Better times on horizon, says Formica chief

Mark Adamson says Formica's short-term growth prospects hinge on the company's ability to tap the rapidly growing Asian markets. Photo / Richard Robinson

Profits around $100 million annually are being projected for an iconic global brand whose boss is in Auckland this week.

Mark Adamson, Formica Group president and chief executive from Ohio, is here vowing that the lacklustre business will make better returns soon.

As boss of the business with 11 factories and 27 distribution facilities across Asia, Europe and North America, Adamson, of Newcastle, England, said the business would beat this year's $34 million operating profit in the June 2010 year.

That was about double Formica's 2009 profit, said the 44-year-old, yet the increase came during an international downturn.

"We expect to see another increase in earnings although we might not be that far but we won't be far short. We have to be honest and say we would need a mild recovery in our economies to get to $100 million," said Adamson.

Philip King, general manager of investor relations at Fletcher Building, which owns Formica, said the company had a return-on-funds benchmark expectation from new acquisitions shortly after purchase.

"We normally look to get 15 per cent returns three to four years after acquisition. But at Formica, that's delayed a couple of years, essentially because of the downturn," King said.

Adamson said 15 per cent might have been achieved if the markets Formica operated in were at more normal levels.

The recession hit after Fletcher's 2007 $1 billion Formica purchase.

Adamson is here partly for a Fletcher chief executive team-building summit held at Villa Maria with infrastructure and construction's Mark Binns, building products' Chris Ellis, distribution's John Beveridge, laminates and panels' David Worley and steel's Paul Zuckerman.

Formica's immediate growth prospects were focused on Asia, Adamson said.

"Asia has double-digit growth so it's exciting. We have footprints in Malaysia, Indonesia and Vietnam and we're looking to expand south to Bangkok and Indonesia," he said.

New plants could be opened in Malaysia's Kuala Lumpur or Penang but nothing was decided, he said.

Formica employs 1000 staff in Asia where 80 per cent of sales are to the commercial sector, compared with only 50 per cent in Europe and North America.

Adamson, an accountant and ex-financial controller of pharmaceutical giant GlaxoSmithKline, joined Formica in 1998 as chief financial officer of the European division, then became managing director of Britain and Ireland.

In 2004, he was appointed president of Formica Europe and became chief executive of Formica Corporation after Fletcher bought it.

He has qualifications from Northumbria University and is a member of the English Institute of Chartered Accountants and the Institute of Taxation.

Formica had been in Chapter 11 before Fletcher bought it and Adamson recalled how in 2002 it had debts of about US$400 million.

"The issue for Formica was not the size of its losses but its debt. It was highly leveraged," he said.

Adamson has shifted his family to the US. Six weeks ago, he left Britain for offices at Formica's Evendale plant in Cincinnati, Ohio, where Fletcher's revamped board will meet on October 4 before the company's annual meeting at Eden Park in November.

King said whether shareholders would meet in the older ASB stand or the new stadium was yet to be decided.

Fletcher is trading at a two-year high, around $8.59, up after this month's earthquake.

FORMICA GROUP
* A Fletcher Building company
* Making 3.4 per cent return on funds
* Target 15 per cent or $150 million
* Growth coming from Asia
* Celebrates centenary in 2013