NEWS OF THE W EEK
EUROPE’S FIRMS STAY UPBEAT CHEMICAL EARNINGS: First-
half results are weak, but companies remain optimistic
M
OST MAJOR EUROPEAN chemical makers
reported lower earnings in the first half of the year. Nonetheless, the companies expect no further profit deterioration in coming months. One company, Bayer, is even raising its earnings forecast for all of 2012. Because they are based in countries that are at the epicenter of the current global economic downturn, European firms are not particularly optimistic about the strength of demand for chemicals this year. But they are confident about their ability to contain costs and improve cash management. Moreover, the weakening of the euro in recent months has helped them book higher euro-denominated profits on foreign sales. In addition, demand for certain chemicals—especially agrochemicals—has been strong despite the weak economy. Among major companies reporting results so far, the Swiss agrochemical and seed producer Syngenta is one of only two to post higher earnings versus the year-ago period. Sales in the Northern Hemisphere were strong in 2012, Syngenta explained. Germany’s Bayer also raised earnings and said it now expects to record 10% higher profits this year, compared with an earlier prediction of only slight earnings growth. The company is particularly bullish about its crop protection business, but it also expects rising sales of pharmaceuticals to buoy its performance. In contrast, profits at BASF dropped 24% in the first half compared with the year-earlier period. The German giant said the economic environment has worsened. In particular, “the Chinese growth engine has started
to stall,” the company noted, and BASF expects overall global economic growth to slow in coming months. Still, BASF said it will deliver the profits it had earlier promised to generate in 2012. One contributor to BASF’s confidence is resumption of its crude oil production in Libya. In addition, BASF said it will manage expenses with utmost care. For example, the company will slow hiring in Asia this year, putting a brake on what it had planned just a few months ago. Arkema recorded what appears to be the worst performance of the major chemical firms in Europe: a firsthalf profit drop of 74%. The French firm said its lower profit was mostly caused by expenses associated with
EUROPE’S FIRST-HALF RESULTS
Except for Bayer and Syngenta, major producers suffered profit erosion SALES EARNINGSa ( $ MILLIONS)
AkzoNobel Arkema BASF Bayer Clariant Kemira Solvay Syngenta
$10,613 4,234 50,761 25,631 4,136 1,412 8,558 8,265
$389 113 3,741 1,956 95 77 380 1,500
CHANGES FROM 2011 SALES EARNINGSa
6.5% 14.7 5.9 8.4 9.4 0.8 1.8 7.3
-29.3% -73.7 -23.6 7.9 -43.8 -12.9 -40.8 5.0
PROFIT MARGINb 2012 2011
3.7% 2.7 7.4 7.6 2.3 5.5 4.4 18.1
5.5% 11.6 10.2 7.7 4.5 6.3 7.6 18.5
NOTE: Monetary figures are converted at the June 30 exchange rate of $1.00 U.S. = 0.7894 euros and 0.9485 Swiss francs. a Net earnings after taxes and extraordinary items. b After-tax earnings as a percentage of sales.
the sale of its vinyl business. For the whole of 2012, it expects to perform as well as it did in 2011. In recent remarks to analysts, Gilles Auffret, head of Solvay’s Rhodia business, explained the resilience of Europe’s chemical industry. China’s economy is slowing down, but growth remains strong. In the U.S., growth is uneven, strong in some areas and weak in others. Meanwhile, South America is bouncing back.“Generally speaking,” he said, “except for Europe, things are going quite well.”—JEAN-FRANÇOIS TREMBLAY
PHARMACEUTICALS Europe now targets Servier in push against deals to delay generics The European Commission last week claimed that patent settlements between the French drug company Servier and several of its generics competitors may be delaying entry of a generic version of the heart drug perindopril in Europe. The accusation is the latest by officials on both sides of the Atlantic involving the so-called pay-for-delay tactic of drug firms to thwart generic drug competition. The EC lists generic drug manufacturers Teva Pharmaceutical Industries, Niche/Unichem, Matrix (now Mylan
Laboratories), Krka, Lupin, and others in its charge that Servier induced competitors to enter settlements in which they agreed to hold off introducing generic versions of perindopril. If the EC finds sufficient evidence of collusion, it can impose a fine of up to 10% of annual revenues on the companies involved. Earlier this month, European authorities filed similar charges against drugmaker Lundbeck as well as Merck KGaA, Ranbaxy Laboratories, and other generic
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drug firms. Meanwhile, the U.S. Supreme Court may take up a pay-for-delay case after a federal appeals court’s finding last month that a settlement between Bayer and Barr Laboratories, now part of Teva, is anticompetitive. The Generic Pharmaceutical Association, a U.S. trade group, issued a statement on the Philadelphia court ruling contending that patent settlements are a legitimate means of doing business that does not delay introduction of generic drugs.—RICK MULLIN
