Chemical makers cut costs in slow market

Large chemical firms posted tepid financial results in the third quarter, with many logging modest increases in sales but lackluster profits. Companies are looking to cut costs and trim their portfolios—largely in Europe—to help nudge momentum toward better results.

Both sales and earnings at BASF were flat compared to the same quarter in 2023. The world’s largest chemical company saw its sales volumes improve across nearly all its businesses, though lower prices offset most of those gains.

An exception was BASF’s automotive emission control catalyst unit, which had declines in both volumes and prices due to weak vehicle sales. CEO Markus Kamieth expects the poor performance to persist.

“At the beginning of the year, we had assumed that global light vehicle production would be stable or decline slightly,” he said in prepared remarks. “After a weaker-than-expected third quarter for global light vehicle production, we have revised our assumptions for 2024 and now anticipate a global decline of up to 2.5% on account of lower production in Western Europe and in North America.”

The automotive slowdown also hit the engineering polymer maker Celanese, which posted modest declines in sales and earnings. Volumes of engineered materials sold into industrial segments, including the auto industry, fell by 8% during the quarter.

Celanese is responding with cost cutting. The company says it will temporarily idle some production facilities to reduce inventories by $200 million. It also plans to slash its dividend by 95% and institute a $75 million cost reduction program aimed mostly at selling, general, and administrative expenses. And it plans reduce capital spending.

Chemours, which posted a 1% increase in quarterly sales and a 6% decline in profits, plans to reduce annual costs by $250 million. The company is also considering shifting its portfolio to higher growth, more profitable markets like refrigerants for data center cooling.

“Given the cyclicality of our industry, cost management must be part of our DNA,” Chemours CEO Denise Dignam said in a conference call with analysts.

Chemours says it may reduce the footprint of its performance materials unit, which makes fluoropolymers. For instance, it is putting on hold an expansion of its Nafion membrane materials plant in Villers-Saint-Paul, France, because of weakness in the hydrogen market.

Huntsman, which posted a 37% decline in third-quarter profits, aims to cut $50 million in costs in its polyurethane business, primarily in Europe, in addition to the $280 million in costs it has cut company-wide in recent years. Polyurethane rival Dow recently announced that it was considering selling some of its European polyurethane assets.

Dow is one of several chemical makers that are either selling or closing plants in Europe, which has suffered in recent years from relatively high production costs. LyondellBasell Industries, for instance, has begun a review of its European polyolefin business.

Huntsman CEO Peter Huntsman is pessimistic about Europe. “We see a record amount of global chemical assets, especially in Europe, that are on the market,” he told analysts in a call. “I would personally be surprised if all of these assets are sold. So, I imagine very few of these are actually making money.

“Given Europe’s desire to rid itself of manufacturing, which I see reflected in its adherence to antigrowth energy and regulatory policies, I doubt the prospects will change anytime soon. We may well see a number of facilities closed.”