Power performers

05 September 2005 00:01  [Source: ICB Americas]

A YEAR of strong growth for the chemical industry was topped in 2004 by sharp profit increases for many producers. After the deep slump of recent years, the return to stronger profitability had to be welcome.

Volume demand climbed for most firms, quarter by quarter, across the first nine months of the year at least. Stronger demand put pricing power back in the hands of producers, after it had been weakened over years of poor results in the deepest downturn in more than 20 years. At last prices were pushed higher, to help combat steeply rising raw material costs. Sales values expanded and, with stricter cost control, so did profitability.

The ICIS Top 100 chemical listing charts the fortunes of the leading global chemical producers in 2004 and, for some, in fiscal 2004–05. It captures the financial performance of different companies in different parts of the world but it equally offers unique insight into industry and chemical-sector trends.

This is apparent from the current listing. BASF is placed at the head of the league table of chemical producers as it has by far the highest sales in terms of US dollars. But the tabulations do not attempt to split out purely chemical operations from chemical producer’s results for the year, so as to obtain the fullest data sets for each company. Only the chemical interests of the oil majors, however, are included.

SALES GROWTH

The data are grouped to give a feel for sales growth and profitability, both in absolute sense and relatively, as percentage changes are shown for each entry. Key performance ratios can be derived from the full data set.

Analysis of the compiled results shows that the leading companies in terms of sales growth in 2004 were Lyondell and Lubrizol, each with top-line growth greater than 50 percent. The petrochemical majors benefited greatly in 2004 from rising volume demand and rising prices, pushed through on the back of much higher feedstock costs.

Among the top 10 in terms of sales growth were Sabic, Shell, ExxonMobil, National Petrochemical Company (NPC) of Iran, Sinopec, Repsol and Chevron Phillips. Indeed, no petrochemical firm produced sales growth below 10 percent in a banner year for the segment.

SPECIALTY PRICES

The fact that top-line growth was lower among the specialty chemical makers is hardly surprising, given the fact that prices in this sector remained under pressure throughout 2004. Firms were battling price erosion rather than the other way round. Only in the first half of 2005 has it been broadly possible for speciality companies to push through price increases sufficient to help combat the general downward trend.

Some specialty firms also have their own problems linked to the popular life science intermediates segment where overcapacity is rife. The impact of this was seen in 2004, with companies such as Lonza and Rhodia reporting a contraction in sales.

Driving growth through to the bottom line is never easy, but chemical companies have become smarter and indeed more ruthless in recent years. The 2004 numbers reflect the profits many petrochemicals players were able to achieve on the back of particularly strong sales growth. Some took the opportunity to push through more restructuring and book the consequences as exceptional charges for the year.

Distinct profit growth was also not confined to petrochemical players. Companies such as ICI and newly created Lanxess (the Bayer chemicals spin-off) reported sharp net profit improvements.

Part of the strategic battle in recent years sector-wide has been to tackle organizational and production-related costs. Few companies employed more people in 2004 than in 2003, apart from those making more acquisitions than divestments.

On the cost front, 2004 was another year of restrained capital investment but the data show that many companies began to push spending higher. Capital spending in general for the sector has dropped below depreciation as companies have become more conscious of what they can achieve with existing assets. That is not to say, however, that key projects are passing internally set projected rates of return.

The industry mood was more buoyant in 2004 than it has been for a number of years. It remains so in 2005. Supply-demand balances in many product chains are tight and look likely to remain so in the medium term despite companies’ ambitions to capture more growth with their own production facilities.

In the midst of the upturn in 2004, many companies were conscious of the rising cost of simply doing more business. That having been said, the focus remained very much on controlling selling, general and administrative costs.

