11 February 2005 17:00 [Source: ICIS news]
Although most companies are boosting spending levels, 2005 will likely be the fifth straight year when capital spending trails depreciation (see chart). Any spending above depreciation indicates that a company is spending more than it has averaged in the past, while spending below depreciation means a firm is spending less than it has averaged in previous years.
"There is a bit of a creep up in capital spending in 2005 versus 2004, but much of this is more reflective of overseas investments in
Dow Chemical will increase capital spending from $1.33bn(Euro1.03bn) in 2004 to around $1.5bn in 2005. However, expenditures will still remain well below depreciation levels of around $1.9bn.
The company will continue to invest in high-value products such as Filmtec membranes, Ucar Emulsion Systems and MDI (diphenylmethane diisocyanate). Dow will also make use of joint ventures (jv) and Six Sigma productivity programmes to boost production while limiting capital outlays.
Lyondell Chemical is boosting capital spending from $229m in 2004 to $332m in 2005, mainly to upgrade the environmental performance of its Equistar Chemicals facilities in
"The increase is all anticipated spending in line with our environmental schedule," said a Lyondell official. "This includes reducing NOx emissions at Equistar’s
Lyondell will increase capital expenditures at Equistar from $107m in 2004 to $167m in 2005, at its intermediate chemicals and derivative business from $62m to $80m, and at Millennium Chemicals from $60m to $85m.
Nova Chemicals will significantly step up spending in 2005, revising upward its long-term planned capital spending of 50% of depreciation, or $160m, to $165m per year from 2003 to 2007.
"We have generated a lot of cash and are very pleased with our new product development and marketing success," said president and chief executive Jeff Lipton on the company’s fourth quarter conference call. "As a result, we have decided to increase our capital expenditure for the 2003 to 2007 period from about 50% of depreciation to about 65% of depreciation. As a result, capital expenditures will average about $200m for the five-year period."
After spending $242m in 2004, Nova plans to spend around $300m in 2005. Major projects include modernising and expanding its ethylene cracker in Corunna, Ontario, Canada ($75m in spending in 2005), and spending around $60m to increase production of certain styrenics performance products such as Arcel mouldable foam resin used in packaging.
"We have developed an ambitious maintenance and modernisation programme for 2005 that will move up projects already penciled in for 2006 or 2007," said Lipton.
Eastman Chemical is one of the few companies that will spend above depreciation in 2005. The company is boosting capital spending 41% from $248m in 2004 to $350m this year, ahead of expected depreciation of $310m. Much of the increase will go to Eastman’s $100m IntegRex polyethylene terephthalate (PET) plant being built in
DuPont may increase capital spending from $1.3bn in 2004 to $1.3bn-$1.4bn in 2005, ahead of depreciation of $1.1bn.
Industrial gases giant Praxair will raise capital spending from $668m in 2004 to $700m-$750m in 2005. Depreciation is expected at around $628m.
Of the up to $750m in spending, 65% will be devoted to growth projects, 25% to maintenance and 10% to cost reduction, according to chief financial officer James Sawyer.
By market segment, 31% of growth capital expenditures will go to the energy market, 20% to metals and 16% to manufacturing. The company has 28 major projects in the pipeline, including building two air separation units to supply high-purity oxygen and nitrogen to Shell and China National Offshore Oil Corporation’s (CNOOC’s) $4.3bn integrated petrochemicals complex in
Rohm and Haas will raise capital spending from $322m in 2004 to $375m in 2005 - still below expected depreciation of around $400m. The company is building a research and development (R&D) centre in
"There are no major new capital projects in the works," said a company official. "Capital will be spent on upgrading infrastructure in our various manufacturing operations, the research centre in
|CAPX as % of Depreciation|
|Rohm and Haas||-9%||-17%||-1%||-12%||-1%||5%||-18%||-23%|
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