From the Sector

• Rising global demand for particularly high-performance silicon carbide (SiC)-based semiconductors

• Increase in production capacities at the Shanghai (China), St. Marys (USA) and Meitingen (Germany) sites

SGL Carbon will significantly increase capacities for the production of graphite products for the semiconductor industry by 2024. As part of the investment budget for the Business Unit Graphite Solutions set out in the medium-term planning, a mid-range double-digit million euro amount will be made available for the expansion of production over the next two years. The company is thus responding to the strong growth in demand in this sector and strengthening its commitment to the global megatrend of digitalization.

The expansion program will take place in several steps over the next two years. In St. Marys, North America, and at the Chinese site in Shanghai, capacities for purification and for high-precision, computer-controlled processing of graphite components and felts will be expanded. In Meitingen (Germany), a new plant for the production of carbonized and graphitized soft felt is under construction. Further capacity expansions at various locations are being planned.

Archroma, a global leader in sustainable specialty chemicals and solutions and a portfolio company of U.S.-based private investment firm SK Capital Partners (“SK Capital”), announced it has entered into a definitive agreement to acquire the Textile Effects business (“Textile Effects”) from Huntsman Corporation. Closing of the transaction is subject to customary conditions and approvals and is expected to take place in the first half of 2023.

Since its formation in 2013, through a series of mergers & acquisitions, as well as internal investments in R&D, manufacturing and service capabilities, Archroma has been building a comprehensive portfolio of solutions to serve the emerging needs of the textile industry. The combination with Textile Effects and its rich historical roots of Huntsman and Ciba Specialties will create a technology powerhouse that will include Archroma’s legacy heritages of Sandoz, Hoechst, Clariant, BASF and Dohmen who have been at the cutting edge of the textile industry for decades, and together will continue to serve customers for years to come.

Both Archroma and Textile Effects are founding members of Sustainable Chemistry for the Textile Industry (SCTI), an alliance of leading chemical companies that strives to empower the textile and leather industries to apply sustainable, state-of-the-art chemistry solutions that protect factory workers, local communities, consumers and the environment.

• An innovative European project to process and recycle plastic textile waste
• A partnership to reach the objectives set by the European Union in reducing CO2 emissions by 2030
• A unique consortium rallying 16 public and private European organizations working together for more circular economy

Carbios joined WhiteCycle, a project coordinated by Michelin, which was launched in July 2022. Its main goal is to develop a circular solution to convert complex^[1] waste containing textile made of plastic into products with high added value. Co-funded by Horizon Europe, the European Union’s research and innovation program, this unprecedented public/private European partnership includes 16 organizations and will run for four years.
 
WhiteCycle envisions that by 2030 the uptake and deployment of its circular solution will lead to the annual recycling of more than 2 million tons of the third most widely used plastic in the world, PET^[2]. This project should prevent landfilling or incineration of more than 1.8 million tons of that plastic each year. Also, it should enable reduction of CO2 emissions by around 2 million tons.
 
Complex waste containing textile (PET) from end-of-life tyres, hoses and multilayer clothes are currently difficult to recycle, but could soon become recyclable thanks to the project outcomes. Raw material from PET plastic waste could go back into creation of high-performance products, through a circular and viable value chain.
 
Public and private European organizations are combining their scientific and industrial expertises:

• industrial partners (Michelin, Mandals, KORDSA);
• cross-sector partnership (Inditex)
• waste management companies (Synergies TLC, ESTATO);
• intelligent monitoring systems for sorting (IRIS);
• biological recycling SME (Carbios);
• product life cycle analysis company (IPOINT);
• university, expert in FAIR data management (HVL);
• universities, research and technology organizations (PPRIME – Université de Poitiers/CNRS, DITF, IFTH, ERASME);
• industry cluster (Axelera);
• project management consulting company (Dynergie).

 
The consortium will develop new processes required throughout the industrial value chain:

• Innovative sorting technologies, to enable significant increase of the PET plastic content of complex waste streams in order to better process them;
• A pre-treatment for recuperated PET plastic content, followed by a breakthrough recycling enzyme-based process to decompose it into pure monomers in a sustainable way;
• Repolymerization of the recycled monomers into like new plastic;
• Fabrication and quality verification of the new products made of recycled plastic materials

 
WhiteCycle has a global budget of nearly 9.6 million euros and receives European funding in the amount of nearly 7.1 million euros. The consortium’s partners are based in five countries (France, Spain, Germany, Norway and Turkey). Coordinated by Michelin, it has an effective governance system involving a steering committee, an advisory board and a technical support committee.