THE TOP 100

	Sales	Operating profit or EBIT	Net profit	Total assets	R&D	Capital spending	Employees
Company	$m	Change, %	$m	Change, %	$m	Change, %	$m	Change, %	$m	Change, %	$m	Change, %	Number	Change, %
1 BASF	50,818	12.5	6,574	82.7	2,549	106.9	45,915.5	0.9	1,588.0	6.2	2,612.8	-15.8	81,955	-6.0
2 Bayer	40,286	4.2	2,441	-	816	-144.3	51,179.1	1.0	2,852.5	-12.4	1,726.1	-26.7	13,000	-2.1
3 Dow Chemical	40,161	23.1	-	-	2,797	61.7	45,885.0	9.5	1,022.0	4.2	1,333.0	21.2	43,203	-6.8
4 Shell Chemicals	29,497	41.7	1,339	-583.4	930	-545.0	-	-	-	-	705.0	17.7	8,600	0.0
5 ExxonMobil Chemicals	27,781	37.6	-	-	3,428	139.4	-	-	-	-	690.0	-0.3	-	-
6 DuPont	27,340	1.3	-	-	1,780	77.6	35,632.0	-3.8	1,333.0	-1.2	1,232.0	-28.1	60,000	-25.9
7 BP	21,209	31.9	-900	-258.5	-	-	-	-	-	-	2,289.0	195.4	12,400	-22.3
8 Mitsubishi Chemical	20,421	13.7	1,386	51.4	517	60.3	18,379.1	-1.6	832.1	0.8	626.1	-3.2	33,261	-0.7
9 Total	20,042	16.1	888	158.3	888	158.3	-	-	-	-	1,225.2	-18.8	-	-
10 Sabic	18,279	46.5	6,269	121.7	3,791	112.3	33,322.7	14.3	-	-	-	-	2,300	0.0
11 Sinopec	17,862	39.0	2,311	428.0	-	-	-	-	-	-	1,330.0	50.0	-	-
12 Akzo Nobel	17,177	-2.8	1,760	22.2	1,159	42.2	16,793.9	3.8	165.2	-7.6	745.9	-5.2	61,400	-5.0
13 Degussa	15,222	1.5	952	6.5	403	-214.2	18,456.4	-2.9	471.1	4.2	1,016.7	-3.5	44,566	-1.7
14 Asahi Kasei	12,849	9.9	1,080	90.1	527	104.0	11,845.3	1.7	473.0	4.7	638.7	-20.7	23,820	-4.8
15 Air Liquide	12,694	11.7	1,729	6.8	1,053	7.2	19,528.6	31.1	139.8	-36.0	1,351.1	-	35,900	12.5
16 Sumitomo Chemical	12,090	11.9	981	57.9	-	-	15,377.7	6.4	-	-	1,173.1	14.2	20,195	6.1
17 Huntsman	11,486	24.1	184	117.5	-228	-28.8	9,437.0	8.0	-	-	227.0	18.8	11,500	-11.5
18 Mitsui Chemical	11,448	12.7	751	49.4	244	109.6	11,240.4	1.4	325.5	6.1	439.3	3.1	12,228	-1.0
19 ICI	10,732	-4.2	918	11.4	402	950.0	9,457.4	-5.2	281.7	-2.0	287.4	8.7	33,820	-6.6
20 Solvay	10,664	4.2	1,075	17.2	732	25.8	13,588.1	3.4	559.1	2.2	763.5	1.6	29,300	-2.8
21 DSM	10,495	28.1	662	66.3	355	88.5	12,097.6	-4.9	387.2	6.7	452.2	-83.3	24,180	-7.4
22 Dainippon Inks & Chemicals	9,354	2.9	449	9.9	99	66.8	9,315.5	-1.8	-	-	-	-	26,757	0.9
