23 April 2012 00:00 [Source: ICB]
Just like the chemical industry itself, Italy's largest producer is ringing the changes. A new strategy is now underway to overhaul the business
The company will focus on four key business units, overseas expansion and innovation
Growth in the mature European market is lackluster, while the region is also facing major competition from Asia and the Middle East, increasing demands from the green economy, feedstock volatility and geopolitical concerns. As a result, companies are having to become more market-focussed and innovative to ensure their survival and success.
It was these factors that led to Italy's Polimeri Europa - part of ENI Group - to unveil its new strategy to transform the company and strengthen its position for the future.
With a lack of well-planned rationalization since the early 1990s, the company acknowledges it was not in the best position to face these challenges. The new plan, therefore, calls for improved results in the next four years as a result of restructuring, increased efficiency, diversification of its product portfolio and an increased global presence. This will mean the conversion of units that are no longer economically viable, an emphasis on expansion overseas through licensing, and a move toward four market-focussed business units: elastomers, styrenics, intermediates and polyethylene (PE). The company will also rebrand as versalis to reflect its new direction and vision.
With more than 90% of sales in Europe - and about 50% in Italy alone - a fundamental shift in strategy is necessary, says CEO Daniele Ferrari. Investment during the new four-year plan through to 2015 will total about €2bn ($2.6bn) - the largest in the company's history. It expects to see the result of some of these changes by mid- to late 2013.
"The difficulties facing our industry are well known," says Ferrari. "Obviously, we're living in a world that is changing - politically, strategically and financially. We have seen financial power move to Asia, an aging population, a financial crisis and stagnant growth."
Steam cracker overcapacity also remains an issue, despite some rationalization during the past five years. However, more needs to be done, he says: "We foresee more to come in Europe."
This year, emerging countries are expected to account for half of global chemical production. New competitors are aggressively entering the market thanks to the rapid expansion in Asia and the Middle East, and unprecedented investment.
"The challenge for Europe is to maintain an industry which is still leading in terms of chemical production," Ferrari says. "In 2011, 24% of the world's chemical production was in Europe. It's a €500bn industry that employs 1.2m people, and we must not forget that. It can still be competitive and grow if we invest in efficiency and the renewal of the assets. In Europe, we have good infrastructure and a well-qualified workforce - but change is necessary, particularly in Polimeri Europa. Our integration and overall efficiency can be greatly improved," adds Ferrari.
His aim is to concentrate on products and technologies where the company holds regional or global leadership and consolidate in areas exposed to competition from more advantaged regions. Licensing will also become a tool to form joint ventures and become an equity partner. Europe remains a key region but it is important to gain a footprint elsewhere, he says.
Sites will be regenerated in Italy, with improvements to integration and production flexibility. The producer will also enter into green chemistry, notably with its 50:50 Matrica joint venture (see page 5).
"There is cultural change happening in a company that was traditionally confined to Europe and has to be revitalized and become international through a completely different business model," says Ferrari.
"The degree of risk is only moderate because we're not transforming radically but are building on our strengths.
"We're not entering completely new markets; we're starting from sectors where we're already a leader. This is the time for a new name, new identity and a new focus."Next Article - License for growth
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