^[1] Complex waste: multi materials waste (Rubber goods composites and multi-layer textile)
^[2] PET: Polyethylene terephthalate

• Currency-neutral sales up 4%, despite more than € 300 million negative impact from macroeconomic constraints
• Markets representing more than 85% of the business grow 14% overall
• Gross margin down 1.5pp to 50.3% reflecting significantly higher supply chain costs
• Operating profit reaches € 392 million
• Net income from continuing operations amounts to € 360 million
• FY 2022 outlook reflects double-digit growth during the second half of the year

“Our Western markets continued to show strong momentum in the second quarter amid heightened macroeconomic uncertainty. With Asia-Pacific returning to growth, markets combined representing more than 85% of our business grew at a double-digit rate,” said adidas CEO Kasper Rorsted. “With sports back at center stage this summer, revenues in our strategic growth categories Football, Running and Outdoor all increased by double digits. However, the macroeconomic environment, particularly in China, remains challenging. The recovery in this market is – due to continued covid-19-related restrictions – slower than expected. And we have to take into account a potential slowdown in consumer spending in all other markets for the remainder of the year.”

Currency-neutral revenues increase 4% despite macroeconomic constraints
In the second quarter, currency-neutral revenues increased 4% as adidas continued to see strong momentum in Western markets. This growth was achieved despite continued challenges on both supply and demand. Supply chain constraints as a result of last year’s lockdowns in Vietnam reduced top-line growth by around € 200 million in Q2 2022. In addition, the company’s decision to suspend its operations in Russia reduced revenues by more than € 100 million during the quarter. Continued covid-19-related lockdowns in Greater China also weighed on the top-line development in Q2. From a channel perspective, the top-line increase was to a similar extent driven by the company’s own direct-to-consumer (DTC) activities as well as increases in wholesale. Within DTC, e-commerce, which now represents more than 20% of the company’s total business, showed double-digit growth reflecting strong product sell-through. From a category perspective, revenue development was strongest in the company’s strategic growth categories Football, Running and Outdoor, which all grew at strong double-digit rates. In euro terms, revenues grew 10% to € 5.596 billion in the second quarter (2021: € 5.077 billion).

Strong demand in Western markets
Revenue growth in the second quarter was driven by Western markets despite last year’s lockdowns in Vietnam still reducing sales, particularly in EMEA and North America, by
€ 200 million in total. In addition, the top-line development in EMEA was also impacted by the loss of revenue in Russia/CIS of more than € 100 million. Nevertheless, currency-neutral sales grew 7% in the region. Revenues in North America increased 21% during the quarter driven by growth of more than 20% in both DTC and wholesale. Revenues in Latin America increased 37%, while Asia-Pacific returned to growth. Currency-neutral revenues increased 3% in this market despite still being impacted by limited tourism activity in the region. In contrast, the company continued to face a challenging market environment in Greater China, mainly related to the continued broad-based covid-19-related restrictions. As a result, currency-neutral revenues in the market declined 35% during the three-months period, in line with previous expectations. Excluding Greater China, currency-neutral revenues in the company’s other markets combined grew 14% in Q2.

Operating profit of € 392 million reflects operating margin of 7.0%
The company’s gross margin declined 1.5 percentage points to 50.3% (2021: 51.8%). Significantly higher supply chain costs and a less favorable market mix due to the significant sales decline in Greater China weighed on the gross margin development. This could only be partly offset by a higher share of full price sales, first price increases and the benefits from currency fluctuations. Other operating expenses were up 19% to € 2.501 billion (2021: € 2.107 billion). As a percentage of sales, other operating expenses increased 3.2 percentage points to 44.7% (2021: 41.5%). Marketing and point-of-sale expenses grew 8% to € 663 million (2021: € 616 million). The company continued to prioritize investments into the launch of new products such as adidas’ new Sportswear collection, the next iteration of its successful Supernova running franchise and first drops related to the Gucci collaboration as well as campaigns around major events like ‘Run for the Oceans.’ As a percentage of sales, marketing and point-of-sale expenses were down 0.3 percentage points to 11.8% (2021: 12.1%). Operating overhead expenses increased by 23% to a level of € 1.838 billion (2021:
€ 1.492 billion). This increase was driven by adidas’ continuous investments into DTC, its digital capabilities and the company’s logistics infrastructure as well as by unfavorable currency fluctuations. As a percentage of sales, operating overhead expenses increased 3.5 percentage points to 32.8% (2021: 29.4%). The company’s operating profit reached a level of € 392 million (2021: € 543 million), resulting in an operating margin of 7.0% (2021: 10.7%).

