Perstorp AB - Company Profile, Information, Business Description, History, Background Information on Perstorp AB

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It is our objective that Perstorp AB will be a globally oriented specialty chemicals company.

History of Perstorp AB

Perstorp AB operates as a specialty chemicals group focusing on polyalcohols, which are used in the production of resins for the coatings industry. Perstorp was acquired by Sydsvenska Kemi AB in 2001. Its operations were merged with Neste Oxo, and in 2002 the entire group reorganized under the Perstorp name. The company operates five divisions: Perstorp Performance Chemicals; Perstorp Coating Intermediates; Perstorp Oxo Intermediates; Perstorp Engineering Materials; and Perstorp Formox. The firm has manufacturing operations in Europe, North America, and Asia. Sydsvenska Kemi is controlled by private investment firm Industri Kapital.

At a small mill on the edge of a beechwood forest in the southern tip of Sweden, Wilhelm Wendt founded Perstorp AB in 1881. Stensmölla Kemiska Tekniska Industri, as it was originally called, was initially dedicated to product development and refinement of its only source of raw materials, the beechwood forest. Today the company is no longer dependent upon wood products; however, it still produces much of its original product line begun over a century ago.

Production of Acetic Acid Begins: 1884

Originally, charcoal was the only commercial product at the Stensmölla Kemiska Tekniska Industri. However, after he had established his own company, Wendt, an engineer, built a purification plant to separate useful products from waste in the fene gases captured during the carbonizing process to produce acetic acid and wood alcohol. The production of acetic acid began in 1884.

Wilhelm convinced skeptical Swedish housewives that this new acetic acid vinegar made from beechwood was better than the alcohol-base vinegar that they had used and trusted for years. The new stock lasted longer, tasted better, was less expensive, and stayed fresh longer than its competitor. The acetic acid won many prizes at exhibitions in Chicago, Lubeck, Copenhagen, and Göteberg. When combined with a winning advertising campaign, this helped Wendt to achieve the first commercial success at his new company.

By 1888, the company grew to employ 16 people in the production of charcoal and acetic acid. During this time, Wendt also shortened the company's name to Sk√•nska √Ąttiksfabriken. Due to the fact that he did not always have access to the raw materials he needed, Wendt decided that he would have to maximize the refining process to make the company profitable. In 1898, therefore, he built a refinery to separate wood alcohol into pure methanol, chemical acetin, and woodnaphta denaturating methanol.

Financial Difficulties: Early 1900s

From 1900 to 1904, the company was confronted with financial problems. In order to overcome these problems, Wendt constantly reinvested all of the liquid assets back into the company. In 1904, Wendt built a new plant to produce cresote, carbinoleum, and pitch from pine tar, as well as perform other carbonization processes. During the Russo-Japanese War, cresote was issued to Japanese soldiers to prevent dysentery. Wendt sold all of the cresote his company could manufacture to Japan. In 1905, Wendt built a new factory designed to convert methanol to formalin. Formalin, or formaldehyde, was first sold as a disinfectant.

Between the years 1907 and 1914, the company barely met operating costs. Despite the company's dismal financial outlook and Sweden's continuing economic crisis, Wendt continued to heavily fund his product development experiments. At the start of World War I in 1914, however, acetic acid sales were so optimistic that Wendt built a glass factory to produce the bottles for the acid. Sales in the new glassworks were supplemented by the production of commercial lighting glass for export to England.

As World War I continued, Wendt realized that he could capitalize on Germany's inability to export products. He began producing acetyl acid, which had previously been imported from Germany. The company's pharmaceutical factory, begun in 1905, expanded its product line to include urotropine, or hexamethylenetetramine, which during those days was considered effective against polio and other diseases.

During this time the sawmill became an integral part of the company's raw materials production. The timber from the mill was now distributed so that the best pieces would go to the newly established furniture factory. Lesser pieces would go to the packaging plant for acetic acid bottles, while others were used to produce butter churns, which had been a product at the mill since Wilhelm Wendt's father started the mill. The worst pieces would be used to fire the burners in the mill.

Developing Isolit: 1910s-20s

During the war years, Wendt employed a well-educated Indian chemist named Das Gupta in the company's pharmaceutical laboratory. Das Gupta's job was to develop a new pharmaceutical product that would compete with the German manufacturers after the war was over. He discovered, after many experiments, a substitute shellac with excellent insulating properties named "indolac." Das Gupta then took the indolac, mixed it with pitch and tar, and created a plastic, or Isolit, as it was called at Sk√•nska √Ąttiksfabriken. The new raw material was the Swedish version of the German bakelite, which had been on the market for years and was protected by a large number of patents. Fortunately for the company, the Germans decided not to take the matter to court.

In 1917, Skånska began manufacturing its first plastic product, a handle for electrical knife switches. The first products were riddled with problems and were discarded in the stream that ran through the area. When factory officials decided this was not safe, Skånska dumped the defects in a designated area behind the plant. Isolit's production constituted the birth of Scandinavia's first plastic products.

