Top 100: Europe chemicals suffer torrid markets

23 September 2013 00:00  [Source: ICB]

2012 was a tough one for Europe-based chemical companies struggling to maintain sales and profitability in the midst of the eurozone crisis and stalling growth in Asia, particularly China.

Many companies suffered declines – some in double figures – in many financial metrics from the year before, which had seen a strong recovery from the downturn of 2008-2010. BASF, for example, suffered a 20% fall in operating profit while INEOS’ figure fell by 51% over the same period.

EU mapThe shale gas phenomenon was already impacting Europe by 2012 as US producers benefitted from steep falls in natural gas and ethane feedstock prices. Chemical production volumes continued to decline in Europe in 2012 while US figures showed a continuing recovery.

Benefitting from this, unlike most of its European peers, LyondellBasell – with a large asset base in the US – managed to achieve a 32% increase in 2012 net profit. The company said 85% of its ethylene production in North America was based on natural gas liquids (NGLs).

CEO Jim Gallogly said: “Olefins in North America continue to benefit from strong margins created by low priced natural gas liquid raw materials. However, outside of North America, the global olefins industry continues to experience low operating rates and profitability, negatively impacting our European olefins and commodity polyolefin businesses.”

Companies with a heavily Europe-focused portfolio suffered from torrid conditions in many end-use markets such as construction and automotive as well as sputtering export markets to China and across Asia. In October BASF announced it would cut 400 jobs from its construction chemicals business and shift focus for the unit away from southern Europe and the UK, where construction demand remained weak.

EU table

Meanwhile, pursuing its strategy of moving further downstream into specialties it acquired US-based biological seed treatment technology provider Becker Underwood from investment firm Norwest Equity Partners for $1.02bn (€785m). BASF said the deal would strengthen its global crop protection business and help it become a leading provider of technologies for biological seed treatment and seed treatment colourants and polymers.

Although sales improved by 17%, INEOS suffered a steep decline in operating profit in 2012 as it struggled with poor Europe markets and feedstock slate. Innovative as ever, the company unveiled plans to ship US-derived feedstocks to its European operations with the construction of a new ethane tank in Norway. INEOS inked a 15-year agreement with US-headquartered shale gas producer Range Resources Appalachia to provide it with ethane for its European operations from the Marcellus shale reserves in the US northeast.

By: Will Beacham
+44 20 8652 3214

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