Net income from continuing operations reaches € 360 million
The company’s net income from continuing operations slightly declined to € 360 million (2021: € 387 million). This result was supported by a one-time tax benefit of more than € 100 million due to the reversal of a prior year provision. Consequently, basic EPS from continuing operations reached € 1.88 (2021: € 1.93) during the quarter.

Currency-neutral revenues on prior year level in the first half of 2022
In the first half of 2022, currency-neutral revenues were flat versus the prior year period. In euro terms, revenues grew 5% to € 10.897 billion in the first six months of 2022 (2021:
€ 10.345 billion). The company’s gross margin declined 1.7 percentage points to 50.1% (2021: 51.8%) during the first half of the year. While price increases as well as positive exchange rate effects benefited the gross margin, these developments were more than offset by the less favorable market mix and significantly higher supply chain costs. Other operating expenses increased to € 4.759 billion (2021: € 4.154 billion) in the first half of the year and were up 3.5 percentage points to 43.7% (2021: 40.2%) as a percentage of sales. adidas generated an operating profit of € 828 million (2021: € 1.248 billion) during the first six months of the year, resulting in an operating margin of 7.6% (2021: 12.1%). Net income from continuing operations reached € 671 million, reflecting a decline of € 219 million compared to the prior year level (2021: € 890 million). Accordingly, basic earnings per share from continuing operations declined to € 3.47 (2021: € 4.52).

Average operating working capital as a percentage of sales slightly decreases
Inventories increased 35% to € 5.483 billion (2021: € 4.054 billion) at June 30, 2022 in anticipation of strong revenue growth during the second half of the year. Longer lead times as well as the challenging market environment in Greater China also contributed to the increase. On a currency-neutral basis, inventories were up 28%. Operating working capital increased 23% to € 5.191 billion (2021: € 4.213 billion). On a currency-neutral basis, operating working capital was up 14%. Average operating working capital as a percentage of sales decreased 0.4 percentage points to 21.0% (2021: 21.4%), reflecting an overproportional increase in accounts payable due to higher sourcing volumes and product costs.

Adjusted net borrowings at € 5.301 billion
Adjusted net borrowings amounted to € 5.301 billion at June 30, 2022, representing a year-over-year increase of € 2.155 billion (June 30, 2021: € 3.146 billion). This development was mainly due to the significant decrease in cash and cash equivalents.

FY 2022 outlook reflects double-digit growth during the second half of the year
On July 26, adidas adjusted its guidance for FY 2022 due to the slower-than-expected recovery in Greater China since the start of the third quarter resulting from continued widespread covid-19-related restrictions. adidas now expects currency-neutral revenues for the total company to grow at a mid- to high-single-digit rate in 2022 (previously: at the lower end of the 11% to 13% range), reflecting a double-digit decline in Greater China (previously: significant decline). While so far the company did not experience a meaningful slowdown in the sell-through of its products or significant cancellations of wholesale orders in any market other than Greater China, the adjusted guidance also accounts for a potential slowdown of consumer spending in those markets during the second half of the year as a result of the more challenging macroeconomic conditions. Therefore, growth in EMEA is now expected to be in the low teens (previously: mid-teens growth), while revenues in Asia-Pacific are projected to grow at a high-single-digit rate (previously: mid-teens growth). Despite the more conservative view on the development of consumer spending in the second half of the year, adidas has increased its forecasts for North America and Latin America reflecting the strong momentum the brand is enjoying in these markets. In North America, currency-neutral revenues are now expected to increase in the high teens. Sales in Latin America are projected to grow between 30% and 40% (both previously: mid- to high-teens growth).   

Due to the less favorable market mix and the impacts from initiatives to clear excess inventories in Greater China until the end of the year, gross margin is now expected to reach a level of around 49.0% (previously: around 50.7%) in 2022. Consequently, the company’s operating margin is now forecast to be around 7.0% (previously: around 9.4%) and net income from continuing operations is expected to reach a level of around € 1.3 billion (previously: at the lower end of the € 1.8 billion to € 1.9 billion range).

• INDA Announces Full Program and Opens Registration for Premier Event in New Orleans

With reusable and recyclable products and new inputs offering growth opportunities in absorbent hygiene and personal care products, Hygienix™ will provide an insightful view into the market’s future this November in New Orleans.

Industry participants from around the world and throughout the supply chain will convene and connect for the eighth edition of the premier event for the fast-growing segment on November 14-17, at The Roosevelt New Orleans Hotel.

The in-person conference will highlight the segment’s continued growth and new opportunities with presentations by more than 20 industry experts on sustainable inputs, natural fibers, product transparency, reusable menstrual products, recyclable diapers and more as well as the latest market forecasts and insights into consumer buying trends.