The radio industry soon became the primary customer of Isolit products. In 1923, Sk√•nska √Ąttiksfabriken began producing laminates, or the strong, brown board in a radio which electrical parts are mounted on. The industrial grade laminate began as the single, largest-selling product for the company. Also, the company's furniture factory became Sweden's largest manufacturer of radio cabinets.

In the early 1920s, Sk√•nska's chemists, after adding a shiny surface to the industrial laminate, discovered decorative laminates. This new product resisted wear and tear, heat and chemicals. In the mid-1930s, Sk√•nska √Ąttiksfabriken introduced beech parquet. However, because the beech parquet, used as floorboards, had been dried too much, expanded, and subsequently caused a number of household accidents, the company became involved in many lawsuits and was forced to pay substantial damage costs.

During World War II, Skånska refined many tons of charcoal used to manufacture a substitute gas for Sweden's passenger cars. Again, Skånska's production suffered from lack of raw materials. To fuel the modern charcoal plant, Wendt's son, Otto, was forced to cut up millions of parquet boards, which actually turned out to be more economical for the company at this time than selling them on the open market.

Postwar Changes

When World War II ended in 1945, and as the European countries began piecing their industries and economies back together again, Skånska's production was no match for its competitors. Skånska, although no longer the only plastics company in Scandinavia, was the largest, with a product line of more than 10,000 items.

After the war, when Swedish gasoline was placed back on the market, Skånska was faced with disposing of many tons of charcoal. The solution to this problem involved selling the excess charcoal to the carbon bisulphide industry. Thus, in the early 1950s, the company began breaking the dependency link between coal and chemicals. The company did not completely stop operations at the charcoal burning plant until 1970, when environmental controls also became a factor. However, with the purchase of a small barbecue charcoal and industrial coal plant, Skånska never really eliminated coal from its activities.

The company's carefully established chain of raw materials network was finally broken in 1952 when Skånska began using methanol purchased from outside sources to manufacture its formalin. And, in 1967, the saw mill, another important part of the raw materials chain, closed its operation.

After an illness during the early 1950s, Otto Wendt was forced to relinquish some management of the day-to-day operations of the plant. For the first time at Sk√•nska √Ąttiksfabriken, new methods of planning, budgeting, and market analysis were implemented. The company placed new emphasis on quality and on long-term, low-risk projects rather than on the short-term speculation that had characterized its operations before 1945. Sk√•nska also began making efforts to establish business contacts in export markets. It was during this time that the company established a plant in Brazil for the production of laminates.

The next twenty years became the era of the decorative laminate. It was so successful that Skånska could not produce enough to meet the demand of the Swedish market. Since this lack of production was due largely to a constant labor shortage because of the lack of housing for employees, the company helped solve the problem by collaborating with the town of Perstorp to develop new housing facilities.

Polyalcohol Production and Exporting in the 1950s

In 1955, Skånska began producing the polyalcohol trimethylolopropane, intended primarily for the paint industry. The company's interest in polyalcohols began in the 1940s, when Otto Wendt used profits from the charcoal operations to fund a study at the University of Lund. As a war concession at the end of World War II, the German chemical industry was forced to open up the contents of its patents and process descriptions. Like other chemical companies at the time, Skånska incorporated many of the German ideas into its production methods. Some of these ideas were incorporated into Skånska development of a polyalcohol based on formalin called pentaerythritol.

In 1955, Otto Wendt relinquished the daily management of the company to his brother-in-law, Olle Naucl√©r. Prior to this appointment, Naucl√©r served as chairman of the board of directors for ten years. Otto Wendt, however, continued to serve as chairman of Sk√•nska √Ąttiksfabriken.

By 1956, the company turned its attention to the export market. Despite intense competition, this move was quite successful. Skånska's success was due to three critical factors: first, the company carefully chose its agents abroad; second, it invested funds to maintain a large inventory; and third, the company also instituted a successful marketing strategy aimed directly at the consumer.

Formalin, the primary raw material in Skånska's polyalcohols, was also an important ingredient in several other products. In 1958, in a mutual exchange of information with Reichhold Chemicals, Skånska received valuable information about several products, one being formalin. In 1959, Skånska began using Reichhold's inexpensive method of producing formalin called Formox.

Like Otto Wendt, Olle Naucl√©r advocated increased research, especially in the field of thermoplastics. During this period, Naucl√©r established the Perstorp Research Foundation for research projects. During his 15 years as president, he prepared the company for a larger market. To ensure the company's access to private venture capital and to reduce the chance of a takeover, Naucl√©r extended ownership of the company and placed its shares on the open market. He also added new members to the board of directors that were outside the circle of family relations. In addition, Sk√•nska √Ąttiksfabriken A.B. officially changed its name to Perstorp AB.

Perstorp Goes Public: 1970

In 1970, Perstorp's shares went on the open market in Stockholm. More than 700 employees took advantage of Perstorp's special offer and became some of Perstorp's initial shareholders. Olle Nauclér retired in 1970, and Gunnar Wessman took over as president of Perstorp. This marked the first time in the company's 90-year history that a member of the Wendt family was not among the executive management staff. The Wendts were, however, represented on the board of directors. The company then began its program of international expansion first initiated in the 1950s.

