Gerresheimer on track to sell off technical plastics

By Phil Taylor

- Last updated on GMT

Related tags: Novo nordisk, Gerresheimer

Germany's Gerresheimer has now finished all the preparatory work
required for the sale of its technical plastics division and will
start the process of finding a buyer shortly.

Analysts at Dresdner Kleinwort have welcomed the move, noting that technical plastics - which includes products such as mobile phone casings and automotive parts - has much lower profit margins than Gerresheimer's fast-growing medical plastics division. "We see a potential disposal as a clear positive, as EBITDA [earnings before interest, depreciation and amortisation] margins should improve ... in case of the disposal​," they commented. The main driver for plastics growth at Gerresheimer is the core medical systems unit, which makes products including dry powder inhalers, injections systems, and aerosol dispensers, as well as diagnostic components and medical pumps. The technical plastics business has revenues of around €80m a year, with EBITDA margins in the low single digits compared to around 19 per cent as a whole across Gerresheimer's glass and plastic packaging portfolio. The improvement in margins afforded by the sale should overcome any one-off financial impact of the sale in 2008, according to Dresdner Kleinwort. Gerresheimer has said that there are 20-30 companies who have expressed an interest in the technical plastics unit, which was acquired alongside the medical plastics business when the company bought Wilden in 2007. However, the company's management has insisted this will not be a fire sale - they anticipate the process could take as much as six months as they intend to get a good price for the business. Medical plastics remain the primary focus for Gerresheimer, which recently announced a major capacity expansion in medical plastics at its site in Pfreimd, Germany, taking production space to 14,000 sq. m. from 5,500 sq. m., as well as 2,000 sq. m. of cleanroom space. A new 1,500 sq. m. facility is being built to house the site's tool maintenance and repair service, and another 2,000 metres of production space will be added in a second expansion phase, scheduled to take place between 2009 and 2010. That investment comes on the back of a string of acquisitions by Gerresheimer as it continues to build a platform in plastics. Aside from the Wilden deal and earlier purchase of Superfos Pharma in 2005, the firm added Spanish PET company EDP and Brazil's Allplas in the first quarter of this year. Dresdner Kleinwort believes that aggressive growth strategy is being rewarded by strong orders for inhalers, diagnostic systems and insulin pens. In a research note, analyst Yasmin Majewski said that Gerresheimer already has a contract with Novo Nordisk to supply insulin pens that accounts for around 5 per cent of the total available market of around 400 million units - valued at €210m. The company recently confirmed another contract with a 'top three player', she added, predicting that Gerresheimer should achieve revenues of around €15m from this segment in 2009. The three leading companies in the segment are Novo, Sanofi-Aventis and Eli Lilly.

Related topics: Drug Delivery

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