Hygienix also will offer two specialized workshops, and a myriad of business connection opportunities including a welcome reception on Nov. 14 and a first-time attendee mentorship program.
Participants will discover innovative products in absorbent hygiene and personal care at tabletop exhibits with evening receptions on Nov. 15-16, providing opportunities for 60 companies to showcase their unique offerings.

Three finalists will each present their innovative and technically sophisticated disposable absorbent hygiene products as they vie for the prestigious Hygienix Innovation Award™. Nominations are open until August 29. Demonstrating the interest in sustainability, last year’s award recipient was Kudos Diaper Subscription featuring its 100% cotton disposable diaper.

Hygienix Highlights
Absorbent hygiene – the single largest nonwoven end‐use category (by square meters) – is expected to continue its strong growth over the next four years, creating market opportunities in this thriving area driven by growing consumer interest for environmentally-friendly options in material inputs and end-of-life options.

Participants will hear the latest data and forecasts from analysts during presentations by Robert Fry, Jr., Ph.D., Principal of Robert Fry Economics LLC on the Global Economy – What we Can Expect in 2023; Pricie Hanna, Managing Partner, and Colin Hanna, Director of Market Research, Price Hanna Consultants on Disposables versus Reusables; and Simon Preisler, Vice President of Logistics, Central National Gottesman delivering a Logistic Market Update.

A panel of entrepreneurs will discuss the challenges, biases and taboos to bringing innovations into the marketplace. Experts sharing their insights will be Mia Abbruzzese and Alexandra Fennell, co-founders of Grace; Amrita Saigal, founder and CEO, Kudos; and Cindy Santa Cruz, President of ParaPatch.

A session on Next-Generation Menstrual Products and their Users will feature Liying Qian, Research Analyst, Euromonitor International providing market data on disposable and reusable period products; Frantisek Riha-Scott, Founder, Confitex discussing reusable products; and Greta Meyer, Co-Founder and CEO, Sequel on Reengineering the Tampon.
Also focusing on period products will be a presentation by Danielle Keiser, Managing Director, Impact, Madami on Changing the Conversation with Consumersmoderated by Heidi Beatty, Chief Executive Officer, Crown Abbey, LLC.

Other intriguing not-to-be-missed presentations centered on sustainability trends include:

• Assessing Sustainable Fiber Options in the Context of Disposable Hygienic Products – Richard Knowlson, Principal, RPK Consulting LLC
• Five Generations of Hygiene + Sustainability – Matt Schiering, Professor of Marketing, Dominican University
• Recycling Approaches for Disposable Diaper Waste – Jeannine Cardin, Quality and R&D, RecycPHP Inc.

Hygienix will provide additional focused learning opportunities with two essential short courses (with separation registration fees) on Nov. 14 focused on Absorption Systems for Absorbent Hygiene Products, from 1 to 3:30 p.m. and Global Diaper Trends from 3:45 to 6 p.m.

Natural fibres offer mechanical strength, low weight, and resilience, as well as renewability and biodegradability, making them ideal partners to high-tech, modern, and sustainable textile applications. The DNFI Innovation in Natural Fibres Award offers recognition for outstanding design and innovation in this important textile sector.

The DNFI award has proven to be successful in raising awareness of the outstanding work being done by specialists in this field and previous winners speak of their appreciation for the subsequent media coverage and interest in their work.

• Applicants are invited to submit their proposals by email to: Secretariat@dnfi.org.
• Application templates are available on the DNFI web site: https://www.dnfi.org/dnfi-award
• Closing Date for award applications is 9. September 2022.
• A maximum of two extra pages (for a total of three pages) of information and three photographs/graphs/tables may be included with this submission.

Stahl, an active proponent of responsible chemistry, has joined CLIB, an international open innovation cluster of stakeholders in the biotechnology space. CLIB is committed to providing networking opportunities for its members across different industries and sectors with a view to using biotechnology to foster sustainability. Stahl’s membership of the network underlines the company’s commitment to open innovation and to working with partners across value chains to reduce its Scope 3 emissions.

CLIB members include large companies, SMEs, start-ups, academic institutes, universities, and other stakeholders engaged in biotechnology and the circular- and bioeconomy as a whole. As part of this cluster, Stahl seeks to connect with likeminded contacts and partners to explore opportunities for increasing the use of bio-based and bio-derived solutions in its chemistries, products, and applications. In turn, Stahl hopes to add value to other members of the network by providing a route to market for biotechnology solutions through the company’s extensive range of industrial products and applications.
 
