INSIGHT: DuPont sharpens up for growth

18 August 2009 17:36  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--New efficiencies have been forced on companies by the downturn to ensure cash flows and, for some, ultimately, their survival.

But cuts can be creative; or at least create the circumstances from which firms can seek to grow again.

Opportunity has not been destroyed by the credit crisis and recession but has changed, morphed even.

Customer buying patterns have shifted, perhaps permanently.

A shift in consumer attitudes in a much-changed credit environment affects the markets for goods of all sorts.

Has the downturn dealt a blow to innovation, for instance, or at least the desire for innovative products, as suggested recently by Paul Hodges in his ICIS Chemicals and the Economy blog?

If it has, then chemicals producers had better watch out. There may not be a market for the next new and improved intermediate or processing aid.

The global recession has helped draw emphasis to the differences between local and global markets.

Chemical producers for years have looked to deep sea markets for growth. Those in the west want to tap into fast growing markets in China and the east.

Those in the east seek a foothold in large but often mature western business. The low-cost feedstock chemicals producers in the Middle East sit in a prime position.

As the world moves on from deep economic recession to something new - slower growth, stagnation, perhaps, or, at the very least, different patterns of change - companies need to be prepared.

Consultants Accenture talked in a recent chemicals briefing paper about managing the extraordinary. Companies are currently doing just that.

No one can predict when the downturn will end. There are signs of economic growth and chemicals business is springing back to life. But the sustainability of the recovery has been questioned.

Companies have been forced to cut hard, but it is the way in which a firm reacts to recession that affects its long-term future.

Cut with surgeon-like precision, Accenture suggests. Its research has shown that long-term winners from past recessions have tended to see the downturn as an opportunity to improve and build rather than just “hunker down”.

It also expects that there are only a few chemical companies able to grow against the current tide.

These would be financially strong and near complete with any transformation towards a preferred business model.

They are in a position to look ahead and prepare, Accenture says, to sharpen and accelerate plans to develop new offerings and take market share.

“They essentially are ready to use the current business environment as a springboard for accelerating improvement and moving ahead of their competitors,” it adds. 

It is not clear yet which chemical companies might fall into this category but over the years it will be.

Some interesting news this past week highlighted the organisational steps DuPont is taking to address growth post the downturn.

DuPont says its innovation will be focused on four growth trends to do with food, safety protection, a decreased dependence on fossil fuels and growth in emerging markets. And it intends to drive its science to market through a more streamlined organisational structure.

The company is consolidating its number of businesses from 23 to 14, doing away with the chief operating officer role and appointing a new chief financial officer. It has already cut deeply to manage costs through the downturn.

Clearly, the streamlining is designed to save more but it is also expected to drive decision-making closer to the customer by, DuPont says, “increasing regional business responsibility and accountability”.

DuPont was one of the earliest companies in the US to publicly acknowledge the shift eastwards in the centre of gravity of the chemicals business.

Domestic US business is vitally important to the big, innovation-based chemicals maker but, as its quarterly financial results last year particularly showed, global customers and operations are vitally important. The company operates in 70 countries. 

“DuPont will meet the economic recovery as a stronger, faster and more agile global competitor,” CEO Ellen Kullman said when the reorganisation announcement was made.

“We will accomplish this by driving responsibility and accountability ever closer to our customers and regions, providing greater transparency to our progress and results, streamlining our organisation, and maintaining an intense focus on productivity.”

DuPont has not over-reached itself in recent years like some of its large chemical company peers and is in a position now to reap the rewards. It has, however, to be ultra-efficient and capable of capturing growth in ever more complex global markets.

Navigating through the downturn has been difficult for all firms. Beating a path to customers and to profitability through the next phase of the chemicals cycle could be even more challenging.

Companies may cut in the bad times but have to lay the foundations from which they can more effectively capture growth.

For more on DuPont visit ICIS company intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Nigel Davis
+44 20 8652 3214

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly