ICIS Top 100 Chemical Companies: Analysis of results

10 September 2012 00:00  [Source: ICB]

Profits and sales surged ahead in 2011 and companies with Asia exposure shot up the ranks. Sinopec rose two places to become the second-largest chemical company


 Some companies have vaulted up the rankings

Copyright: Rex Features

While on paper it was a good year for the chemical industry, 2011 will be remembered for all the wrong reasons. Having started with such promise, it soon began to run off the rails. Oil prices climbed but demand growth slowed. By the end of the year, manufacturing industry activity globally was subdued and chemical demand had fallen away.

But sector companies' financial results for the calendar year reflect the strength of the first half of 2011, rather than the slump in the fourth quarter. Some companies produced record financial results.

At the start, chemical companies were convinced that 2011 would be a strong year, with demand driven by a recovering US economy and growth in the important China market. But sector growth estimates were revised downward sharply by mid-year.

Earnings reflected the changing macroeconomic and industry environment. For upstream players, particularly, the third quarter was difficult, and the fourth quarter even harder.

ICIS collects financial information on the leading global chemical companies for its Top 100 chemical company listing and analysis.

The listing by sales in 2011 reflects a world that continues to change, with emerging market players showing the strongest year-on-year growth.

Some chemical producers hit new sales records in 2011 as rapidly growing international markets compensated for quickly contracting growth in the US and, particularly, in Europe.

The eurozone sovereign debt crisis began to weigh heavily on markets and national economies as the year progressed. Chemical industry players, as suppliers of vital intermediates for manufacturing, construction, transport and consumer products, felt the squeeze on all fronts. The upstream chemical participants and, particularly, those involved with more basic chemicals, petrochemicals and plastics, were the first to respond to changing market conditions.

Volumes suffered in some sub-sectors in the second quarter, while others followed suit later on. The third-quarter slowdown was most noticeable in the financial results of upstream petrochemical producers squeezed by still-high oil-based raw material and energy costs and starting to feel the negative impact of lower sales volumes.

During the course of the year, producers gained more on price than on volume. The important emerging markets underpinned growth, while well-established markets and important end-use sectors, such as construction, struggled.

Against the backdrop of what turned out to be a difficult year, and certainly one of contrasting quarters, most producers in the Top 100 nevertheless performed well.

The year started with cash flowing and companies determined to keep costs under control. Working capital was being managed effectively, while some took the opportunity to pay down or reschedule debt.

The ICIS ranking by sales shows that the Top 100 players - those with sales of $3.2bn plus - saw healthy sales growth of more than 12% in 2011. The upstream petrochemical players showed the strongest growth for the year, having pushed sales much higher in the first half as volume demand increased.

These companies in particular were able to push their product prices higher as oil prices climbed and feedstock naphtha costs rose. In rough terms, petrochemical prices tend to follow the price of crude oil, whether the feedstock is oil- or natural gas-based.

Product portfolios and regional growth characteristics continue to shape the ICIS Top 100 table. The upstream petrochemical producers achieved particularly strong growth in 2011, while specialty chemical makers tended to grow at a slower rate. Once again, however, the quarter-to-quarter dynamics of the results are masked in the annual figures.

The ICIS Top 100 Chemical Companies listing by sales reflects continued mergers and acquisitions (M&A) activity in the sector, as well as diverse regional growth dynamics.

The growth and influence of Asian companies is the story behind changes in the 2011 rankings. China's largest petrochemical producer, Sinopec, continued to grow strongly during the year, with its chemical segment sales up by 28.9% in local currencies, and by 34.9% higher in US dollars.

We include the chemical segments of the major oil companies in the ICIS Top 100 listing and analysis. We convert reported financial data to US dollars at the relevant financial year-end exchange rate, so the strength of certain currencies against the dollar plays a part in the rankings. Columns in the ICIS Top 100 table give year-on-year sales and profits percentage changes in US dollar and reporting currency terms.

Other major Asia players making important gains in 2011 were Thailand's PTT Global Chemical, which represents the combined businesses of the former PTT Chemical and PTT Aromatics, and Indorama, one of the most prolific acquirers of assets in the chemical industry over the past two years.

South Korea's Honam Petrochemical saw sales jump by 47.6%, while petrochemical sales for India's Reliance Industries increased by 28.2%.