Also in 1970, Perstorp acquired one of the largest laminate producers in Great Britain. In addition, Perstorp purchased a polyalcohol plant in the United States. During this time, Gunnar Wessman began a modernization of the company's organizational structure. Under the motto "Security is based on change," Wessman introduced divisionalism, which decentralized Perstorp's decision-making processes.

Karl-Erik Sahlberg became president of Perstorp in 1975. Under his direction, all product development was concentrated in the separate divisions. Perstorp created Pernvo A.B., the company's New Business Development arm, in order to ensure that long-term projects were not neglected for short-term return on investments made by the divisions. In 1984, Perstorp again changed its organizational structure to represent its nine market-oriented business areas. These included: Perstorp additives; Perstorp Chemitec; Perstorp compounds; Perstorp electronics; Perstorp specialty chemicals; Perstorp components; Perstorp plastics systems; Perstorp surface materials; and Pernvo.

Growth Through Acquisition: 1980s

In 1982, Perstorp bought the amino plastics operation of Italy's Resem SpA. With this purchase, Perstorp became the world's leader in the production of amino plastics. In 1983, Perstorp acquired Pispalan Werhoomo Oy and Tunhems Industri A.B. In the fall of 1984, Perstorp entered the biotechnology field. Perstorp Analytical, a division of Perstorp Biotec, acquired Lumac BV of Holland, a manufacturer of analytical systems for industrial microbiology, from 3M Corporation of the United States. In addition, Perstorp acquired the Swedish company ServoChem A.B., which developed analytical instruments for the brewery industry.

In November 1985, Perstorp Chemitec acquired LaBakelite S.A. of France. LaBakelite was one of the largest manufacturers of resins and phenolic molding compounds in Europe. In the same year, Perstorp acquired the seamless flooring and wall covering portion of the Swedish Gunfred Group, which has been incorporated into Perstorp Chemitec. Pernvo Inc. of the United States acquired minority shareholdings in Health Products Inc. (Michigan) and R Cubed Composites Inc. (Utah), while selling all of its shares in Composite Craft Inc.

During its acquisition spree, Perstorp managed to integrate new items into its product line, including Pergo laminate flooring, which was launched in 1984. While many of the companies it acquired during the 1980s specialized in similar fields to Perstorp, the purchases allowed the firm to gain new footholds in the biochemistry and plastics industries.

Specialty Chemicals Operations: 1990s and Beyond

Like many large European chemical companies, Perstorp underwent a series of changes during the 1990s. The company consolidated its operations and renewed its focus on its core businesses. Over the course of the decade, Perstorp revamped its operations in preparation for its boldest move to date, its sale to Sydsvenska Kemi, which would position it as a leading specialty chemicals group.

As part of its reorganization, Perstorp divested and spun off many of its acquisitions from the 1980s. In 1999, its life science operations were spun off as PerBio Science AB. A company executive commented on the move in a March 1999 Chemical Market Reporter article, claiming that "by spinning off Perstorp Life Science, we will be able to concentrate more fully on our specialty chemicals operations."

The company continued focusing on its chemical business in the new century. It streamlined its business structure, creating four main divisions: Specialty Chemicals, composed of the firm's polyols business; Chemitec, its resin and molding compound unit; Formox, which included the firm's formalin and catalysts business; and Composites.

Perstorp's new focus made it an attractive takeover target. By 2000, private investment firm Industri Kapital had made a $1.1 billion bid for the company. Industri dropped its offer, however, due to the poor financial results of the company's Pergo unit. During 2001, Perstorp spun off Pergo, sparking Industri's interest in the firm once again.

Perstorp agreed to a deal with Industri, which would solidify the company's position in the chemicals industry. Industri Kapital created Sydsvenska Kemi AB to act as a parent company, and in June 2001 Sydsvenska Kemi purchased Perstorp. It had already acquired Oxo Holding AB and its specialty chemical business Neste Oxo. Originally, Industri planned--along with the Finnish government--to merge the new Sydsvenska Kemi's operations with the chemical businesses of Kemira Oy and Dynea Oy. In December 2001, however, Industri and Finland's government dropped their plans. As such, the operations of Perstorp and Neste Oxo were combined. In early 2002, all operations were integrated under the Perstorp name.

Perstorp, under the leadership of president and CEO Lennart Holm, believed the joining would be beneficial on several fronts. Management expected increased profitability and an upturn in sales and considered the new company's larger customer base and geographical reach as key to future growth opportunities.

The merger was indeed a significant milestone in Perstorp's 119-year history and signaled the company's commitment to its future direction--to become a world-class specialty chemicals company.

Principal Divisions: Perstorp Performance Chemicals; Perstorp Coating Intermediates; Perstorp Oxo Intermediates; Perstorp Engineering Materials; Perstorp Formox.

Principal Competitors: Akzo Nobel N.V.; Clariant Ltd.; Rhodia SA.


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