BUSINESS
GLOBAL TOP 50 Top three companies change position as sales rise but profits slide PATRICIA L. SHORT, C&EN LONDON
T
not even the recognition that 1997 was an unsustainably "frothy" year can bring much comfort to an industry desperately trying to maintain selling prices and contain costs. Also continuing is the inexorable reshaping of the worldwide chemical industry into what is indeed a global marketplace with global production. Thirteen companies from the U.S. made this year's ranking, down two from the year before. SLIDE PERSISTS Aggregate sales of the U.S. Profit margins continue to erode companies in the ranking, $145.5 billion, are up 9.6% Profit margin over the previous year. But 15 the U.S. share of the global total is down 5.3%, to 30.8%. On the 2 0 0 2 list, the U.S. share was 32.5%, and it was 33.4% in 2001. Europe is home to 21 companies in the ranking, 1989 90 92 93 94 95 96 97 98 99 00 01 02 03 the same number as on the NOTE: Based on C&EN's annual listing of the Global Top 50 chemical 2003 list. Aggregate sales of producers. those companies, $210.9 billion, are up 11.9% over Making up numbers four, five, and six the previous year and account for 44.6% of the global total. That is slightly down from are Bayer, Total, and ExxonMobil, all with the 46.1% share of total sales that Eurochemical sales of at least $20 billion in pean companies accounted for in the 2003 2003, the year on which this year's survey is based. It is in the remainder of the top 10, however, that perhaps the most startling T O P 50 O P E R A T I O N S position shift has occurred, as Japan's Mitsubishi Chemical bounded up to number nine, to follow petrochemical giants BP and Shell and bump specialties producer Deverage rates of both capital and gussa down one space, to number 10. R&D spending are down for the Sales of the Top 50 companies worldchemical companies in Chemical & wide show a striking increase of 15% over Engineering News's most recent global Top the previous year. The threshold for mak50 survey. ing the ranking, accordingly, is $3.8 billion, In last year's report, C&EN pointed out up significantly from the cut-off in last that the capital spending level then was the year's listing of $3.1 billion. lowest for the seven years the figures have HEY CHANGED ORDER, BUT T H E
top three companies in Chemical &Engineering News's rankings of the global Top 50 companies remain, for the third year running, Dow Chemical, BASF, and DuPont. The members of this "super league" show sales of almost a full third more than those of the next largest producers.
ranking and their 48.3% sales share in 2002. By contrast, the share accounted for by Japanese producers increased from 12.6% in the 2002 ranking, to 13.0% in 2003, to 14.2% this year. Aggregate sales of Japanese companies in this year's ranking are $67.2 billion, up 26.3% over the previous year, in part reflecting an increase in companies represented from eight to nine. However, the largest increase—a 45% change—comes from the all-encompassing region of "everywhere else." Only six companies from outside the three major regions appeared in the 2003 ranking; that total increased by one this year. The combined sales of the seven now on the list are $49.3 billion, accounting for 10.4% of the global total. T h e share was 8.3% in the 2003 survey and only 5.7% in 2002. Countries represented in this segment are Canada, China, India, Saudi Arabia, South Africa, Taiwan, and—the latest to join the Top 50 — South Korea. LG Chem and Japan's Hitachi Chemical are the two newcomers to this year's ranking. Dropped off the list are Honeywell, which reported chemical sales of $3.2 billion, and Monsanto, with chemical sales of $2.9 billion. Most of the major changes in position reflect a currency exchange bonus when C&EN converts from stronger national currencies to U.S. dollars for this survey Ironically, the currency effect that boosts non-US. companies' ranking in C&EN's Top 50 is the bane of their bookkeeping: When companies convert sales dominated by US. dollars to their local currencies for financial reporting, those figures take a hit.