Fertilizer makers also grew strongly in 2011, as did important regional players in chemicals such as Mexichem, Russia's SIBUR, Brazil's Braskem, Poland's PKN Orlen and Saudi Arabia's SABIC.

The major changes in rankings by sales in the ICIS Top 100 largely reflect these gains.

Sinopec's petrochemical operations jump two places in the table to claim second place behind leading industry giant BASF despite strong growth by others in this leading group of producers.

US-based Dow Chemical slips to fourth in the table from second last year, reflecting its realignment as a more specialty-oriented materials producer.

Five companies showed sales growth of more than 40%; 12 achieved growth of more than 30%.

Not surprisingly, perhaps, the strongest top-line growth was shown by Asian companies and fertilizer producers. However, petrochemical groups based outside Asia but with a strong presence there also did well.

Only 12 of the Top 100 companies saw sales contract in 2011. Among them were some of Japan's leading chemical producers that were hit hard by the earthquake and tsunami that struck the north-east of the country's main island.

M&A activity helped push Belgium's Solvay and PTT Global Chemical into the top 30 group in 2011. France's Rhodia is no longer included in the rankings, having merged with Solvay in 2011.


China's Sinopec grew strongly during the year, to reach second place in the listings

Copyright: Rex Features

Volume demand growth earlier in the year and pricing power helped the large petrochemical producers make gains in 2011, despite the fourth-quarter slump. In 2011, the West Texas Intermediate (WTI) oil price fluctuated between $75/bbl and $112/bbl, with the high point early in the second quarter and the low point at the start of the fourth quarter, and lower prices in the second half of the third quarter. The ICIS Petrochemical Index (IPEX), which reflects prices of a group of 12 important petrochemical and polymer products in three regions, moved from 300.45 in January to a peak of 374.94 in June and then down to 300.78 by December.

Producers in Europe tied to naphtha and other oil-related feedstocks faced a challenge in passing their feedstock price increases on to customers in polymers and intermediates downstream from the cracker. Companies cracking ethane in the Middle East continued to achieve high returns. Those cracking ethane in the US benefited greatly from low and competitive ethane prices brought about by the North American shale gas revolution.

US fertilizer producers also benefited greatly from low natural gas prices in North America, but were also boosted by demand growth.

Intermediates and specialty chemical makers were squeezed by higher upstream chemical costs but, once again, demand in the first months of the year helped them to retain and increase prices.

Industrial gases producers, which are also included in the ICIS Top 100 analysis, made the most of the industrial demand for gases in the emerging economies, particularly China.

Volume demand growth, lower costs and higher prices translated into increased profits for most chemicals players in 2011. Earnings before interest and tax (EBIT) surged for CF Industries, Agrium and Occidental Chemical of the US, and for Norway's Yara International and South Korea's SK Energy, as well as Sinopec. Profits data are not available for all the companies listed in the ICIS Top 100, but the table shows both EBIT and the net profit results. We also list the important assets, spending and employee data on which the ICIS Company of the Year award is based. The winner will be announced in our 24 September issue. ICIS collects a considerable amount of financial data on the major chemical companies, not all of it shown in the table published in ICIS Chemical Business. The additional data are available on request.

The strongest operating profit margins (operating profits to sales ratio) in 2011 were shown by the fertilizer producers - Potash Corp of Saskatchewan, CF Industries and EuroChem. Russia's SIBUR and SABIC also produced strong operating margins, as did industrial gases companies including Germany's Linde, and Praxair of the US.

The ICIS Top 100 data also show that companies were using their cash to add new production capabilities in 2011. Capital spending across the Top 100 companies listed in 2011 increased by an average of 28%.


