NEWS OF THE WEEK FORECAST
BETTER TIMES FOR CHEMICAL FIRMS? ACC members expect rise in 2002 sales and earnings, drop in employment
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HE AMERICAN CHEMISTRY
Council says 2002 will be better than 2001 for the U.S. chemical industry But even if the projected results prove accurate, the industry's fortunes will still fall below where they were in 2000. Every fall, ACC surveys its members to get their perspective on the coming year. This year, the association received completed surveys from 95 of its 165 member companies. Those companies represent $186.6 billion in sales. However, while the number of participating life sciences companies was sufficient to allow reporting of their responses separately, ACC warns that because of their low participation rate it cannot be assumed that those responses are statistically valid. The survey indicates that total chemical industry sales will increase 2.1% this year over last. In ACCs survey for 2001, only 3% of the respondents expected lower sales; this year, they are not so optimistic, with 28% expecting declining sales. Basic chemical companies are the least optimistic: Responses project an average sales increase of just 1.4%, against improvements of3.8% for specialty chemical companies and 7.4% for life sciences firms. Exports will not help the basic chemical sector very much. Respondents there expect only an average 1.3% rise in export revenues, compared with 3.0% for specialty chemicals and 13.4% for life sciences. But with a cyclical recovery expected in the second half of 2002, the highly leveraged basic chemical sector should rebound HTTP://PUBS.ACS.ORG/CEN
from a very low base. That earnings rebound will be helped as basic chemical feedstock costs fall a further 9.5% and fuel and power unit costs decline 16.7%. So while basic chemicals will lag in revenue growth, they will lead the way in earnings growth. The total survey projects net operating income to increase 42.5% this year over last. The basic chemical sector indicates a 56.0% rise in income, while specialty chemicals predicts a 10.9% increase. Life sciences companies, however, expect to contract an average 0.5%. In specialty chemicals, where prices historically have been set by "value in use" and not by cost, earnings are not usually impacted as much by demand pressures. This has changed recently as demand slowed for companies dealing primarily with industrial mar-
BRIGHTER OUTLOOK Sales, earnings predicted to rise this year Total chemicals Basic chemicals Specialty chemicals Life sciences
Sales
^
I)
— 2
i
f
Total chemicals Basic chemicals Specialty chemicals Life sciences -20
0
•••
U % change
6
8
S
20 % change
Earnings 40
60
SOURCE: American Chemistry Council
kets. In addition, supply-chain management practices have eroded value in use, and overcapacity and rising costs for chemical intermediates are a problem in some specialty segments. Lower employment also provides a boost to earnings, and chemical companies evidently are not done cutting. The survey indicates that employment will decline another 1.5% this year, with basic chemicals down 1.6%, specialties down 1.1%, and life sciences up a minuscule 0.3%.— WILLIAM ST0RCK
02/02/02
Air Products Celebrates Oxygen o some people, Saturday was merely Groundhog Day or Superbowl Eve, but to the employees and customers of Air Products & Chemicals, it was 02/02/02—a day to celebrate oxygen. Air Products, one of the world's largest industrial gases companies, picked Feb. 2, 2002, as the kickoff for a month of feting oxygen, the product that started company founder Leonard Pool in business in 1940. Uday Parekh, Air Products' business development manager for the chemical process industries, was the one to make the connection between the firm's first product and the oncein-a-century date, while driving to work one day in December. Parekh says he bounced his observation off a few people in the company cafeteria and it quickly took hold.
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"Within six weeks, the whole thing grew into a nice communications tool," Parekh says. Oxygen gave birth to Air Products and, of course, advanced life on Earth, he notes. It has also been the source of many Air Products innovations over the years for customers in industries as diverse as metalworking, glassmaking, health care, and waste treatment. The biggest part of the celebration, Parekh says, is a thank-you package going out to Air Products customers worldwide that contains party favors and a multilanguage T-shirt. In addition, the company has launched a factpacked website at http://www.airproducts. com/oxygen, and it's sponsoring a contest in which children draw pictures of what oxygen means to them.-MICHAEL MCCOY
C & E N / FEBRUARY h, 2002
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