Glass half full or half empty?

By Malini Hariharan

Despite a bleak global economic environment in the near term and uncertainty on how deep the next crisis will be chemical industry executives appear to be remarkably bullish about future prospects as is evident in KPMG’s latest industry survey.

Eighty five per cent of the 142 senior chemical industry executives surveyed in June expected revenues to increase next year.

Among the different regions, executives in the US were the least optimistic but even here 77% predicted a revenues to grow in 2012. Asian executives were understandly most bullish with 96% confident of revenue growth with 49% expecting a significant increase and 47% seeing a moderate increase.

The confidence was despite expectations of higher raw material costs next year and concerns among European and US executives on the macro economic risks.

So where will growth come from? The most cited answers were expansion in new markets, new product development and acquisitions.

Sixty six per cent of executives said their companies would be involved in a merger or acquisition as a buyer in the next two years. In addition, 70% of executives said their companies had enough cash on the balance sheet to pursue strategic acquisitions.

And 80% planned to boost capital spending next year, for new products and services, acquisitions, and research and development. All of the executives surveyed in Asia-Pacific predicted higher capital spending.

The optimism in the survey is very different from the current mood on the ground for many petrochemicals. As mentioned in the Monday post, the peak demand season in China has turned out to be very weak and there is a general reluctance on part of Asian buyers to hold stocks. In Europe too, weak demand has started exerting downward pressure on prices.

The American Chemistry Council (ACC) said in a recent report that there has been a “marked deceleration [in chemicals production] in some countries and regions, a downturn.” It added that most leading indicators of global industrial activity signalled “further softness”.

The survey makes interesting reading but it is best to take the results with a pinch of salt.

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