The Chemical world This week
INDUSTRY RECOVERY PICKS UP MOMENTUM crease over first-quarter 1971. Her- force behind the overall industry cules is up 40%. Du Pont boasts a improvement is better volume. 34% boost. FMC is up 27%, Dow Chemical production today is runChemical 25%, Olin 20%, Allied ning about 10% higher than a year Chemical 19%, Union Carbide 15%, ago. And the trend is still up. This, and American Cyanamid 7%. Only of course, is related to considerably Celanese, down 11%, and Akzona, higher sales—12% for the first quarter. And there seems to be almost down 29%, have failed to join in. This rash of exceptionally strong a direct mathematical relationship gains is apparently not just a flash between sales gains and earnings in the pan. First, it is a continua- gains for the basic chemical industion and an extension of an industry try. In five of the past 11 years, inresurgence that has been gathering steam since early last year. And, dustry sales have grown by 10% or second, it is based on solid improve- better. During these years afterment in the economic fundamentals tax earnings went up an average of of the industry. For instance, sales 12%. In the seven years in which are up strongly, about 12%, produc- the sales gain was less than 10%, tivity is rising sharply, overall however, earnings fell by an averchemical prices are now relatively age of 4%—with maximum destable after years of erosion, and creases in earnings of 16% in both plant capacity utilization rates are 1967 and 1970. getting back to respectable levels. The industry is currently enjoyIn other words, the basic chemical ing a heady improvement in producindustry is finally getting it all to- tivity. The belt-tightening of the gether after five years of disjointed past two years or so is at last payand frustrating operation. ing off—at least in terms of shortThe basic chemical industry term gains. Chemical industry employment started its current improvement in first-quarter 1971. But earnings for is today 2% lower than it was a year the quarter were still down about ago—999,000 in March this year 10% from the year- compared with 1,019,000 in March earlier level. The 1971. So with production up someChemical profits surge on strong sales gain second quarter, thing like 10% over the period, this FIRST-QUARTER 1972 however, brought a means a 12% improvement in proNet Per cent income* slight earnings up- ductivity. With wage costs going Sales Per cent change change (Millions (Millions turn, the first such up at only about a 7% annual rate, from, from of of 1971 dollars) 1971 dollars) year-to-year gain in it all adds up to a very substantial eight quarters. The decline in unit labor costs. Last BASIC CHEMICALS third quarter year was the first year of falling Akzona $ 137.5 $ 5.4 -29% 10% brought a 12% in- unit labor costs in the basic chemiAllied Chemical 349.3 19 13 13.3 crease. And a 24% cal industry in five years. They American Cyanamid 323.6 7 5 24.7 boost in the fourth went down about 3%. This year Celanese 332.1 -11 16 12.2 quarter capped the unit labor costs in the industry Dow Chemical 550.2 13 25 41.0 could fall even more. year. Du Pont 1045.0 14 34 99.0 All these improvements for the 1972 now starts FMC 358.4 27 12 16.3 basic chemical industry are indeed with about a 25% GAF 173.9 17 59 5.2 increase. And this very welcome. But they have to be Hercules 214.4 13 15.1 40 is a 25% increase put into perspective. Even if chemKoppers 128.3 8 38 1.3 over the already ical makers maintained their 25% Monsanto 13 615.0 47.5 56 improving first earnings gain of the first quarter for Reichhold Chemicals 52.3 15 1.8 295 quarter of 1971. the full year (something that isn't Union Carbide 759.6 2 15 50.1 This is a much very likely to happen), their earnstronger perfor- ings for the year would still fall a DRUGS mance than the 24% little shy of their 1966 peak. In Abbott Laboratories 120.4 99 11 9.2 gain in the fourth constant dollar terms they would Baxter Laboratories 67.8 31 35 7.1 quarter last year, be down about 30%. And if such a Merck 222.8 33.7 15 15 because that gain 25% earnings gain were accomMiles Laboratories 19 26 78.3 3.7 was posted over the panied by a 12% sales gain, profit Pfizer 237.2 7 22.6 11 badly strike-de- margin would still only be 5.6%, Smith Kline & French Laboratories 91.4 13 10.3 13 pressed fourth well down from the 8% or more Upjohn 119.6 18 27 11.5 profit margins of chemical comquarter of 1970. The key driving panies in the mid-sixties. a Excluding extraordinary items.
