Stahl Bides Time Taking Market Share as Rivals Seen as Targets

Stahl Holdings BV, whose chemicals treat Louis Vuitton leather bags and shoes, said it has gained market share among automotive clients and may buy competitors hurt by the economic slowdown.

Stahl, owned by Paris-based buyout firm Wendel SA, had stable sales in 2011 against a backdrop of shrinking orders in the wider market as the debt crisis, a housing slump and raw-material inflation took a toll on furniture and clothing demand, leather-finish head John Fletcher said in an interview.

The leather chemicals industry is poised for consolidation, Fletcher said in a telephone interview yesterday. TFL Holding GmbH has been taken over by administrators and BASF SE opted to keep its operation in March after failing to garner attractive bids. Clariant AG, Lanxess AG and Stahl are the other main players in the market and are in a good position to wait for acquisition targets, he said.

“If you talk about the big five, we have to wait and see what happens to TFL and BASF in the next 24 months, because most likely Lanxess, Clariant and Stahl are in a very good position to wait,” Fletcher said. “Conditions could get worse before they get better for those two companies.”

Stahl and its largest rivals are trying to move away from commodity leather chemicals used in furniture and garments, where competition from Italian rivals such as Alpa Spa and Lamberti SpA and low-cost Asian players is growing, to tap rising demand for luxury goods and cars.


TFL, based in Weil am Rhein, Germany, is suffering after its private equity owner saddled it with 65 million euros ($85 million) in debt, leading the company to break covenants in 2008, people familiar with the situation have said. Odewald bought TFL, which has annual sales of about 240 million euros, from Permira Advisers LLP in 2003 for an undisclosed price.

Creditors of TFL are poised to start the sale process, the company’s trustee said in December.

Efforts to consolidate among European suppliers of leather chemicals have so far been hampered by low valuations.

Stahl may be interested in certain “lucrative” parts of TFL, Fletcher said. Stahl, with a reported 182.8 million euros of net debt, is prepared to make “small and medium bolt-on” acquisitions, according to a Dec. 2 presentation.

“You could imagine a break-up scenario if things are very bad for TFL on cash,” the executive said. “Some Chinese could be involved, other smaller Italian competitors could have enough cash to buy a factory or one sales region of TFL.”

Asian Overhaul

Stahl is halfway through the restructuring of its Asian business, where operations have been hurt by the drop in Chinese-made furniture sold to the U.S. and a decline in demand for “heavy gloss” used in fashion goods, Fletcher said.

Stahl’s revenue in 2011 was probably “in line” with 2010, which amounted to 330.1 million euros, the Stahl director said. Market conditions have been weakening with the exception of the global luxury goods segment. Stahl also had significant growth in market share of the automotive leather, where demand has held up over the past year.

“That was a major achievement because in the leather community, the volumes of leather coated in 2011 was significantly less because the cost of leather itself is at a very elevated level,” Fletcher said.

Earnings before interest, taxes, depreciation and amortization fell to 14.6 percent of revenue in the first half of 2011 from 16.6 percent of sales for the whole of 2010. That margin was little changed in the second half of 2011 from the first half, Fletcher said.

“We expect some relief in the margin pressure to be coming in 2012,” Fletcher said. “Certain raw materials have the potential to come back down and we expect our prices to be kept at the levels we have now.”

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