Where is the volume growth?

As the first wave of third-quarter earnings results come in for the chemical sector, profits have largely been solid, showing year-on-year gains. Earnings were propelled by price increases. Yet, one element has been conspicuous in its absence – that of volume growth.

Germany’s BASF, the world’s largest chemical company, posted a 6% year-on-year gain in underlying operating profits for the third quarter. But volumes were flat versus a year ago. The same pattern was apparent across the board for chemical companies.

US-based Dow Chemical posted a 15% increase in year-on-year earnings per share with results coming in slightly short of Wall Street expectations. Volumes were off by 4% in coatings and infrastructure, down 3% in performance materials, and up just 1% in performance plastics.

On an overall geographic basis, volumes were down by 3% in North America; down by 2% in Europe, Middle East and Africa; but up by 5% in Asia-Pacific; and up by 7% in Latin America.

Going forward, CEO Andrew Liveris cited the volatility of the global economic recovery, and expects “jagged economic conditions over the near term.”

He sees continued headwinds for the developed countries, which are constraining consumer spending and business investment. But in emerging markets such as Asia and Latin America, “growth in the middle class continues to drive demand, particularly as it pertains to infrastructure and urbanization.”

US-based DuPont beat Wall Street expectations, posting a 73% year-on-year rise in underlying third-quarter earnings per share.

Overall pricing was strong, but volumes were down by 1% in performance chemicals; up by 4% in performance coatings; and down by 7% in performance materials.

DuPont highlighted concerns on destocking in consumer electronics, solar, and performance polymers.

US-based Celanese saw a 13% year-on-year gain in third-quarter earnings growth, beating Wall Street expectations. In its acetyl intermediates segment, pricing rose by 23%, but volumes were down 2%. However, its advanced engineered materials segment saw both pricing and volume gains of 5% and 7%, respectively.

US-based Solutia posted a 7% year-on-year increase in third quarter earnings per share, exceeding Wall Street estimates. But volumes were down 2% in its advanced interlayers segment, and down 1% in performance films.

Encouragingly, the company expects sales in the fourth quarter to be comparable to the $519m (€374m) in the third quarter on slightly higher sequential volumes, offset by the translation impact of a stronger US dollar.

As the earnings parade marches on this week, the spotlight will shine on the volume picture going forward. In an uncertain economic environment, it’s going to be an uphill battle for volume growth. But if confidence returns, things can turn quickly.

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