Top interviews: Can you give us an insight into your business activities and which application areas you cover? Which companies does Masterflex supply, among others?
Detlef Herzog: Masterflex AG is excellently positioned as an innovation and technology leader in the advanced polymer sector in an attractive niche market. Its core competence in the field of polyurethane (PU) extends along the entire value chain - from materials development and proprietary process technology to the marketing of PU products. PU can be modified in a variety of ways and thus offers numerous advantages over traditional materials such as PVC, rubber and steel.
Masterflex was founded in 1987. In its current business units High-tech Hose Systems, Medical Technology and Innovative Wear Protection, the Group today serves more than 8000 customers in over 20 industries worldwide and is therefore highly independent of industry and economic cycles. Masterflex has set important international standards through innovations and today occupies a leading global market position, particularly in high-tech hose systems - strengthened by high market entry barriers and low competition.
Top Interviews: What exactly do you mean by advanced polymers and what advantages do they have over conventional PVC?
Detlef Herzog: Advanced polymers such as polyurethane are high-tech specialty plastics that stand out from so-called commodity plastics such as polypropylene and PET thanks to their wider range of properties and applications. Polyurethane is a true all-rounder because it can take on a wide variety of properties. Compared to PVC, it is characterized by its higher abrasion resistance and its temperature resistance, important properties when transporting abrasive materials through hose systems. Medical tubing and catheters made of PU can, for example, significantly reduce the risk of thrombosis and infection. This is because PU can have antithrombogenic or antibacterial properties. PVC, on the other hand, must be coated with heparin to be antithrombogenic. However, the heparin degrades in a short time in the patient's body.
In wear protection, Masterflex offers pipes and pipe bends lined with PU. These have a considerably longer service life than a steel pipe. In addition, polyurethane is more environmentally friendly. PVC is hazardous waste and hydrochloric acid is released in the event of a fire.
Top Interviews: What competitors are there and how do you see yourself positioned compared to them?
Detlef Herzog: Masterflex today occupies a leading global market position, particularly in high-tech hose systems - strengthened by high market entry barriers and low competition. For many PU products, Masterflex has a monopoly position worldwide or competes with only one, unlisted, competitor. In the medical sector, we are doing pioneering work. We supply so-called medical operation sets directly to hospitals and clinics. These complete sets contain all the medical instruments required by the attending physician. This significantly reduces the logistical effort required to prepare an operation. This is in line with the trend in the healthcare sector towards cost reduction. There are some group-based competitors in this field, but in our view they cannot offer the necessary flexibility of an independent supplier like Masterflex. In addition, since the construction of a clean room hall in September 2000, we have had one of the most modern production facilities for medical hoses made of polyurethane in Europe. This has put us in an ideal position to successfully position ourselves in the medical technology market.
Top-Interviews: Are you considering a move to the Neuer Markt?
Detlef Herzog: We made a conscious decision in favor of the SMAX. Masterflex is an industrial company with tangible products.
In our view, the industry structure of software, IT and telecommunications that prevails on the Neuer Markt does not offer the right market environment. In the SMAX, we are right at the forefront. Masterflex was admitted to the SDAX just three months after the IPO. This success is certainly due to the fact that we offer the financial community not only a good equity story, but also excellent fundamental data. We can already look back on many years of successful corporate development with double-digit sales and earnings growth, and the prospects for the future remain positive.
The current development on the Neuer Markt and the return to value stocks show that we made the right decision.
Top Interviews: When does the lock-up of existing shareholders expire? Are they planning to sell shares or extend the lock-up?
Detlef Herzog: The existing shareholders are very committed to Masterflex AG. This is documented by a voluntarily extended lock-up period of 24 months. In addition, a pooling agreement was concluded among the existing shareholders, which regulates the delivery of shares for the five subsequent years.
Top Interviews: How much interest are institutional investors showing in your stock?
Detlef Herzog: Our goal in going public was to obtain a balanced structure of institutional and private investors. We succeeded in doing this. The interest shown by institutional investors at our roadshow was very high, and more have joined us since the IPO. Through our Investor Relations department, we maintain contact with existing investors and approach new ones.
Top Interviews: In the first nine months of 2000, sales increased by 92.5% to DM 57.8 million, while EBIT grew by 31.0% to DM 8.7 million. Are you on target with these figures?
Detlef Herzog: We are more than satisfied with the development of sales to date. The development of EBIT has also improved compared with the same period last year. Looking at the year as a whole, we will certainly achieve our sales target of DM 77.0 million (+85%). We were also able to increase EBIT considerably compared to 1999. However, a number of special effects will result in a lower growth rate. These relate primarily to our change of strategy in the USA .
