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European Producers’ 2012 Earnings Stifled By Ongoing Economic Recession

Chemical Earnings: Full-year results are lackluster with no economic pickup in sight

by Alex Scott
February 25, 2013 | A version of this story appeared in Volume 91, Issue 8

Credit: Companies
Table shows that most companies in Europe experienced a profit decline.
Credit: Companies

Key European chemical manufacturers are posting earnings for 2012 that are lower than the previous year as the region’s economic recession continues to bite. The concern voiced by companies including Clariant, AkzoNobel, and Solvay is that Europe’s recession shows no signs of ending. Firms are now seeking to cut costs in their home market while expanding elsewhere in the world.

Clariant’s 8.3% sales growth in 2012 was driven by its 2011 acquisition of catalyst maker Süd-Chemie, without which sales would have been flat. The Swiss firm’s pigments and additives businesses fared worst of all as a result of a severe downturn in demand in the coatings, printing, and electronics markets, primarily in Europe. “The basic assumption is that there is no real driver for strong growth in Europe and that things will stabilize but not pick up,” says Patrick Jany, Clariant’s chief financial officer. “Over the years we are reducing our dependency on the European market.”

AkzoNobel had a dismal 2012, recording a net loss of $2.9 billion after posting a one-time charge of $2.8 billion, mainly to cover the restructuring of its poorly performing decorative paints business. The Dutch firm expects the economic outlook in Europe to remain gloomy.

Brussels-based Solvay experienced a slight drop in net earnings. CEO Jean-Pierre Clamadieu says an efficiency program that reduced costs by $225 million was the key factor enabling the firm to meet its financial targets for the year. Clamadieu forecasts more of the same, with “difficult trading conditions” persisting. He anticipates the firm’s costs will be more than $500 million lower in 2014 than they were in 2010.

The Swiss companies Lonza and Syngenta both experienced brisk growth but for very different reasons. Lonza’s strong sales hike was largely due to its 2011 acquisition of Arch Chemicals. Net earnings, however, continue to be about half that posted by the company in 2010. Lonza took steps to streamline itself in 2012, and CEO Richard Ridinger indicates that more “structural changes” will be required in 2013. Nonetheless, Lonza is predicting sales and profit margin increases for 2013.

Demand for agrochemicals has remained relatively strong, to the benefit of Syngenta, the world’s largest agrochemicals firm, which posted record profits. Syngenta CEO Michael Mack continues to be one of the few chemical company leaders in Europe confident of financial growth for the year ahead.

One CEO who does share Mack’s optimism is DSM’s Feike Sijbesma, who predicts strong growth in pretax profits in 2013 on the back of a flourishing nutrition business. The Dutch-based company’s pharmaceutical services business is not faring so well, however, and lost money for the second year running.

German majors BASF and Bayer are due to announce their financial results later this week.



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