23 Chevron Phillips Chemical	9,238	33.7	-	-	626	8,842.9	6,872.0	10.1	-	-	201.0	-9.9	5,300	-2.8
24 Lanxess	9,169	7.0	80	-	-16	-	6,197.0	1.0	166.5	-26.8	372.3	-10.5	19,659	-3.7
25 Basell	9,071	17.5	-	-	-	-	-	-	-	-	-	-	6,600	-0.8
26 Shin-Etsu	9,023	16.2	1,415	20.8	869	24.5	13,768.4	6.5	260.4	6.1	1,028.5	-2.9	17,384	0.0
27 Johnson Matthey	8,876	3.6	399	3.6	-	-	2,578.0	-1.9	-	-	-	-	-	-
28 BOC	8,320	6.4	1012	27.6	478	20.5	8,440.3	-4.5	-	-	-	-	43,383	-2.5
29 GE Advanced Materials	8,290	17.1	710	15.3	-	-	-	-	-	-	-	-	-	-
30 Sekisui Chemical	7,992	5.2	340	57.9	208	48.4	6,983.7	0.0	213.6	-3.4	240.6	7.1	17,002	0.1
31 Merck	7,917	-18.6	1,051	5.4	892	216.6	7,746.4	-18.1	810.9	-1.0	316.8	-16.7	28,877	-15.6
32 Clariant	7,475	0.2	483	-9.8	131	-6.8	6,839.5	-2.5	240.1	-11.0	-	-	24,769	-6.1
33 Air Products	7,411	17.7	880	48.0	604	52.1	10,040.4	6.0	126.7	4.6	816.0	-30.3	19,000	0.0
34 Polimeri Europa	7,350	20.7	368	nm	-	-	-	-	-	-	134.0	-29.8	6565	-6.9
35 PPG Industries	7,309	10.6	-	-	-	-	-	-	-	-	-	-	15,700	-1.3
36 Rohm and Haas	7,300	13.7	-	-	497	77.5	10,095.0	6.1	263.0	10.5	322.0	-5.0	16,691	-3.2
37 Syngenta	7,269	11.4	541	3.8	460	84.0	12,008.0	9.5	809.0	11.4	166.0	-21.3	19,536	2.5
38 Rhodia	7,149	-10.0	-471	286.0	-846	-53.7	7,402.6	-16.3	211.2	-16.6	269.4	-14.6	20,577	-10.8
39 LG Chem	6,886	25.7	505	10.4	518	48.1	5,486.9	19.3	-	-	-	-	10,000	0.0
40 Reliance Industries	6,866	2.7	860	10.6	860	10.6	3,356.0	2.0	-	-	23.0	-71.0	-	-
41 Yara International	6,703	12.4	555	30.3	582	72.0	4,260.0	3.4	21.0	7.9	-	-	7,067	-4.9
42 Praxair	6,594	17.5	1,103	19.6	697	19.1	9,878.0	18.9	77.0	2.7	-	-	27,020	6.2
43 Eastman Chemical	6,580	13.4	-	-	-	-	5,872.0	-6.0	154.0	-11.0	248.0	7.8	12,000	-20.0
44 Ineos	6,500	-	-	-	-	-	-	-	-	-	-	-	10,000	-
45 Borealis	6,265	26.0	376	612.8	150	1,168.8	4,250.9	0.3	55.5	2.5	259.9	61.3	4,939	-1.9
46 Ciba Specialty Chemicals	6,158	-3.8	455	3.5	273	-9.6	-	-	252.4	2.5	-	-	19,338	3.6
47 Sherwin-Williams	6,114	13.1	632	10.1	393	18.4	4,274.0	16.1	34.0	0.0	107.0	-8.2	28,690	11.3
