19 February 2010 15:26 [Source: ICIS news]
By Nigel Davis
“We believe the recovery is fragile and will be slow,” CEO of coatings and specialty chemicals maker AkzoNobel, Hans Wijers, said on Thursday.
“We continue to focus on customers, cost reduction and cash generation, but investments to capture growth will remain a priority - particularly in high growth markets.”
The sentiment behind Wijers' comments was echoed by the heads of other European specialty chemicals players this week. But the clear indication of just how far financial market perception has moved ahead from physical market reality was the 7.4% drop in the company’s share price on the day of the earnings announcement.
Clearly the the first half of the first quarter has been difficult.
Clariant CFO Hariolf Kottmann said this week that his company had seen no growth so far this year. The
That, particularly, comes as a further blow to the Swiss chemicals industry. The country’s chemicals workers' union suggested the decision had sounded the death knell for the sector.
Kottmann also said that Clariant had not moved operations to
In the current climate all companies are focused on costs. And the possibly wrong, or only slowly implemented, strategic steps of the past have hurriedly to be fixed.
A clear problem for executives now is that guidance can realistically only remain vague. Financial analysts were quick to point out on Thursday that AkzoNobel did not give any quantitative guidance for 2010, although it re-iterated a medium-term earnings before interest, tax, depreciation and amortisation (EBITDA) target.
In 2009 it saw revenues fall 10% and EBITDA drop by 8%. It said that specialty chemicals volumes were improving but that coatings volumes were still negative year on year in the fourth quarter.
AkzoNobel has strong global market positions in decorative paints so should be able to tap into regional growth, but the business has been hard hit by the economic slump. The industrial coatings businesses have understandably fared worse in very difficult circumstances.
There can be little confidence that industrial growth will return swiftly to lift this part of the business and the specialty chemical products that AkzoNobel makes that are widely used across industry.
Solvay was another company on Thursday to say that market conditions “remain challenging”. Following the divestment of its pharmaceuticals business, the vinyls and chemicals maker is creating a new reporting division focused on high tech and potentially high growth areas, including new energies, organic electronics, white, or industrial biotechnology, and nanotechnology. This will showcase the technology drive behind the company.
Part of these operations will eventually be transferred into the existing business segments.
Solvay is in the enviable position of having ready cash with which to expand and it is likely to be looking for strong technology as well as market access.
The company said that demand for its specialty polymers had improved in the fourth quarter but that the vinyls operations had been hit by reduced sector activity at the year end and margin pressure in Europe and
“Thanks to its growth initiatives, its competitive positions and the measures taken in the last two years, Solvay is prepared in case of a longer crisis,” the company said in its results statement.
Those comments indicate the Solvay, like so many other this February, is a company readied to tough it out for longer. Such sentiment will hang over the sector until there are much clearer signs of sustainable downstream growth.
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