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a Chemical segment figures. Includes inter-segment revenues, e.g. revenue for sales of by-products to other divisions. For ExxonMobil, inter-segment revenue was $22.8bn in 2011 and $18.1bn in 2010. For Sinopec = external sales with inter-segment sales. Ube figures = Chemicals & Plastics + Specialty Chemicals & Products.

b 2010 finances are based on the sum of predecessor and successor components after emergence from bankruptcy, 30 April, 2010.

c Financial year-end 31 March, 2012.

d Net sales includes inter-segment sales; data excludes HealthCare division (2011 sales €17.2bn; 2010 sales €16.9bn).

e Excludes real estate and energy business areas.

f Linde Gas & Engineering sales, operating profit and employee figures only.

g Pro-forma results include the acquisition of Rhodia from January 2011.

h PTT Global Chemical Public Company Limited was formed by the amalgamation of PTT Chemical Public Company Limited and PTT Aromatics and Refining Public Company Limited and was registered as a new entity on 19 October, 2011.

i Petrochemical figures. For SK Energy, the sales revenue figure includes inter-segment sales.

j Optical segment and glass segment figures have not been included.

k Asahi Kasei excludes homes and healthcare segments.

l Financial year-end 30 June, 2011 - business segments' total turnover figures: polymers, solvents, olefins, surfactants, waxes and nitro used.

m Financial year-end 31 May, 2012.

n ICIS estimates. BP Petrochemicals figures only. Revenue represents third-party sales as well as other operating revenues and excludes the sales made by joint ventures, which are equity accounted. BP's underlying replacement cost profit, excluding joint venture interests in Europe.

o Net sales figure. The total of NPC and its associated companies in 2011 is $25bn.

p Adhesive Technologies segment only.

q Net profit is pre-tax.

r Sud-Chemie sales consolidated for the eight-month period following acquisition in April 2011.

s All figures for SIBUR are based on combined financial information, which excludes results of the mineral fertilizers and tires businesses divested by SIBUR in December 2011.

t 2011 and 2010 figures (re-stated) exclude the vinyl products business segment, announced as having been sold to the Klesch Group.

u Nalco was fully acquired by Ecolab in December 2011.

v 2010 income statement and cash-flow statement adjusted to reflect disposal of the COMPO business. 2011 figures refer to continued operations, excluding COMPO, which was sold to Triton with effect from 18 October, 2011.

w Includes the assets and results of the operations acquired from Eastman Chemical, from 1 February, 2011.

x 2010 figures re-stated.

y Momentive companies listed separately as fiscal-year 2011 financials for the Momentive holding company have not been filed.

z Financial year ending 30 September, 2011.

aa Adopted new and revised Thai financial reporting standards (TFRS) from 1 January, 2011. Figures for 2010 re-stated according to new standards.

bb Specialty Materials figures used.

cc Figures are for petrochemicals and fertilizers only.

dd Figures exclude PVC/chlor-alkali and part of the organic chlorine derivatives activities sold to Kerling (through INEOS ChlorVinyls) in June 2011. 2010 figures are re-stated to reflect the disposal.

ee Excludes Winchester segment.

ff Includes Arch acquisition on 20 October, 2011.

gg Includes operating results from International Specialty Products from date of acquisition (August 2011), and excludes Ashland Distribution, divested in March 2011.

hh e_SIhtFinancial year end 28 October, 2011.

ii Formerly known as Cementhai Chemicals.

Reasons for exclusions

  • PetroChina Does not segment chemicals from refining business.
  • Repsol No longer discloses its chemical figures.
  • OMV Includes petrochemical operations in its refining and marketing segment.
  • Shanghai Petrochemical Majority owned by Sinopec.
  • Koch Does not segment chemical data.
  • Samsung Total Sales equity accounted in Total and Samsung figures.
  • ChemChina Accounts not made public by the company.
  • China Blue Star Chem Majority owned by ChemChina.
  • Formosa Plastic Corp US Not segmented in Formosa reports.
  • Formosa Petrochemical Corp Does not segment chemicals from its refining business.
  • Nan Ya Plastics Sales a mixture of chemicals and processed items.
  • Yeochon NCC Results included with Hanwha and Daelim.
  • Daelim Below Top 100 in sales because Yeochon NCC is accounted as an equity company.
  • Samsung Does not consolidate various chemicals-company interests into one area.
  • Hanwha Chemical 2011 accounts not yet made public by the company.
  • Flint Group Accounts not made public by the company.
  • Lubrizol Acquired by Berkshire Hathaway on 16 September, 2011; Lubrizol business not segmented.
  • PIC Accounts not made public by the company.

Exchange rates

Key financial exchange rates used for 2011 data (2010 in parentheses): €/$ 1.296 (1.325) based on 31 December year end; $/Yen 82.9 (82.8) based on 31 March year end.

By: Nigel Davis
+44 20 8652 3214

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