Fecc: Commentary

Difficult business and economic conditions in Europe continue to provide a challenging environment for chemical distributors to operate in. Overall economic growth is still sluggish, but the distribution sector appears to be responding well and teasing out top and bottom line growth by a variety of means.

As we report in this special publication, prepared in association with Fecc on the occasion of its annual congress in Istanbul, there are still several levers for distributors to pull. M&A activity in 2015 continued at the strong level of 2014, with larger companies especially active in extending their geographic and product reach. Several, including Brenntag, Azelis and IMCD have made significant investments in North America recently.

Distributors have also been successful in winning new business as chemical producers put more of their business through distribution channels. This can be seen as part of their ongoing efforts to reduce cost and complexity, and is gathering pace as distributors develop their service offerings and technical expertise.

And not least, chemical distributors have been growing business by moving into new areas – notably the food ingredients and supplements – and by innovating new products themselves, as we explore on pages 16 and 17.

On the negative side, those distributors that have invested outside Europe in developing economies and high growth markets have seen a slowdown in China, difficult conditions in most of Latin America and declining oil and gas chemical sales in North America as low oil prices reduce shale drilling. In Europe, the possibility of the UK voting to leave the EU – so-called “Brexit” – is already having negative impacts on business confidence and the value of sterling.

All have the potential to dent confidence further. But, even though 2016 is developing into what may well be a challenging year, distributors seem reasonably confident they are on the right track and that their growth story is sustainable.