ICIS top 100 Chemicals Companies: Latin Americans grow strongly though Braskem faces headwinds

17 September 2012 00:00  [Source: ICB]

The Latin American leaders that made it into this year's Top 100 performed well in 2011 with all but one achieving double-digit sales growth and many - with the exception of Brazil's Braskem -- improving their operating results.

Latam mapHowever in terms of global rankings the picture was mixed, mainly because they were overtaken by companies from other regions that performed even better. Mexico's Alpek (Grupo Alfa) and Mexichem both moved upwards, Alpek from 72 to 62 and Mexichem from 104 to 98. But Braskem fell from 15 to 21 while Mexico's Pemex dropped from 92 to 104. Chile's SQM is a new entry to the global list.

With almost triple the sales of its nearest rival, Braskem is by far the biggest chemical producer in Latin America. But the company has been hit hard by Brazil's economic slowdown. Although it achieved increased sales in 2011 over a restated 2010 result, operating profits dived and the company swung from a net profit of $1.13bn to a net loss of $277m in 2011.

The situation remains challenging this year and for the second quarter of 2012 the company reported its third net loss in four quarters as a result of a slowdown in the Brazilian economy.

Although Braskem attributed much of the loss to the stronger US dollar, volumes fell because growth had slowed substantially in Brazil.

GDP growth slowed from 7.5% in 2010 to 2.7% in 2011 and will likely be 2.5% this year, according to the International Monetary Fund.

For the first quarter, Braskem posted a net income of reais (R) 152m ($78m, €60m), down 50% from R305m a year earlier.

Margins were depressed because of low economic activity, especially in developed countries, coupled with rising raw material prices, especially naphtha. The price of naphtha increased by 16% over values in the fourth quarter of 2011, the company said.

Polyethylene terephthalate (PET) producer Alpek achieved substantial increases in both sales and operating profit in 2011, and has continued the trend this year. It reported first-quarter earnings of $156m (€119m), up 7% year on year. Alpek attributed the increase to higher revenues, the integration of new plants and lower prices for natural gas. Utilisation rates also increased, improving margins.

First-quarter revenue reached $1.896bn, up 13% from $1.678bn from the same time last year.

There were higher sales throughout the polyester chain. For the full year 2012 Alpek management forecasts a 10% increase in sales to $1.7bn.

In 2011 it integrated the Wellman Pearl River, Mississippi, PET and purified terephthalic acid (PTA)-PET plants in South Carolina, which were bought from Eastman.

CFO Raul Millares said that it is examining opportunities in North America stemming from its shale gas boom.

Mexichem, meanwhile, in August signed a memorandum of understanding to evaluate the creation of a joint venture to build a 500,000 tonne/year ethane cracker in the US.

Latam top 10 2012

If the companies go through with the project, North American group OxyChem will use nearly all of the ethylene as feedstock to produce 1m tonnes of vinyl chloride monomer (VCM) at its complex in Ingleside, Texas. OxyChem would then sell the VCM to Mexichem under a long-term contract.

Mexico's long-awaited Ethylene XXI project is on schedule for start-up in 2015, according to Braskem, which has a 65% stake in the project, with Mexico-based Idesa holding the remainder.

Located in the Nanchital region of Mexico's Veracruz state, the Ethylene XXI project comprises an integrated ethane cracker and polyethylene (PE) units. The cracker will use Technip technology and have a 1.05m tonne/year capacity.

Planned downstream production includes two high density polyethylene (HDPE) plants with capacities of 350,000 tonnes/year and 400,000 tonnes/year and one 300,000 tonne/year low density polyethylene (LDPE) plant. INEOS is providing the HDPE technology, while LyondellBasell is providing the LDPE technology.

By: Will Beacham
+44 20 8652 3214

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