It was originally our intention to use the proceeds from the IPO for further acquisitions in the USA. Several discussions with potential takeover candidates convinced us that this strategy would entail considerable - possibly incalculable - costs, but only minor benefits. This is because we would also have had to take over production capacities that fall far short of our high technological standard and would therefore be relatively useless to us. That's why we decided to set up our own sales organization. We have already recruited staff and are opening our own sales offices in strategically important areas. This strategic realignment was partly reflected in increased selling and personnel costs. Nevertheless, EBIT should grow by a very pleasing 36%, enabling us to pay a dividend for the first time for fiscal 2000.
Top Interviews: What are your sales and earnings forecasts for 2001 and 2002?
Detlef Herzog: The new production capacities, the additional products in the medical and innovative wear protection areas, and the further expansion abroad should also permit significant leaps in growth in 2001 and 2002.
We expect a double-digit increase in sales and a significantly disproportionate improvement in earnings. Possible acquisitions could further increase these figures.
Top Interviews: Can you tell us about your marketing strategy?
Detlef Herzog: Our goal is to find new applications for polyurethane. We are not interested in mass production, so we have positioned ourselves in highly profitable niche markets. There we offer high-quality products and system solutions for very specific problems. This strategy has made us the market and technology leader in the field of high-tech hose systems. We have set new standards in the market with numerous innovations. Many of our products have a unique position on the market. We will continue to pursue our positioning as a specialist for polyurethane solutions in our other current and future business areas.
Top interviews: In which international markets are you represented and what role do they play?
Detlef Herzog: We are represented in Europe - in Germany, France and the UK with our own production facilities. The share of sales is about 70 %. Since 1999, we have also been represented in the USA. The share is about 30 % and is to be increased considerably in the next few years.
Top-Interviews: How do you explain the drop in the share price since the high of just under 40 euros to currently 25 euros?
Detlef Herzog: The Masterflex share has been caught up in the general downward trend of the stock markets. Although we are listed on the SMAX, the parallelism with the trend on the Neuer Markt was clearly visible. Profit-taking from our stock was obviously used to offset losses in other stocks. However, there were no significant price falls. We continue to trend above the issue price, which is not currently the case for many other companies. We are confident that our share price will continue to move upwards, as we continue to offer positive sales and earnings prospects for the coming years. This continues to make a long-term investment in Masterflex shares attractive.
Top Interviews: Has the high oil price had an impact on your business?
Detlef Herzog: No. More and more polyurethane suppliers are entering the market. This has led to falling prices. In addition, we are in a comfortable negotiating situation with our suppliers due to the considerable volume we purchase.
Top Interviews: What do you intend to do with the money from the IPO, do you already have concrete plans for it?
Detlef Herzog: As already explained, our original intention was to use the proceeds from the IPO for further acquisitions in the USA. We are now using part of the funds to build up our own sales organization. We continue to explore the possibility of making acquisitions in various areas.
Top Interviews: You are building a larger research center on the company's premises. What areas will this be used for and when can we expect it to go into operation?
Detlef Herzog: The groundbreaking ceremony took place on November 6, 2000, and since then the construction of the technical center has been progressing well. We expect it to be commissioned at the end of March/beginning of April. In this pilot plant, we will conduct interdisciplinary research and development in the field of advanced polymers. This will also include test series for testing new products in specific applications. We will hire additional specialist personnel, for example a chemist.
Top Interviews: Your company is also active in the field of nanotechnology. What exactly are you developing for what purpose and when can we expect a breakthrough and the first applications?
Detlef Herzog: With the help of nanotechnology, we want to conduct even more research into the surface properties of polyurethane and further improve its property profile. We want to optimize existing products and find new applications for PU. We are currently working on the development of antibacterial polyurethane. This property is of crucial importance in the medical sector. We are on the verge of a breakthrough here. However, new products must first undergo a series of clinical tests before they can finally be used, so some time will pass here.
Top Interviews: What can your investors expect in the foreseeable future? Are there any talks underway with new customers or anything similar?
Detlef Herzog: The general prospects are excellent. The market for PU products has been growing at double-digit rates for years. At present, only about 15% of all possible applications for polyurethane are being used. Experts consider the PU market to be one of the fastest-growing plastics niche markets of the future.
In terms of our business activities, rapid market penetration in the USA is one of our most urgent goals in the next few years. High-tech polyurethane hose systems are virtually unknown there. We will be holding numerous talks with potential customers here. In Medical Technology, full production will start this spring. The focus here is on the German market. We will be presenting our innovative products to clinics, hospitals and doctors' surgeries and will be exhibiting at trade fairs. In our newest business area, Innovative Wear Protection, the advantages of our product will also be made known in a targeted manner.
In general, we will also continue to look for potential takeover candidates. For example, we are currently considering whether to exercise the option to acquire the remaining shares in Angiokard Medizintechnik GmbH.
Top Interviews: Where do you think Masterflex will be in three years' time?
Detlef Herzog: In Europe, we want to further consolidate and expand our position as market and technology leader in the advanced polymer market. We also want to achieve this goal in the USA. In the long term, Masterflex is to become the global epitome of competence in the development and processing of polyurethane.
Top interviews: Thank you !