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Forbo to Concentrate on Two Businesses with a Global Potential

Published on 2004-09-02. Author : SpecialChem

 

The review of the corporate strategy and operative processes carried out by Forbo over the past five months has shown that the successful development of the Group's three businesses is beyond the company's financial means and management capacities. There is a clear earnings improvement potential in all the three businesses. Consequently, Forbo will focus on the two businesses of adhesives and belting with global development potential. For the successful further development of the capital-intensive flooring business (linoleum and cushion vinyl), Forbo is looking for a partnership offering the segment optimum future chances. With this focusing strategy, the Board of Directors wants to strengthen the Group's profitability in the medium term and create new growth perspectives.

Focus on adhesives and belting

Following a review of Forbo's corporate strategy, the Board of Directors decided that the company will in the future focus on two businesses, i.e. adhesives and belting. The two businesses are well positioned in global growth markets, and they already have several production sites in key regions worldwide.

In the adhesives business, Forbo has a leading market position in selected core segments. The adhesives market promises attractive growth and profitability. It allows the company organic growth in a less capital-intensive business. Besides, the market which is still heavily fragmented will consolidate in the coming years, with Forbo playing an active part in this process.

In the belting business, Forbo with its world market share of 20 % is among the world's three leading suppliers with production sites in Asia, Europe and America. With its good strategic position, this business has a considerable earnings improvement potential. The Board of Directors is convinced that the downswing in this industry is over and that the Group's goals can be reached with the steps that have been initiated.

Securing the flooring business' future

The review of strategies, structures and operative processes has shown that the flooring business, too, has a market position with further development potential. However, in addition to the successful development of the adhesives and belting businesses, Forbo on its own is not able to advance the flooring business fast enough and successfully participate in the market consolidation.

With linoleum and cushion vinyl, Forbo is mainly active in the resilient flooring market. Other flooring materials such as laminates, stone or ceramics recorded stronger growth in the past years. Forbo and its products are represented mainly in Western Europe and in the contract market which is heavily dependent on the public spending policy. Expanding the product range or entering growth markets requires the massive use of financial means and management resources which are beyond Forbo's possibilities.

The Board of Directors has therefore concluded that this business should be strengthened by means of a partnership and that the employees should be given a credible perspective for the future. The complete divestment of the business is not being excluded, either. The proceeds from such a divestment would be used for the further development of the core businesses - adhesives and belting - and for debt repayment.

Measures for improving profitability

Despite the Group's promising starting position, Forbo is not satisfied with the current earnings situation of the businesses. There is a great earnings improvement potential in all the three businesses. Forbo has planned and partly already initiated appropriate measures for improving the profitability.

In the flooring business, the capacities have to be adjusted to the sales volume, and production costs have to be lowered. In the adhesives business, focusing on attractive core segments and the consistent continuation of globalization are in the foreground. In the belting business, the expansion in Asia and Eastern Europe must be used in order to obtain higher margins with premium products.

Strategy holding

In line with the focusing efforts, Forbo will adapt the corporate structure to the new situation, clearly assign responsibilities and reduce overhead costs. The legal and financial structure of the individual businesses will be simplified and integrated as well as directly linked to the strategy holding. This move shall enhance the company's flexibility and focusing potential.

New head of the adhesives business

In the context of the strategic renewal, Forbo appointed Michel Riva as new head of the adhesives business. Formerly he had various international management roles with the chemical group DuPont. His task is to focus the existing activities on strategic market segments and to continue the globalization of the adhesives business.

Forbo is convinced that the focus on two businesses will in the medium term create the preconditions for higher Group earnings and open up new perspectives for the future.

Forbo is a global producer of floorings, adhesives and beltings for drive, process and transport purposes. The company has approximately 5,600 employees and an international network of 30 production companies and 45 sales organisations in 30 countries.

Source: Forbo


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