EAST M A N CHEM ICA L
BUSI NESS
WATCHFUL EYE A worker
monitors operations at Eastman Chemical’s Kingsport, Tenn., complex.
TOP 50 U.S. CHEMICAL PRODUCERS With the recession behind it, U.S. chemical industry GIRDS FOR GROWTH ALEXANDER H. TULLO, C&EN NORTHEAST NEWS BUREAU
THE SIGNS ARE EVERYWHERE that
the U.S. chemical industry is poised for expansion. Prices and sales volumes, decimated by the Great Recession, have both posted sharp increases. Profits have come roaring back. Chemical company stock prices are up. And firms are now focused on longterm growth: They are starting to take the cash they hoarded during the recession and redeploy it in expansions and acquisitions. According to the latest edition of C&EN’s survey, the combined revenues of the Top 50 U.S. chemical companies jumped 19.4% in 2010, hitting $290.8 billion. These results are far better than those posted in 2009, but the industry has a long way to go to make a full recovery. In 2008, the Top 50 firms posted combined revenues of $319.6 billion. Of the 50 firms surveyed, 41 saw their sales increase. Topping the ranking again, Dow Chemical posted a 19.6% increase in MORE ONLINE
sales to $53.7 billion. Of the top five firms, just PPG Industries posted an increase in revenues of less than 10%. Only eight companies saw chemical sales fall. Cytec Industries, W.R. Grace, ISP, Arch Chemicals, and Sigma-Aldrich posted modest declines of less than 6%. Sigma-Aldrich’s results, however, are not a matter of bad performance: C&EN considers the firm’s sales resulting from its own manufacturing, rather than its distribution of products made by other companies. Last year, Sigma-Aldrich made 65% of its products; this year, it produced only 60%. And there is a reasonable explanation for each of the firms that posted sharper declines. Sunoco’s chemical sales declined by 32.6%, and its ranking dropped from 34 to 44. However, last year the company sold its polypropylene business to Brazil’s Braskem. The two outliers, fertilizer maker
Read about C&EN’s methodology for ranking the Top 50 chemical companies at C&EN Online, cenm.ag/bus1. WWW.CEN-ONLINE.ORG
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Mosaic and crop protection chemicals producer Monsanto, posted sales declines of 34.4% and 34.7%, respectively. Both firms, however, make agricultural chemicals and have fiscal years that ended in the middle of 2010. Thus the crash of the agricultural sector in 2009 skewed their results. On top of that, Monsanto’s chemical business has a structural problem. Some 70% of its sales come from the glyphosate herbicide Roundup, which has come off patent. Generic glyphosate, much of it produced offshore, is flooding the market. This, the company admits in its annual report, “has caused increased competitive pressure in the market and a decline in the business.” Industry profitability recovered fully in 2010, C&EN’s survey shows. The combined operating income for the 43 firms that report year-over-year comparable earnings rose 43.0% in 2010, hitting $33.5 billion and eclipsing the record posted by the Top 50 in 2007. Profits declined at just five companies, and only Monsanto posted a loss. A FEW COMPANIES fell off the list this
year. Fertilizer maker Terra Industries was acquired by CF Industries. This deal is also a big reason why CF’s sales rose by 52.0% and its ranking climbed from 23 in last year’s survey to 20 this year. Hexion Specialty Chemicals and Momentive Performance Materials, both owned by the private equity firm Apollo Management, merged last year and filed for an initial public offering (IPO) of stock late last month. The new firm, Momentive Performance Materials Holdings, replaced the two companies at number nine in the ranking. Arizona Chemical and SK Capital both dropped off the ranking this year. Documents filed for Arizona’s planned IPO provided figures for last year’s number 49 ranking. However, it canceled the offering when its owner, Rhône Capital, sold a controlling interest to another private equity firm, American Securities. SK Capital, which owns Aristech Acrylics and the
