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Business

European Firms Feel The Squeeze

Earnings: Chemical firms struggle to recapture sales, earnings growth

by Alex Scott
February 28, 2014 | APPEARED IN VOLUME 92, ISSUE 9

Just-released financial results for 2013 show that key European chemical companies are still struggling to reestablish profit growth after the worldwide recession that began in 2008.

BASF, the world’s largest chemical company, expanded sales and earnings only modestly in 2013, and that was because of a 16% increase in sales and a 50% hike in pretax profit by the firm’s oil and gas operations, which make up 20% of its sales. Without the oil and gas segment, sales would have fallen 0.4% and pretax profits would have dropped 6.1%.

BASF Chairman Kurt Bock told journalists during a briefing at the firm’s headquarters last week that he expects economic conditions in 2014 to be similar to those in 2013. “We do not expect strong tailwinds this year. Overall, we expect to perform well in a market environment that remains challenging in 2014,” Bock said. The German firm is anticipating “somewhat higher growth” in sectors such as transportation, consumer goods, and electronics.

Solvay’s profits nosedived in 2013, but restructuring at the Belgian firm during the year positioned it to take advantage of any future economic improvement, CEO Jean-Pierre Clamadieu said. “Indeed, we start to see—especially in Europe—some signs that things could get better.” The company expects to generate about $140 million in annual savings starting in 2016 by cutting soda ash production in Europe and increasing it in the U.S. It expects another $140 million in savings in its nylon and intermediates business.

AkzoNobel’s 2013 results benefited from a cost-reduction program initiated at the end of 2011. Although the firm’s overall sales declined for the year, sales increased in the second half. Further restructuring is in the cards, said CEO Ton Büchner, who expects the economic environment in 2014 to be “fragile.”

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