Europe’s largest independent hemp grower and processor, HempFlax, sees incentives for expanding into construction. That’s why it recently launched its own sustainable building supplies division.
HempFlax, based in the Netherlands, took over the German natural insulation manufacturer Thermo-Natur. Under the asset-based deal, the Bavarian company has been renamed HempFlax Building Solutions and will continue its production of Thermo Hemp insulation
The move reflects HempFlax’s strategy to diversify its portfolio of hemp-derived products – something many in the European hemp space say CBD-focused farmers in the United States should consider doing themselves.
But is an expansion into hempcrete insulation a viable business strategy? While EU plans for a carbon-neutral economy could incentivize the production of hemp-based building materials, the hurdles represented by the COVID-19 economic downturn, a dearth of processing facilities and a lack of hemp building standards may not be so easily overcome.
Closing the deal
HempFlax CEO Mark Reinders said his company was ready to act when it learned that Thermo-Natur had stopped production on May 1, but said his company acted quickly to close the deal, and production at the factory started back up last week.
Reinders told Hemp Industry Daily that the acquisition underlines the company’s commitment to becoming less dependent on CBD revenue and further diversifying its product portfolio.
“We want to continue investing in non-CBD business lines,” Reinders said. “We always keep a close eye on the mix in our revenue streams so that we are not that sensitive to volatility in some of the business lines.”
Just under half of HempFlax’s total revenue currently comes from its CBD business. Around 20% of the company’s income is sourced from its animal-care bedding and nesting line, and another 15% comes from industrial products like plastics and fibers.
HempFlax supplies its six product divisions with biomass from contract farms in the Netherlands and Germany and its own growing operation in Romania. The company cultivated just under 2,000 hectares (4,942 acres) of hemp this year.
Outlook for post-coronavirus construction
The construction industry has not been spared from the economic downturn resulting from measures to stem the spread of COVID-19, but contraction in the sector has shown signs of easing.
While home-building activity and commercial construction in the eurozone continued their downward spiral in May, the rate of decline slowed compared to April, according to a survey of construction firms carried out by IHS Markit.
“The rate of decline eased considerably as restrictions on business operations and workers were relaxed,” said Bernard Aw, principal economist at IHS Markit.
“In fact, Italy posted a mild rise in construction output, though Germany and France still recorded declines, albeit at much slower rates.”
Reinders acknowledged the construction and building sector will continue to be affected by the current recession, but he said that it was possible to use the downturn as an opportunity. HempFlax came out ahead after the 2008 financial crisis, he noted, because the company used that time to rebuild its production line.
“We are trying to do the same again,” Reinders said.
Hemp insulation is a niche market: According to HempFlax, it represents less than 0.5% of the 3.3 million tons of insulation used each year in the construction industry. But the long-term potential, especially in Europe, cannot be ignored, he said.
“I am convinced that renovating houses will be bigger than building houses,” Reinders said. “That will be done by people doing it themselves, and they will care about the materials that they use. A private home owner is looking for sustainable materials.”
He predicted a long life for the hemp construction sector.