Downturn For Capital, R&D Investments
A
IF ONLY profitability would keep pace— but that is not what is happening to the industry In fact, the aggregate profit margin in this year's survey—chemical operating profits as a percentage of chemical sales—slipped for the sixth year in a row, to a record low of 5.5%. That level means that the profit margin for the Top 50 is now less than half the margin that the industry enjoyed in 1997. And HTTP://WWW.CEN-ONLINE.ORG
been included in the rankings, a reflection of the attendant decline in operating profit margins shown by the global Top 50 chemical companies. This year, the slide continues: From 7.0% of chemical sales in the 2002 survey to 6.3% in 2003, capital spending is now only 5.5% of the chemical sales of the global Top 50 companies. In fact, of the 46 companies that specifically report chemical capital spending, only 12 show an increase. Most com-
monly, companies note that spending is being held down tightly, frequently at less than levels of depreciation. That level of spending is not a sustainable course for the industry's innovative health, but given the recent profitability picture, companies no doubt believe that it is necessary. R&D spending, on the other hand, was showing a marginally less pessimistic trend. R&D spending as a percentage of chemical sales had been ticking along at 2.5% in the 2000, 2001, and 2002 surveys, and in 2003 perked up to 2.6% of sates. This year's report shows the percentage slipping back to only 2.2% of sales. Still, out of the 35 of the Top 50 companies to report chemical R&D spending, 20 show an increase in spending and two report no change. The remaining 13 have cut back. C & E N / JULY 19, 2004
11
-BUSINESS
ASIA ENTERS TOP 10 Japanese company joins top tier for first time, while top three companies hold their own
RANK 2003 2002
1 2 3 4 5 6 7 8 V 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50
CHEMICAL CHEMICAL SALES CHANGE SALES AS 1$ MILLIONS) FROM % OF TOTAL 2003 2002 SALES
COMPANY
1 3 2 5 4 6 8 7
Dow Chemical BASF DuPontd Bayer Total ExxonMobil6 BP Royal Dutch/ Shell 17 Mitsubishi Chemical 9 Degussa 10 Akzo Nobel 13 SABIC 14 China Petroleum & Chemical 11 ICI 1? Mitsui Chemicals 31 Formosa Plastics Group lb Dainippon Ink & Chemicals 16 General Electric 18 Air Liquide 19 Sumitomo Chemical 34 Toray Industries 22 Shin-Etsu 30 Chevron Phillips 20 Huntsman Corp. 27 DSM 25 PPG Industries 29 Equistar Chemicals 28 Reliance Industries 26 Clariant 23 Rhodia 38 Air Products 24 BOC 45 Sasol 33 Eastman Chemical 39 Rohm and Haas 35 Asahi Kasei 37 Praxair 36 Syngenta 42 Solvay 21 Norsk Hydro 43 ENI 40 Ineos Groupf 41 Ciba Specialty 44 Celanese — LG Chem 32 Teijin 46 Borealis 49 Nova Chemical 47 Lyondell Chemical - Hitachi Chemical
HEADQUARTERS COUNTRY
$32,632.0 30,768.9 30,249.0 21,567.5 20,197.3 20,190.0 16,075.0
18.2% 100.0% U.S. 1.7 81.5 Germany 13.2 99.9 U.S. -2.0 66.7 Germany -7.6 17.1 France 23.0 8.5 U.S. 23.0 6.8 U.K. U.K./ 15,186.0 32.2 7.5 Netherlands