48 Lyondell Chemical	5,968	57.0	105	-	54	-	15,928.0	108.7	41.0	10.8	83.0	-69.0	10,800	222.4
49 Linde	5,419	4.2	866	7.0	-	-	-	-	-	-	714.8	33.0	17,570	0.9
50 Transammonia	5,300	32.5	-	-	-	-	-	-	-	-	-	-	-	-
	Sales	Operating profit or EBIT	Net profit	Total assets	R&D	Capital spending	Employees
Company	$m	Change, %	$m	Change, %	$m	Change, %	$m	Change, %	$m	Change, %	$m	Change, %	Number	Change, %
51 Nova Chemicals	5,270	33.5	264	-452.0	262	835.7	5,047.0	14.4	48.0	6.7	147.0	-6.4	4,100	-4.7
52 Sasol	5,255	-6.5	188	-23.9	-	-	-	-	-	-	-	-	-	-
53 Celanese	5,069	10.1	130	10.2	-175	-218.2	-	-	-	-	210.0	13.5	9,000	-5.3
54 Tosoh	5,052	22.0	501	94.0	-	-	4,794.0	13.0	-	-	409.0	116.0	-	-
55 Mosaic	4,673	-	265	-	86	-	-	-	-	-	-	-	-	-
56 Engelhard	4,166	12.1	-	-	231	0.9	3,179.0	8.4	99.9	7.4	123.0	7.9	6,500	0.3
57 UCB	4,154	3.4	655	-0.6	491	6.8	7,275.3	73.9	509.0	39.3	3,425.1	286.9	11,403	-1.4
58 Repsol	4,095	35.1	343	63.2	-	-	-	-	-	-	396.7	261.7	32,376	5.7
59 Kaneka	4,085	9.4	402	34.3	231	58.4	3,703.8	1.2	-	-	215.9	0.8	6,649	0.8
60 Occidental Chemical	3,675	18.9	-	-	-	-	-	-	-	-	-	-	2,974	-3.7
61 Mitsubishi Gas Chemical	3,624	14.1	288	106.7	352	99.8	4,612.7	4.1	-	-	-	-	2,277	-
62 Honeywell Specialty Materials	3,497	10.4	-	-	184	35.3	-	-	-	-	156.0	8.3	-	-
63 Kuraray	3,466	6.9	324	18.6	180	21.7	4,443.0	10.1	136.0	1.5	446.0	41.9	6,919	2.4
64 Wacker-Chemie	3,443	3.0	264	-432.1	108	-183.7	3,323.6	-2.0	205.8	0.0	494.1	9.9	14,688	-6.0
65 Orica	3,430	14.3	401	25.1	238	224.8	3,008.4	16.8	22.5	3.3	144.2	65.8	10,111	0.0
66 Kemira	3,429	-7.5	194	30.2	76	0.3	2,563.0	-0.9	-	-	-	-	7,137	-32.0
67 Dow Corning	3,373	17.4	442	29.8	238	34.9	-	-	-	-	-	-	8,800	0.0
68 Showa Denko	3,210	0.7	239	39.0	-	-	3,599.0	-1.2	43.0	-1.6	74.0	-	-	-
69 Lubrizol	3,159	53.9	-	-	-	-	4,566.0	135.1	191.0	14.4	133.0	50.3	7,779	54.6
70 NPC (Iran)	3,138	37.4	-	-	121	-57.1	17,359.0	23.5	26.0	10.2	1,404.0	-64.9	16,499	0.6
71 Cognis	3,073	4.2	134	98.0	-46	-52.1	3,404.8	-4.0	125.9	-7.9	178.7	8.2	8,059	-6.9
72 Nalco	3,,033	9.6	-	-	-	-	5,934.0	-3.7	-	-	92.0	-8.9	10,000	-4.8
