NEWS OF THE WEEK
EUROPEAN DECLINE PERSISTS SECOND QUARTER: Reports show
poor earnings, but some positive signals are on the horizon
E
UROPEAN CHEMICAL FIRMS report that
second-quarter results were terrible compared with last year’s, although not quite as bad as those in the first quarter. Demand was still weak but no longer dropping, and some firms saw the shadows of a recovery. In its report to investors, DSM wrote that the global economic downturn had “a very adverse effect” on all of its businesses except nutrition but that it saw improved demand compared with the first quarter. Overall, the company booked just $14 million in earnings, a huge 94.8% drop from second-quarter 2008. Although DSM’s revenues remained leaden, costcutting activities that began late last year put a floor under operating results. “Early and aggressive action to reduce costs, a focus on cash, stringent management of working capital, and the ongoing resilience of our life sciences businesses” kept DSM in the black, Chairman Feike Sijbesma said. The firm is accelerating its cost reduction program, adding 250 job cuts to the 1,000 layoffs it announced in December 2008. Specialty chemical firm Clariant is also focusing on cash and cutting costs. The firm, which in June announced 500 layoffs in addition to 1,400 previous ones, posted a loss of $66 million for the quarter and reported that volumes were down 23% from last year’s quarter. However, Clariant saw destocking ease and says it has started to increase output in some businesses.
EUROPE’S SECOND QUARTER
Another round of poor earnings, but demand began to stabilize SALES EARNINGSa CHANGE FROM 2008 ($ MILLIONS) SALES EARNINGS
AkzoNobel Arkema BASF Bayer Clariant DSM Kemira Merck KGaA Rhodia Solvay Wacker Chemie
PROFIT MARGINb 2009 2008
$5,140 1,635 17,520 11,224 1,739 2,738
$217 -160 481 746 -66 14
-10.2% -22.7 -23.3 -5.9 -24.1 -20.4
-13.4% def -73.6 -7.3 def -94.8
4.2% nm 2.7 6.6 nm 0.5
912 2,559 1,383 2,897 1,298
42 154 -50 108 -105
-12.3 0.6 -19.6 -12.3 -17.5
57.9 -47.9 def -39.4 def
4.6 6.0 nm 3.7 nm
4.4% 4.0 8.0 6.7 2.4 7.8 2.6 11.6 2.8 5.4 13.6
NOTE: Monetary figures converted at the average June exchange rate of $1.00 U.S. = 0.7136 euros and 0.9252 Swiss francs. a After-tax earnings, including significant extraordinary and nonrecurring items. b After-tax earnings as a percentage of sales. def = deficit. nm = not meaningful.
Kemira was able to boost earnings even while revenues declined 12.3%. The company had implemented price increases last year and eliminated $33 million in fixed costs. In addition, steady demand for municipal water treatment products and specialty chemicals for agriculture and pharmaceuticals helped the firm weather the crisis. At Bayer, health care and crop science businesses saw increased revenue, but a continued slump in demand for plastics and coatings hurt overall earnings. CEO Werner Wenning warned that additional shutdowns may come for the polycarbonates business. Although its sales stayed level, Merck KGaA reported much higher operating expenses for pharmaceutical R&D and marketing compared with last year’s, leaving it with a 47.9% drop in earnings. The company said it is seeing some recovery in its struggling liquidcrystals business, but demand for pigments is not improving.—MELODY VOITH
ACRYLICS Arkema will buy business that FTC ordered Dow to sell France’s Arkema will wade deeper into acrylic chemistry by acquiring Dow Chemical’s acrylic acid plant in Clear Lake, Texas, and its UCAR acrylic latex business in North America for $50 million. The businesses will have combined sales this year of about $450 million, Arkema says. Dow is selling them as a condition of winning Federal Trade Commission approval for its purchase of Rohm and Haas, which is also a big producer of acrylic acid and latexes. Dow CEO Andrew N. Liveris notes that the announcement of the sale comes ahead of the Nov. 27 deadline set by FTC.
Although the agency must still approve the selection of Arkema as the buyer, the companies expect to close the deal during the fourth quarter. “This acquisition is fully in line with our commitment to develop our best product lines and boost our downstream integration,” Arkema CEO Thierry Le Hénaff said in announcing the deal. Arkema already produces acrylic acid in Bayport, Texas, and Carling, France. It makes key derivatives such as acrylic esters and superabsorbent polymers at several sites around the world, and in 2007, it purchased Coatex, a manufac-
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turer of acrylic-based specialty polymers. Just recently, Arkema announced the construction of a new specialty polymers plant in Changshu, China (C&EN, Aug. 3, page 16). Phil Phillips, managing director of coatings-oriented Chemark Consulting Group, says Arkema is paying a bargain price to get a latex business with a “fair to good” brand reputation in the marketplace. He suggests Arkema might want to phase out the UCAR brand, which dates back to Union Carbide days, and relaunch the products under its own name.—MICHAEL MCCOY
