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Business

European firms grind out profit growth in 2016

Sales were stable, but a challenging environment is in play

by Alex Scott
February 26, 2017 | APPEARED IN VOLUME 95, ISSUE 9

Several European chemical firms have reported a hike in 2016 earnings on the back of slow sales growth.

Full-year results

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European specialty chemical firms raised profits in 2016 despite challenging markets.
Source: Companies
European specialty chemical firms raised profits in 2016 despite challenging markets.
Source: Companies

Specialty chemical and plastics firms Clariant, Covestro, DSM, and Kemira all posted marked increases in earnings. Their 2016 performances compare with the slightly weaker financial results of their U.S. specialty chemical counterparts. The European companies say they are optimistic about improving their performance in 2017 despite uncertain market conditions.

The firms achieved much of their growth not because of improvements in their markets but rather because of changes to their approach. Clariant’s earnings improvement for 2016 is due to the Swiss ­company’s ongoing shift into high-margin specialty chemicals combined with good cost management, CEO Hariolf Kottmann says.

Kottmann says he is confident Clariant will continue to improve its financial ­position on all fronts through 2017 “in spite of a continued challenging economic environment.” Specific challenges Kottmann expects to face in 2017 are high volatility in commodity prices and currencies.

Covestro grew earnings partly through cost reduction but also through a 7.5% increase in production volumes. A testament to Covestro’s progress during 2016—its first full financial year since being carved out of Bayer—is that its share price has almost doubled.

At C&EN’s press time, AkzoNobel was the major European chemical company reporting the most disappointing results, with sales down as much as 5% for decorative paints, performance coatings, and specialty chemicals—its three main divisions. The firm blames the decline on unfavorable currency shifts and pricing effects. But AkzoNobel says it is positive about the outlook for its business.

Also upbeat is privately owned petrochemicals and fuels maker Ineos. The firm is not required to publish its finances but says 2016 was a record year with pretax profits of $4.5 billion from sales of about $42 billion. Ineos says it will repay $1.3 billion of debt from its own cash resources.

“These figures confirm that Ineos is doing better than ever,” says founder and Chair Jim Ratcliffe. “All the businesses are performing well. Ineos is in great shape.”

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