Average cap spending cut in 2001 was 22% - more to come?

11 October 2002 08:26  [Source: ICIS news]

Chemical companies worldwide cut back sharply on spending last year in the face of increasingly difficult operating conditions. Tight controls have remained in place throughout 2002 as the sector has continued under pressure.

As I mentioned in Insight on 1 October, the global political situation is such that few companies are willing in the final quarter of the current year to sanction big new projects, particularly those in potentially sensitive regions of the world.

Difficult current conditions and the uncertain outlook will work together to constrain investment in new plant and machinery and, in some products, bring tighter supply demand balances sooner than expected. In that respect the impact of the cutbacks will be largely positive and help lift some depressed parts of the industry out of the doldrums.

In petrochemicals it is not difficult to see a window of opportunity and better times for monoethylene glycol (MEG). Much the same can be said for styrene and PVC (polyvinyl chloride). Other products are in a similar position although for the petrochemicals and plastics sector to improve markedly supply has to balance much more closely with demand for the big polymers, polyethylene (PE) and polypropylene (PP). That is why most in the industry believe now that the next upturn will not be seen until 2004 at the earliest.

My table shows some of the data collected for the ‘Top Performers’ analysis published across the Reed Chemicals Group portfolio of magazines in late September and summarised in Chemical Insight and Chemical News & Intelligence. Capital spending figures were collected for 105 chemical companies or for the chemicals businesses of some of the oil majors, and the numbers say a lot. Only 37 companies increased spending last year - in some cases the reported increases included acquisitions. Just 27 firms lifted expenditure by more than 10%.

The table shows the opposite end of the scale and the companies that made the big cutbacks. Net profit figures have been juxtaposed with the spending numbers. They illustrate the tough conditions faced by the industry in 2001 with 29% of the companies reporting a net loss.

In many respects, although not in all cases, the worst hit companies cut the most. The table includes the 50 of the 68 companies which cut spending in 2001 and fiscal 2001/02. The average cutback was 22% with seven companies cutting by more than 50%, 27 by more than 20% and 49 by 10%. The figures do not make easy reading. They reflect the performance of a sector in which activity slowed markedly over the course of the year.

Unfortunately, while there has been a clear increase in activity in 2002 operating conditions currently are such that few companies believe they can spend more, other than on the most strategic of projects. The cutbacks continue.

Cuts in capital spending and chemicals profits in 2001

Company

Net profit

Change

Capital

Change

Company

Net profit

Change

Capital

Change

($m)

Spending

($m)

spending

($m)

($m)

Acetex

5

-71.2%

3

-73.6%

Occidental Chemical

-394

loss

120

-22.6%

Hercules

-2

loss

63

-64.8%

DuPont

4339

87.5%

1494

-22.4%

Nova Chemicals

-128

loss

168

-61.8%

Showa Denko

-261

loss

246

-19.3%

Solutia

20

-83.7%

94

-57.5%

Repsol

194

-18.7%

AECI

45

20.5%

9

-56.6%

Georgia Gulf

-12

loss

18

-18.0%

Borden Chemical

-125

loss

47

-54.7%

Ferro

39

-46.4%

54

-17.7%

Sabic

476

-51.0%

611

-50.4%

British Vita

50

-20.1%

22

-17.3%

Mitsui Chemical

58

-55.2%

463

-47.7%

Air Products

519

-2.5%

806

-17.1%

EVC

-77

loss

15

-47.4%

Cytec

71

-41.5%

64

-16.5%

Noveon

-15

loss

36

-43.6%

BASF

5214

372.4%

2703

-16.4%

Sterling Chemicals

-224

loss

17

-41.4%

Equistar

-283

loss

110

-16.0%

ExxonMobil

882

-24.0%

872

-40.6%

Shin-Etsu

516

6.2%

614

-15.7%

Sherwin-Williams

263

-15.0%

83

-37.8%

Praxair

430

18.5%

595

-15.5%

H B Fuller

44

-10.6%

31

-37.3%

BOC

371

-22.7%

518

-14.8%

Olin

18

-77.9%

65

-31.6%

IFF

135

-9.8%

52

-14.3%

Ethyl

10

14.0%

10

-31.2%

ISP

-1

loss

53

-14.1%

Wellman

12

-60.9%

28

-28.7%

Sekisui Chemical

393

7.1%

289

-12.3%

Hitachi Chemical

24

-75.9%

206

-27.9%

Dow

-385

loss

1587

-12.2%

Arch Chemicals

3

-91.1%

45

-27.6%

Crompton

-124

loss

137

-11.7%

Linde

257

5.2%

638

-26.8%

Airgas

54

11.8%

58

-11.5%

Mississippi Chemical

-37

55.7%

15

-26.7%

Orica

-95

loss

106

-11.5%

FMC

100

-35.1%

146

-26.2%

Cabot

136

19.3%

122

-10.9%

Dow Corning

-23

loss

-224

-24.9%

Rutgers

60

78.6%

207

-10.8%

Hanwha Chemical

-111

loss

62

-24.6%

Tosoh

3

-95.1%

127

-10.2%

Lubrizol

94

-8.7%

66

-22.7%

Millennium Chemicals

-43

loss

97

-9.3%



 


By: Nigel Davis
+44 20 8652 3214



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