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CEOs face dilemma over their outlook forecast

Chemical companies, Consumer demand, Economic growth, Financial Events, Oil markets
By Paul Hodges on 14-Apr-2011

Highwire.pngChemical companies are about to report excellent results for Q1. Those upstream may well record even higher profits than in 2007/8.

CEOs and CFOs therefore face a critical decision.

Do they assume today’s trends will continue, and forecast excellent profits for the rest of the year? This would be very tempting, and is clearly the easy option.

But it risks storing up major trouble for the future.

This week, the blog has provided worrying evidence that today’s high crude oil prices could well be followed by a major downturn:

• China’s markets for polymers and aromatics have clearly stalled
• Today’s crude oil price levels have always led to downturns in the past

The cardinal rule for financial markets is, of course, ‘no surprises’.

Many investors would be shocked by the idea that problems might lie ahead. But for CEOs to say nothing now, risks an even greater surprise later in the year.