ST. PAUL, MN. — Adhesives solutions provider H.B. Fuller Company has announced that it has approved a detailed plan associated with the integration of the Royal and H.B. Fuller businesses that is expected to result in the delivery of $35 million in annual cost synergies by fiscal 2020. In addition to procurement savings, this plan includes savings resulting from the closure of two small production facilities, the consolidation of up to six other locations into three locations, and the reduction of certain positions to support manufacturing and SG&A cost savings. These actions are in line with the previously announced Royal integration and synergy plan, and are in addition to planned revenue synergies.
“We are passionate about being the best adhesives provider in the world, and our customers are benefiting from the broader portfolio and expanded development and production capabilities obtained in the Royal acquisition,” said Jim Owens, H.B. Fuller president and chief executive officer. “The integration of our two businesses continues to progress very well, and every day we gain more confidence in our ability to deliver the synergies that we committed. The actions we are announcing will further enhance our efficiency and enable us to deliver the 2020 target of $600 million in EBITDA and corresponding debt paydown.”
These actions will result in pre-tax charges of $35 million to $40 million with after-tax cash costs of between $20 million to $24 million over the next three years. In 2018, we expect to incur charges of approximately $15 million to $20 million ($10 million to $14 million in after-tax costs) related to these actions. These charges will be excluded from the company’s adjusted earnings per share.
“The Royal integration is a three-year project that will be completed in the best interest of customers and employees with a clear focus on creating value for our customers,” continued Owens. “Our goal for the integration of our two great companies are prioritized to protect and grow our business, retain our best employees, deliver our committed synergies and build a unified culture. We are off to a great start, and the actions that we are undertaking will make H.B Fuller a better and stronger company.”
H.B. Fuller announced Feb. 27 that, effective between March 1 and April 1, 2018, or as contracts allow, the company will implement price increases for all adhesives product categories. Increases will be between 5 percent and 12 percent, and will include products supplied by its recently acquired Royal, Wisdom and Adecol businesses. The largest increases will occur in water-based adhesives and in North America where cost increases are highest.
The past 12 months have seen continued increases in feedstock costs, logistics costs and labor costs. Inflationary pressures in global markets have occurred due to trucking shortages, Hurricanes Harvey and Irma in the U.S., regulatory and environmental actions by the Chinese government, and robust demand. These increases will affect products in the company’s hygiene, packaging, durable assembly, construction, paper converting, and engineering adhesives segments.