13 February 2008 17:54 [Source: ICIS news]
By Nigel Davis
Total, for instance, talked on Wednesday of the tight squeeze on its petrochemicals business in the fourth quarter of 2007. That will have persisted to a great extent into 2008.
It is focused on developing production locations based on advantaged ethane feedstock in
At the other end of the scale in chemicals, DSM, closer to the life sciences and active in advanced materials, believes that it can hold profits against some difficult headwinds.
“Guidance on profitability is a difficult task this year given the current macro-economic uncertainty,” it says. But it makes its analysis assuming little knock-on effect on macroeconomic conditions elsewhere of a slowdown in the
Economic uncertainty will cloud the guidance of most firms this reporting season. Sector growth has slowed appreciably over the past few months, the slowdown most obvious in key
European demand growth is expected to slow further and realists see even the powerhouse demand drivers in chemicals such as
As at this time last year, it is difficult to talk in general terms about chemicals sector performance. Individual players will face different pressures in different market segments.
Financial analysts make this point, expressing some concern about the on-going performance of industry giant BASF – which is still seen as being exposed to cyclicality and global economic slowdown. The top stock picks are in defensive segments which have either some environmental focus or, like industrial gases, remain on something of a roll given demand growth for products and services in the world’s developing economies.
Most if not all
But if global growth suffers because of the
A recession in the
Citigroup has buy ratings currently on defensive stocks such as Bayer, Linde, Air Products, Praxair, Givaudan, Symrise, Ecolab and Nalco, on the agrochemicals plays Monsanto and
Among the companies it covers, Credit Suisse in
As commodities become more pressured from slower demand and high feedstock costs then the flight is not so much to specialties but to value. And, of course, companies can capture value in many ways.
The work put in over the past three years and more to hone portfolios and to capture real advantage – whether in a market or, indeed technological sense – will have to prove itself in a slower growth environment.
Companies claim to have done much in the good times in the way of restructuring and rationalisation. Now the value of those efforts will be put to the test.
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