The basic chemical industry has just enjoyed one of its most encouraging quarters in more than five years. In the first three months of this year major chemical companies earned an average 25% more than they did in the first quarter of 1971. And in so doing they maintained a momentum that has been building for the past year—a momentum that now almost assures the chemical industry of a substantial earnings gain for the full year of 1972. This is indeed good news for all employed by, or associated with, the chemical industry. Earnings trends are a strong leading indicator of the directions soon to be taken in such matters as hiring policies, research and development spending, and capital investment commitments. And the industry now seems poised for its first backto-back annual earnings gains since 1965-66. Industry earnings were up about 6% last year. This first-quarter 1972 upsurge has swept almost all the industry's big companies along with it. Monsanto leads with a 56% earnings in-
4 C&EN APRIL 24, 1972
in Passing:
in Brief: Chemical makers have just had their most encouraging quarter in the past five years. In the first three months of this year they earned about 25% more than in the first quarter last year. Sales were up about 12%. Prices are holding relatively steady, productivity is improving rapidly as is plant utilization. It all points up to a good year for the industry. (See facing page) Volumes were up but margins down in 1971 for C&EN's Top 50 chemical company survey, which ranks the 50 largest U.S.-based chemical producers by their chemical sales. Median chemical sales for the 50 moved up 6% from 1970 to $358 million. But the median profit margin and median return on investment for the firms both slipped during 1971. (See page 9) Administration witnesses at House hearings on the nation's R&D efforts provided some new insight into how President Nixon's policies incorporate science and technology into the economic game plan. The hearings are probing both the amount and kind of resources the U.S. should invest in R&D and the best way for making these investments. (See page 16) Recent theories advancing mechanisms of the solar system's early history were presented at the ACS national meeting. Dr. Harold Urey believes that the earth was formed when some 80 or more moon-sized bodies came together. And Dr. John Wood proposes that forces arising from the earth-moon system caused the surface and crust of the moon to be grossly different on the side facing earth from that on the far side. (See page 19) Pesticide development, production, and use are moving in new directions because of forces generated by ecology, economics, and entomology. For instance, industry
is finding that it must adjust to a new economic structure. The farmer must adjust to new farming practices. Over all hang questions of health and ecological damage. (See page 20)
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Poison ivy, poison oak
The market has never been brisk for the leaves of poison ivy and poison oak, but anybody who has 500 pounds of each has the makings of a one-shot deal with procurement officer Damian Crane of the division of biologies standards, National InAt an ACS symposium on nutrition stitutes of Health. What Mr. Crane and public policy in the U.S., a ma- actually wants are proposals to supjor point stressed by many speakers ply purified urushiol, the active is that U.S. dietary habits are chang- principle of the two noxious plants ( 1 ). Thus the man with the leaves ing, and forms of foods are must be equipped also to do a good changing as well. It is imperative, deal of chemistry. NIH estimates they say, that fortification policies that the specified procedures will produce about 500 grams of active be updated. (See page 22) principle from each 500-pound batch of leaves. It will be used in The importance of chemistry as a a double-blind study of the reducbinding force for ACS members; the tion of sensitivity to poison ivy and impact of professionalism; the naoak by oral intake of urushiol. ture of change for the Society—all Urushiol is a mixture of several of these were voiced during the derivatives of catechol with unsaturated C15 side chains which, upon Council meeting at the 163rd ACS hydrogénation, yield the same 3National Meeting in Boston, April pentadecylcatechol. The concept of 9-14. More dues support for C&EN using it to induce a tolerance to and a new Division of Professional poison ivy and oak has been around Relations were approved. (See for some time. The idea has been under study for a decade, in fact, by page 27) a group under chemist Harold Baer In his Priestley Medal Address, Dr. of the division of biologies standards. Dr. Baer's people have been George B. Kistiakowsky comments doing the animal studies and other on some of the current circumwork that normally precedes tests in humans. At Columbia Universtances of American science and sity, meanwhile, Dr. Charles R. Dawspeculates on ways in which scienson has been doing the synthetic tists might participate more effecand natural products chemistry. tively in resolving the critical probA preliminary feasibility study in lems facing the world's people and humans has been completed by dercivilizations. (See page 30) matologist W. L. Epstein at the University of California school of medicine. He found a statistically significant reduction of sensitivity Chemical & Engineering News in 50 prison volunteers. April 24, 1972 The new study should be under Volume 50, Number 17 way this year at five centers: California, Dartmouth, Duke, Ohio 3 Editorial State, and the Kaiser Foundation 4 The Chemical World This Week (2). The subjects will be 150 poiIn Brief: In Passing: son-ivy sensitive volunteers on the Concentrates East Coast and 150 poison-oak sensitive volunteers on the West Coast. 7,8 Industry/Government/International 17,18 Science/Education/Technology In some areas, at least, the work has significant economic import. The Departments Each year, for example, 4000 Cali9 Special Report fornians get poison oak dermatitis, 16 Government and 1% of the state's total work19 Science men's compensation payments goes 20 Technology 27 ACS News/People to victims of the condition. 30 34 48 48
Priestley Medal Address New Products Newscripts Letters
Cover design: Joe Jacobs
(1) Commerce Business Daily, April 5, page 2. (2) JAMA, Feb. 28, page 1144. APRIL 24, 1972 C&EN
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