Stahl’s first face-to-face interaction with its fellow CLIB members will take place at the CLIB Networking Day in October 2022.

In recent years, Riri Group has embarked on a process of vertical expansion aimed at broadening its product range and in-house processing, in order to provide the market with a superior quality product thanks to the variety of its services and technologies. With the acquisition of K4Sint (Knowledge for Sintering) this process has taken another step forward and the Group consolidates its position as ‘one-stop shop supplier’ under the sign of integration, design capacity, customised offer, and innovative technologies.

K4Sint, founded by two Ph.D. materials engineers,  brings to the Swiss Group its experience in Press and Sintering, Metal Injection Molding, Spark Plasma Sintering (Titanium, Aluminum, MMC, Advanced Ceramic). Riri, therefore, integrates within its Group a company capable of developing and producing components, accessories and semi-finished products for internal use but also for customers and companies not only limited to the fashion business: K4Sint will become the go-to facility and production site for steel MIM processes of the entire group. The new unit will also be able to perform metallographic tests, innovative materials development projects and in-depth technological consultancy work for Riri’s customers.

adidas is adjusting its outlook for the financial year 2022. While second quarter results were somewhat ahead of expectations reflecting continued strong momentum in Western markets and a return to growth in Asia-Pacific, the company has been experiencing a slower-than-expected recovery in its business in Greater China since the start of the third quarter. Previously, the company had assumed that in absence of any major lockdowns as of Q3, currency-neutral revenues in the region would be flat during the second half of the year versus the prior year level. However, given the continued widespread covid-19-related restrictions, adidas now expects revenues in Greater China to decline at a double-digit rate during the remainder of the year.

As a result, adidas now expects currency-neutral revenues for the total company to grow at a mid- to high-single-digit rate in 2022 (previously: at the lower end of the 11% – 13% range). Because of the less favorable market mix due to lower-than-expected revenues in Greater China as well as the impact from initiatives to clear excess inventories in this market until the end of the year, the company’s gross margin is now expected to be around 49.0% in 2022 (previously: around 50.7%). Consequently, the company’s operating margin is now forecasted to be around 7.0% in 2022 (previously: around 9.4%) and net income from continuing operations is expected to reach a level of around € 1.3 billion (previously: at the lower end of the € 1.8 billion – € 1.9 billion range).

So far, the company did not experience a meaningful slowdown in the sell-through of its products or significant cancellations of wholesale orders in any other market. Nevertheless, the adjusted guidance also accounts for a potential slowdown of consumer spending in these markets during the second half of the year as a result of the more challenging macroeconomic conditions.

Despite these headwinds, adidas continues to expect double-digit revenue growth during the second half of the year for the total company. In addition to easier prior year comparables, the acceleration will be driven by adidas’ strong product pipeline, the restocking opportunity with its wholesale customers given unconstrained supply as well as the support from major sporting events.

Based on preliminary numbers, adidas’ currency-neutral revenues grew 4% during the second quarter. This increase was driven by strong double-digit growth in North America and Latin America, high-single-digit growth in EMEA (also double-digit growth excluding negative Russia/CIS impact) as well as a return to growth in Asia-Pacific. In euro terms, sales increased 10% to € 5.596 billion. The company’s gross margin declined 1.5 percentage points to a level of 50.3% and operating margin reached 7.0% during the second quarter (2021: 10.7%). Net income from continuing operations was € 360 million in Q2 (2021: € 387 million) supported by a one-time tax benefit of more than € 100 million due to the reversal of a prior year provision.

• Focus on straightening technology and process control

At Indo Intertex, held from 10 to 13 August in Jakarta, visitors get to see the Mahlo-way for process control in textile production. The German machine manufacturer and its partner agency Agansa Primatama will be available to show everyone its leading straightening technology as well as energy saving concepts around the stenter frames. INDO INTERTEX is South East Asia’s largest trade show on the textile and garment industries, bringing together leaders to experience world-class manufacture, technology and solutions.

Indonesia is one of the ten biggest textile producers in the world. Especially the USA, the European Union and Japan import a majority of their requirements from the Southeast Asian Island state. In order to fulfill the increasing demands and the call for high quality goods, producers invest in machinery, equipment and technology.

At IndoIntertex, Mahlo informs about its straightening machine Orthopac RVMC-15, among other. Based on experience reaching back to over 75 years, the machine offers the latest technology for correcting distortions. The modular straightening and process control system ensures a straight-thread product before and after the drying or fixing process and optimises the processes all around the stenter. This increases quality and saves resources and energy. The process control system Optipac VMC-15 measures and controls critical parameters such as dwell time, thread density or residual moisture.