CHEMICAL PROFITS AS IDENTIFIABLE CHEMICAL OPERATING OPERATING CHANGE % OF TOTAL OPERATING CHEMICAL ASSETS AS RETURN ON PROFITS8 FROM OPERATING PROFIT ASSETS % OF TOTAL CHEMICAL 3 ($ MILLIONS) 2002 PROFIT MARGIN* ($ MILLIONS) ASSETS ASSETSC
$2,082.0 78.7% 100.0% 6.38% $30,566.0 24,666.7 57.4 5.6 1,726.7 -20.4 23,813.0 na na na na 26,199.9 def def -1,533.2 nm 6,638.5 4.4 3.1 631.4 -28.2 19,508.0 6.7 7.1 1,432.0 72.5 10,591.0 3.5 3.5 568.0 10.3
73.0% 64.9 98.9 61.8 7.3 11.2 8.6
6.8% 7.0 na def 9.5 7.3 5.4
nm
def
def
15,420.0
9.2
def
648.0 21.4 744.5 40.0 741.1 -19.0 3,016.2 55.5
76.5 100.0 48.6 106.7
4.9 5.8 6.9 29.2
11,583.7 4,812.3 7,148.8 12,300.0
67.1 30.4 52.9 42.2
5.6 15.5 10.4 24.5
260.7 262.2 643.8 -20.6 465.1 -4.5
5.8 100.0 100.0
2.7 6.7 5.0
10,355.1 4,872.9 10,248.0
21.4 22.9 100.0
2.5 13.2 4.5
-209.0
13,216.4 5.6 12,929.7 -2.9 10,750.4 -4.7 10,314.2 29.0
79.6 100.0 72.8 82.7
Japan Germany Netherlands Saudi Arabia
9,744.2 27.9 9,557.9 -4.5 9,394.8 3.5
18.2 100.0 100.0
Lhina U.K. Japan
8,499.0 27.4
52.7
Taiwan
1,410.3
36.1
85.6
16.6
15,778.6
56.0
8.9
8,405.3 1.3 8,371.0 9.4 8,360.1 7.3 8,042.6 4.7 7,393.1 6.1 7,103.6 3.3 7,018.0 28.2 6,990.2 -2.9 6,845.6 -2.9 6,606.0 10.2 6,545.0 18.2 6,540.9 4.4 6,329.7 -8.7 6,170.1 •-17.6 6,029.5 17.6 6,010.2 -8.5 5,845.2 7.1 5,800.0 9.0 5,620.0 11.9 5,617.3 4.9 5,613.0 9.5 5,507.0 4.7 5,481.0 5.9 5,390.4 14.5 5,077.0 2.6 5,000.0 0.0 4,939.8 -6.2 4,610.9 0.3 4,380.5 13.7 4,288.2 14.6 4,156.0 4.5 3,949.0 27.8
100.0 6.2 88.0 80.5 78.8 98.9 100.0 100.0 100.0 75.4 100.0 58.6 100.0 100.0 95.7 85.1 68.4 100.0 87.5 52.0 100.0 83.7 64.1 22.2 8.7 100.0 100.0 100.0 73.2 56.9 100.0 100.0
Japan U.S. France Japan Japan Japan U.S. U.S. Netherlands U.S. U.S. India Switzerland France U.S. U.K. South Africa U.S. U.S. Japan U.S. Switzerland Belgium Norway Italy U.K. Switzerland Germany South Korea Japan Denmark Canada
377.9 803.0 1,421.2 300.1 391.2 1,083.3 76.0 68.7 332.7 939.0 -62.0 722.9 454.1 -179.9 651.9 691.6 253.6 223.0 na 279.4 1,444.0 780.0 396.0 395.4 -199.1 na 424.4 119.9 357.2 130.4 44.1 238.0
9.1 -28.6 4.1 -6.4 76.5 9.5 85.4 na -39.9 28.8 nm 15.0 -11.4 nm -20.2 -15.4 -45.7 4.7 na -6.1 6.3 4.7 -25.4 26.9 nm na -27.5 -47.5 15.5 26.5 -54.1 10.7
100.0 4.0 62.7 52.2 79.9 100.0 100.0 100.0 100.0 96.0 100.0 53.4 100.0 100.0 107.8 83.7 16.1 100.0 na 53.2 100.0 110.0 52.0 11.7 def na 100.0 100.0 62.7 39.0 100.0 100.0
4.5 9.6 17.0 3.7 5.3 15.2 1.1 1.0 4.9 14.2 def 11.1 7.2 def 10.8 11.5 4.3 3.8 na 5.0 25.7 14.2 7.2 7.3 def na 8.6 2.6 8.2 3.0 1.1 6.0
8,768.1 15,044.0 6,707.2 8,634.0 na 11,953.2 6,242.0 8,737.4 3,895.8 5,450.0 5,028.0 3,059.9 2,519.0 2,858.2 9,127.9 3,896.7 5,276.2 6,230.0 7,792.0 5,795.7 8,305.0 2,374.0 4,412.9 3,618.0 2,854.8 na 2,963.0 1,532.1 1,832.9 5,081.5 1,860.2 4,413.0
100.0 2.3 53.9 64.6 na 100.0 100.0 100.0 36.6 64.7 100.0 20.0 31.5 38.7 96.8 63.1 57.3 100.0 82.5 53.8 100.0 21.7 41.3 11.7 3.8 na 26.7 25.1 37.4 100.0 52.5 100.0
