement. It’s about life. It’s the people, the activities, the careers, the ambitions, and the daily joys that matter. Every little effort can make a huge difference. We took bold first steps in 2017, and more will come.

Digital transformation

After extensive work within a cross-functional Digital Transformation Team, Perstorp now has an envisioned digital future, with a full picture developed for how digital transformation can enable us to work smarter and use our existing systems and processes more efficiently. During 2017 we identified our first couple of concrete projects and ideas within Operations and Supply Chain where we will run pilot projects in 2018. We also took the decision to start the implementation of a new CRM system which will enable us to work in new ways both internally as well as with our customers.

We’ve also become an Associated Member of Combient – a joint venture between large Swedish and Finnish companies in traditional industries – where the key question is how to secure competitiveness by being at the forefront of digitization.

A beacon for our sustainability ambition

Sustainability is close to our hearts at Perstorp as we look to lead change towards chemistry that advances everyday life for the better. 2017 was the year we took a clear and progressive stand by defining our ambition to become “Finite Material Neutral”. In short, we should reach a state of operation where we do not take more out of Mother Nature than we give back. This is a highly ambitious and significant level of ambition, and I encourage you to read more about our concrete milestones and action plans in our Sustainability Report.

Fueling new records

Continuous Profitable Growth is our headline moving forward, we have set ambitious and challenging goals for ourselves including outgrowing the market and reaching a new sustainable earnings level.

Yet beyond hard numbers, we've set clear targets for further developing our caring culture, and I am convinced this is the fuel for our success. We've identified four drivers for future profitable growth: Care 365, Customer centricity, Product and market leadership and Leverage integrated platforms. Leadership in how we encourage our people and work together cross functionally will be key to further achievements. It boils down to this: we are building one strong culture comprising both the hard financial performance and the softer value that fuels growth. That symbiosis between performance and caring is the magic formula we're after.

Now let’s begin

To become even better as leaders in the ever-changing environment we are operating in, we have embarked on a development journey as an organization. We call it Leading Change. From record-high EBITDA to groundbreaking innovation and so much more, our people have achieved the extraordinary during the past year. However, to be able to follow our strategy and reach our new targets in the coming years, we need to continue to seek the full potential in ourselves. Leadership and continuous development of our leaders will be the key to make a step change going forward.

I am very proud to lead this company, and it would be easy to lean back now and be satisfied. But it is in our DNA to always look for improvements, to take things to the next level, saying: “Wow, we did it! What more can we do?” Whether in business development, innovation, customer service or safety, we take what we’ve learned and use it to drive that next competitive edge – for ourselves and our customers. Again and again.

Malmö, April 2018

Jan Secher
President and CEO

Key figures in summary

SEK m unless otherwise stated

	2017	2016
Net sales	13,592	11,075
Operating earnings before depreciations (EBITDA)	2,096	1,716
% of net sales	15.4	15.5
EBITDA, excluding non-recurring items	2,133	1,781
% of net sales	15.7	16.1
Operating earnings (EBIT)	1,369	1,129
% of net sales	10.1	10.7
Free cash flow	1,275	1,300
Net debt excluding parent company loan and pension liabilities	12,056	12,964

Net sales, continuing operations, SEK m

EBITDA excl. non-recurring items, continuing operations SEK m

Other key figures

SEK m unless otherwise stated

	2017	2016
Available funds	1,220	983
Net debt	12,496	13,424
Net debt excl. parent comp loan and pension liab	12,056	12,964
Leverage	5.7x	7.0x