10 November 2011 00:05 [Source: ICIS news]
BONITA SPRINGS, Florida (ICIS)--Consolidation in US chemical distribution has slowed this year because some companies are overvalued, but the trend towards more consolidation will continue, a major distributor said on Wednesday.
“Chemical distribution consolidation is inevitable,” said Randy Velarde, president and founder of US-based petrochemical and polymers distributor, The Plaza Group.
Velarde spoke on the sidelines of the 40th Annual Meeting of the National Association of Chemical Distributors (NACD).
Consolidations have slowed this year, because “right now, you are dealing with unrealistic multiples”, said Velarde.
But large distributors are filling in the gaps in their organisations, and “it is much easier to buy than build”, he added.
“Chemical distributors will continue to grow [with] how producers utilise them,” said Plaza Group’s Velarde.
With chemical producers continuing to reduce their size, more responsibilities are turned over to distributors. At the same time, said Velarde, “Producers insist on Responsible Distribution, and require a high level of consultancy” from distributors.
The Responsible Distribution programme in an NACD initiative that requires third-party verification regarding a chemical distributor’s safety, and requires members to continuously improve performance in health, safety, and security.
Consolidation among chemical producers will also continue, and long-term, will make the jobs of chemical distributors simpler. For the short term, however, dealing with “changes in management and company culture make things complicated,” said Velarde.
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