4.3 5.3 21.2 3.5 na 9.1 1.2 0.8 8.5 17.2 def 23.6 24.3 def 7.1 17.7 4.8 3.6 na 4.8 17.4 32.9 9.0 10.9 def na 19.3 7.8 19.5 2.6 2.4 5.4
3,801.0 16.5 3,784.1 5.7
100.0 84.2
U.S. Japan
-1.0 276.2
nm 36.1
100.0 94.8
def 7.3
6,436.0 3,013.5
96.5 88.7
def 9.2
NOTE: Financial figures converted at the following 2003 average rates: $1.00 U.S. = 0.884 euros, 0.612 British pounds, 1.345 Swiss francs, 3.75 Saudi riyals, 8.277 Chinese yuan, 115.97 Japanese yen, 7.082 Norwegian crowns, 46.59 Indian rupees, $34.40 Taiwanese, 7.558 South African rand, 1,192.08 South Korean won, and $1,401 Canadian, a Operating profit is sales less administrative expenses and cost of sales, b Chemical operating profit as a percentage of chemical sales, c Chemical operating profit as a percentage of identifiable chemical assets, d Sales include a significant amount of nonchemical products, e Profits and profitability rates are after-tax. f C&EN estimate, def = deficit, na = not available, nm = not meaningful.
12
C&EN
/JULY
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HTTP://WWW.CEN-ONLINE.ORG
SPENDING Two-fifths of reporting companies upped R&D spending in 2003 CHEMICAL CAPITAL SPENDING CHEMICAL R&D SPENDING % OF % OF CHANGE CHANGE 2003 FROM CHEMICAL 2003 FROM CHEMICAL ($ MILLIONS) 2002 SALES ($ MILLIONS) 2002 SALES
-8.0% -3.2 6.7 10.3 na
3.0% 2.9 4.5 6.0 na
na na na na 401.7
na na na na -1.9
na na na na 3.1
3.9 21.6
363.2 na
6.6 na
3.4 na
-0.9 -28.4 -33.4
9.1 2.6 4.2
na 245.1 283.6
na 1.4 -11.4
na 2.6 3.4
na 394.3 na 930.1 645.3
na 6.0 na -12.5 -31.2
na 4.7 na 10.1 8.0
na 129.2 885.0 106.7 389.8
na 16.1 -4.5 2.4 na
na 1.6 10.6 1.2 6.9
Toray Industries Shin-Etsu Chevron Phillips Huntsman Corp. DSM
na 878.3 223.0 191.0 460.5
na 55.3 -29.0 172.1 -19.1
na 12.4 3.2 2.7 6.7
na 227.0 55.0 65.6 303.2
na -3.5 17.0 175.6 6.8
na 5.3 0.8 0.9 4.4
PPG Industries Equistar Chemicals Reliance Industries Clariant Rhodia
217.0 106.0 94.2 223.7 263.6
-8.8 -10.2 -62.9 -11.2 -37.7
3.3 1.6 1.4 3.5 4.3
306.0 38.0 na 228.9 211.6
5.9 0.0 na -12.5 -7.0
4.6 0.6 na 3.6 3.4
Air Products BOC Sasol Eastman Chemical Rohm and Haas
613.0 385.5 409.6 230.0 339.0
-2.4 -26.9 -22.0 -46.1 -16.7
10.2 6.4 7.0 4.0 6.0
121.0 65.2 49.7 173.0 238.0
0.0 -15.1 4.7 8.8 -8.5
2.0 1.1 0.9 3.0 4.2
Asahi Kasei Praxair Syngenta Solvay Norsk Hydro
481.6 983.0 221.0 348.5 159.1
-10.5 97.4 33.9 -31.7 -27.0
8.6 17.5 4.0 6.4 3.0
na 75.0 454.0 95.0 16.7
na 8.7 6.8 -18.4 -22.4
na 1.3 8.2 1.7 0.3
ENI Ineos Group Ciba Specialty Celanese LG Chem
159.5 na 173.2 209.3 132.2
-43.4 na -6.8 -15.1 10.4
3.1 na 3.5 4.5 3.0
na na 208.9 89.4 58.1
na na -4.4 14.5 16.7
na na 4.2 1.9 1.5
Teijin Borealis Nova Chemicals Lyondell Chemical Hitachi Chemical
302.2 -36.9 134.6 15.5 83.1 130.0 268.0 1,118.2 208.1 14.9
7.0 3.2 3.3 7.1 5.5
na 45.3 45.0 37.0 na
na 2.6 15.4 23.3 na
na 1.1 1.1 1.0 na
Dow Chemical BASF DuPont Bayer Total
-32.2% -14.3 33.8 -25.3 -9.9
3.4% 8.4 5.7 6.2 6.5
692.0 775.0 587.0 392.1 890.5
