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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