2018-10-17

Exceptionally wet weather proves to be good for business

Feralco manufactures and sells water treatment products, mainly inorganic chemicals used in the coagulation process of water treatment plants.  After almost 20 years in Mellby Gård's portfolio, the company achieved its best result so far in the 2017/2018 financial year. Feralco's goal is to be number one or two in European national markets that are generally very mature.  Consequently, the company expects to continue with its current growth strategy focused on targeted acquisitions.

About 70 percent of Feralco's sales go to municipal water treatment plants around Europe. The company is located in the major countries within Europe and sells to a number of African nations. Other sectors include the pulp and paper industry and industrial manufacturers.

Feralco has proven to be a solid and profitable company over many years. Whilst core markets demonstrate reliable but barely growing demand, seasonal factors can have an important effect such as the winter weather conditions experienced during the past year. The very heavy rainfalls in large parts of Europe created a higher than usual demand for coagulant products due to the need to remove the higher level of pollutants washed into watercourses that then need to be removed at water treatment facilities.

"We are working on a mature market with limited organic growth.  At the same time, we are careful about entering apparent growth markets further afield. Whilst it is clear that there will be a growing need for improved water treatment in many parts of the world, these markets are often characterized by high numbers of local market participants and fierce competition which limits profitable investment opportunities", says Stephen Childs, one of the company's two CEOs.

His CEO companion is Ludovic Huitorel and the two have run Feralco together for more than ten years. They make it clear that Europe is Feralco's main market, where it can benefit from a market-leading position in many countries.

"There is room to grow in Europe, but through a continuing consolidation of the market. We have made many successful acquisitions over the years and we have a pipeline with companies we are looking at", says Ludovic Huitorel.

The latest acquisition completed in  June 2018 when Feralco bought the Italian company Braia srl, which is the leading company in Italy for inorganic coagulants used in water treatment and the paper-making process.

"In Italy the water treatment chemicals market is extremely competitive. This latest deal will help us to get closer to customers throughout the Italian market and expands our product portfolio in Italy, "says Ludovic Huitorel.

"In addition to consolidating the water purification market, we also look at the opportunities to grow in complementary industrial areas where our solutions may be relevant. But for reasons of competition, we do not want to develop that in detail right now", says Stephen Childs.

He also points out that the company made investments in the core business during the year. Among other things, the capacity in the production of iron salts has increased in both England and France.

During the year Feralco sold its 50 percent ownership in the joint venture company Akferal in Turkey. The shares were sold to the joint venture partner Akkim Chemicals. The reason for the sale was that the Middle East market became highly competitive and the political situation looks likely to remain unstable for a long time to come.