-27.5 -5.8 -13.7 -20.2 -18.1
3.4 4.8 3.9 3.0 6.9
419.8 2,230.1
-2.1 71.7
887.4 251.7 394.7
Formosa Plastics Group Dainippon Ink & Chemicals General Electric Air Liquide Sumitomo Chemical
$1,100.0 2,594.5 1,713.0 1,345.4 1,261.6
ExxonMobil BP Shell Mitsubishi Chemical Degussa Akzo Nobel SABIC China Petroleum & Chemical ICi Mitsui Chemicals
na = not available.
HTTP://WWW.CEN-ONLINE.ORG
$981.0 904.1 1,349.0 1,299.0 na
High prices for hydrocarbons are benefiting the petrochemical arms of oil and gas producers around the world. This benefit was noted, for example, at ExxonMobil in C&EN's earlier listing of the Top 50 U.S. chemical producers (C&EN, May 17, page 25). A similar boost comes at the European oil companies BP, Total, and Shell. O n the other hand, E N F s chemical operation is showing only modest growth. BUT THE RISE in sales, as with the aggregate of the Global Top 50, is not accompanied by an increase in profitability for the petrochemicals sector. Shell, in the throes of restructuring, showed an operatingloss of $209 million in 2003. ENFs chemical operations showed a loss of $ 19 9 million—an improvement over the loss of $338 million taken in 2002 but nonetheless disheartening for a chemical business that has been bouncing back and forth from profit to loss ever since C&EN began charting the Top 50 in 1990. In fact, this year's list shows a depressing six minus signs in the operating profit column. The largest operating loss— $1.5 billion—was taken by Bayer, which has restructured its operations in order to spin off its chemical business as the new entity Lanxess onJuly 1. And Rhodia's loss is the legacy of an ambitious late-1990s expansion program that went sour; the company expects to turn a profit only in 2006 as it works through a series of restructurings and divestitures. This year's Top 50 is relatively unaffected by divestitures, which have shaped the list over the past several years as companies such as Roche, Aventis, and Henkel have sold their chemical businesses and dropped off. Any impact from this year's decisions regarding mergers, acquisitions, and divestitures will not be seen until next year's rankings, if then. For example, even DuPont's recently completed sale of its $6 billion-per-year fibers business to Koch Industries would not take the firm out of the "super league" in this year's rankings. BP and Bayer have said they will divest their chemical operations, but there is little likelihood of that happening in time to affect next year's ranking. It also remains to be seen where Degussa will end up in the rankings—RAG recently acquired the majority ownership of Degussa, and it is uncertain if it intends to consolidate Degussa's results with those of its existing chemical operations. Perhaps only Lyondell Chemical's pending acquisition of Millennium Chemicals will yield a dramatic jump into superstar status. • C&EN
/ JULY
19, 2004
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