73 Potash Corp of Saskatchewan	2901	17.6	-	-	268	248.1	5,127.0	12.3	-	-	0.0	46.4	4,906	0.0
74 JSR	2,848	11.0	423	39.0	257	42.4	3031.4	5.3	149.5	6.2	169.1	5.7	4,362	0.4
75 Agrium	2,838	13.6	467	2124.0	276		2,656.0	16.9	N/A	N/A	82.0	-17.2	4,617	-1.1
76 Grupo Alfa	2,738	24.0	209	19.0	44	124.0	2,527.0	1.6	-	-	-	-	-	-
77 Israel Chemical	2,715	19.6	355	74.9	251	143.7	3,062.0	2.0	32.0	10.3	119.0	-5.6	8,546	-2.6
78 Solutia	2,697	11.0	5	-112.8	-115	27.8	2,076.0	-15.1	-	-	61.0	-21.8	5,700	-9.5
79 Givaudan	2,680	-1.3	424	42.4	307	62.0	3,767.2	-5.5	-	-	130.6	-5.7	5,901	-1.3
80 Crompton	2,550	16.7	-	-	-	-	2,678.7	5.9	-	-	-	-	4,800	-13.1
81 Valspar	2,441	8.6	-	-	143	26.5	2,634.0	5.5	76.0	8.6	-	-	7,504	7.0
82 Asahi Glass	2,349	25.9	-	128.3	-	-	-	-	-	-	146.1	53.7	-	-
83 Denki Kagaku Kogyo (Denka)	2,342	3.0	200	19.1	98	121.1	-	-	46.2	-4.6	-	-	-	-
84 Ube	2,312	15.2	-	-	-	-	-	-	-	-	-	-	-	-
85 WR Grace	2,260	14.1	-	-	-402	628.8	3,539.0	23.1	-	-	-	-	6,500	3.2
86 PolyOne	2,162	10.0	-	-	-	-	-	-	-	-	-	-	5,233	-20.1
87 Tessenderlo Group	2,078	5.4	137	23.2	58	-1.6	2,235.1	4.0	28.2	2.9	238.3	47.9	8,181	-0.6
88 FMC	2,051	6.8	271	24.3	160	492.6	2,975.0	5.2	93.0	6.9	85.0	-2.3	5,300	0.0
89 IFF	2,034	7.0	-	-	196	13.3	2,363.0	2.4	175.0	10.1	71.0	7.6	5,212	-4.4
90 Hercules	1,997	8.2	227	-11.0	27	-40.0	2,710.0	-0.0	43.0	10.3	77.0	60.4	4,947	2.5
91 Cabot	1,934	7.7	-	-	124	55.0	2,426.0	4.3	53.0	-17.2	119.0	-7.8	4,400	0.0
92 Lonza	1,912	-9.9	188	-28.8	121	51.6	2,927.7	0.9	62.2	2.9	-	-	5,668	0.2
93 Millennium Chemicals	1,888	11.9	7	-112.3	-31	-83.3	2,497.0	4.1	-	-8.7	55.0	14.6	3,420	-5.0
94 Honam Petrochemical	1,886	33.7	314	124.1	517	154.1	2,240	37.1	-	-	-	-	-	-
95 British Vita	1,837	2.0	94	-9.3	113	84.4	-	-	-	-	-	-	7,839	-5.1
96 PKN Orlen	1,663	21.0	244	92.0	-	-	894.0	30.0	-	-	185.0	14.0	-	-
97 EVC	1,654	18.4	52	-0.3	-72	103.8	471.3	-8.6	-	-	-	-	2,918	0.2
98 Great Lakes Chemical	1,604	12.5	53	-184.9	63	-222.4	919.0	20.9	-	-	-	-	3,700	-2.6
99 Kemira Growhow	1,567	1.5	71	37.0	45	-6.7	-	-	-	-	104.0	46.0	2,901	-5.0
100 Asahi Denka Kogyo	1,416	7.4	137	24.2	71	75.1	1,661.3	6.0	-	-	-	-	-	-

US TOP 10 (in millions of dollars)

Company	Sales 2004	Change, %	Net Profit 2004	Change, %
Dow Chemical	40,161	23	2,797	62
ExxonMobil Chemical	27,781	38	3,428	139
DuPont	27,340	1	1,780	78
Huntsman	11,486	62	-228	NA
Chevron Phillips Chemical	9,238	34	707*	830
GE Advanced Materials	8,290	17	710*	15
Air Products	7,411	18	604	52
PPG Industries	7,309	11	1,068*	13
Rohm and Haas	7,300	14	497	78
Praxair	6,594	18	697	19
* operating income
SOURCE: ANNUAL REPORTS

US CHEMICAL INDUSTRY POSTS BANNER YEAR

The top 10 US-based chemical companies had a banner year in 2004. After a painful four-year trough, 2003 saw the start of a recovery, and in 2004 it roared ahead. The petrochemical cycle had finally turned up in earnest amid a robust economic recovery.

Dow Chemical continued to lead the pack with a 23 percent gain in sales to $40.2 billion. Meanwhile, ExxonMobil Chemical edged out DuPont for the number-two slot as revenues surged 38 percent to $27.8 billion on sharply higher petrochemical and plastics prices.

Huntsman, before going public in 2005, saw sales gain 62 percent to $11.5 billion. This was on the back of stronger prices and volumes, as well as the integration of the former Vantico business, now known as Huntsman Advanced Materials.

Chevron Phillips Chemical’s sales advanced 34 percent to $9.2 billion on the surge in olefins and plastics prices. It eclipsed GE Advanced Materials, although the latter still saw a healthy 17 percent rise in revenues to $8.3 billion.

Rohm and Haas continued to represent the specialty pack, with 14 percent higher sales of $7.3 billion, while industrial gas companies Air Products and Praxair continued their steady gains. Each had 18 percent sales growth.

While sales increased strongly, profits rose to new heights. Industry bellwether Dow Chemical came in with 62 percent higher profits of $2.8 billion. But ExxonMobil Chemical took the cake in terms of absolute profitability, more than doubling its after-tax earnings to $3.4 billion.

Financial performance in 2004 may have been impressive, but 2005 promises to be even better in terms of both sales and profitability. Wall Street and most companies expect the US chemical industry to post further strong gains.

After a tough inventory correction in the second quarter of 2005, prices are rebounding and profitability looks to be back on track to exceed 2004 levels.

THE VIEW FROM ASIA

Asian petrochemical companies in general enjoyed a robust 2004, with a number featuring prominently on the Top 100 list.

Large players led the way. Sabic’s sales soared 47 percent to $18.3 billion, its highest ever figure. Sinopec’s sales rose 39 percent to $17.9 billion, due in part to growing domestic demand for synthetic resins, synthetic fibers and synthetic rubber. Double-digit sales increases for some Japanese companies were also attributed to strong domestic demand.

Operating profits for 2004 rose across the region, and Japan’s larger companies posted considerably better operating profits than in 2003. Other reasons were higher prices and increased shipments, bolstered by the recovery of the Asian market, which was led by buoyant demand from China. Operating profits for Sinopec’s chemicals segment was noteworthy for its massive 428 percent increase to $2.3 billion. Sabic, meanwhile, announced its highest-ever net profits of $3.8 billion.

Comparable employment figures among Asia’s leading companies were mixed. Staffing levels fell at some Japanese majors in 2004, a reflection of cost-cutting and divestments, though recruitment did occur elsewhere as a result of asset acquisitions and expansions.

EUROPE HAS A BONANZA YEAR FOR CHEMICALS

Europe’s top chemical producers had a bonanza of a year in 2004, with strong sales and earnings growth. BASF increased its lead at the top of the pack, with a 12.5 percent sales growth pushing turnover to more than $50 billion. Operating profit was up 83 percent to $6.6 billion. In sales terms, BASF is now 25 percent larger than its nearest EU rival, Bayer, which saw sales rise 4% in 2004 to $40.3 billion.

Behind these two lies a group of petrochemicals businesses owned by the three main oil majors, Shell, BP and Total—all with turnover in the $20 billion range. A strong surge in petrochemical volumes and pricing saw sales rise strongly, by 16 percent at Total and 32 percent and 42 percent respectively at BP and Shell. Earnings at the latter, however, were marred by large adjustments for ongoing restructuring in preparation for the 2005 divestments of Basell and Innovene.

In the second half of the top 10, we find Europe’s world-scale specialty chemical concerns, namely Akzo Nobel, Degussa, Air Liquide, ICI and Solvay. Sales advances here are more subdued, and in the case of Akzo Nobel and ICI there are slight declines as a result of ongoing divestments.

Just outside the top 10 comes DSM with 28 percent sales growth to $10.5 billion.

In terms of the global picture, Europe’s leading players are still right up there at the top. The EU Top 10 contributes no less than half of the global Top 20 producers, with BASF and Bayer still leading the three US majors—Dow Chemical, ExxonMobil Chemicals and DuPont. Huntsman is the fourth Top 20 player from the US, while Japan also contributes four producers, with the balance coming from the Middle East (Sabic) and China (Sinopec).

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