TOP 50 U.S. CHEMICAL FIRMS Sales and profits surged as the economy recovered in 2010
RANK 2010 2009
COMPANY
CHEMICAL CHEMICAL OPERATING CHEMICAL OPERATING CHEMICAL SALES AS CHEMICAL PROFITS AS IDENTIFIABLE ASSETS RETURN SALES CHANGE % OF OPERATING CHANGE % OF TOTAL OPERATING CHEMICAL AS % OF ON ($ MILLIONS) FROM TOTAL PROFITSa FROM OPERATING PROFIT ASSETS TOTAL CHEMICAL HEADQUARTERS ($ MILLIONS) 2009 2010 2009 SALES PROFIT MARGINb ($ MILLIONS) ASSETS ASSETSc
1 2 3 4 5
1 2 3 4 7
Dow Chemical ExxonMobild DuPonte PPG Industries Chevron Phillips
$53,674 35,521 31,312 12,438 11,204
19.6% 32.3 20.6 9.2 33.3
6 7 8 9 10 11 12 13
6 9 8 — 5 10 11 12
10,116 9,250 8,554 7,406 6,759 5,997 5,918 5,842
13.0 19.2 10.1 na -34.4 17.8 16.5 15.8
14 15 16 17 18
13 — 15 17 19
5,418 5,000 4,726 4,251 4,016
19 20 21
18 23 27
22 23 24 25 26 27
20 26 28 14 25 22
Praxaire Huntsman Corp. Air Productsf Momentive Mosaicg Dow Corning Celanese Eastman Chemical Lubrizol Styron Honeywelle Nalco Occidental Petroleum Ashlandf CF Industries Westlake Chemical FMC Corp. Ineos Nova Cabot Corp.f Monsantoh Chemtura Cytec Industries
28 29
21 24
30 31 32 33 34 35 36 37
30 37 33 32 36 40 31 43
38 39 40 41 42 43 44 45 46 47
41 39 38 42 46 — 34 48 44 47
W.R. Grace Rockwood Specialties Albemarle Georgia Gulf Ferro Corp.e Solutia NewMarket Corp. TPC Groupi ISP Kronos Worldwide Stepan Arch Chemicals Sigma-Aldrich H.B. Fullerj Kraton Polymers Goodyear Sunoco OM Group Olin Reichhold
48 49 50
— 50 —
Koppers Innophos Tronox
100.0% 9.6 99.4 92.7 100.0
$3,625 4,913 4,578 1,648 1,501
100.0 100.0 94.8 100.0 100.0 100.0 100.0 100.0
Midland, Mich. Irving, Texas Wilmington, Del. Pittsburgh The Woodlands, Texas Danbury, Conn. Salt Lake City Allentown, Pa. Columbus, Ohio Plymouth, Minn. Midland, Mich. Dallas Kingsport, Tenn.
3,087 449 1,425 591 1,333 na 605 891
18.1 42.9 14.0 13.4 24.5
100.0 100.0 14.2 100.0 21.1
Wickliffe, Ohio Berwyn, Pa. Morristown, N.J. Naperville, Ill. Los Angeles
3,986 3,965 3,172
11.7 52.0 36.4
44.2 100.0 100.0
3,116 2,990 2,893 2,891 2,760 2,748
10.3 25.9 29.0 -34.7 8.6 -1.5
100.0 100.0 100.0 27.5 100.0 100.0
2,675 2,649
-5.3 4.1
2,363 2,270 2,102 1,950 1,786 1,688 1,600 1,450
108.2% 112.8 85.0 34.5 112.3
100.0% 16.1 94.2 95.7 100.0
6.8% 13.8 14.6 13.2 13.4
11.8 612.7 22.6 na -45.5 na 31.8 72.3
100.0 100.0 95.5 100.0 100.0 na 100.0 100.0
30.5 4.9 16.7 8.0 19.7 na 10.2 15.3
1,113 na 749 628 438
28.2 na 23.8 25.8 12.6
100.0 na 16.2 100.0 5.8
Covington, Ky. Long Grove, Ill. Houston
252 1,073 378
119.1 38.2 252.7
539 88 248 -25 300 271
100.0 83.0
Philadelphia Channahon, Ill. Boston St. Louis Philadelphia Woodland Park, N.J. Columbia, Md. Princeton, N.J.
17.8 51.5 26.8 17.0 16.7 22.6 -5.9 26.9
100.0 80.6 100.0 100.0 100.0 100.0 100.0 100.0
1,431 1,377 1,363 1,356 1,228 1,130 1,089 1,083 1,037 1,032
12.1 -1.0 -2.4 9.8 33.5 73.3 -32.6 24.3 7.6 17.9
100.0 100.0 60.0 100.0 100.0 6.0 2.9 90.5 65.4 100.0
796 714 701
21.4 7.1 11.1
63.9 100.0 100.0
$69,588 26,235 19,409 10,590 8,016
100.0% 8.7 98.6 70.7 100.0
5.2% 18.7 23.6 15.6 18.7
15,274 8,714 12,119 8,777 12,708 12,648 8,281 5,986
100.0 100.0 89.7 100.0 100.0 100.0 100.0 100.0
20.2 5.2 11.8 6.7 10.5 na 7.3 14.9
20.5 na 15.8 14.8 10.9
4,967 na 4,938 5,224 3,755
100.0 na 13.1 100.0 7.2
22.4 na 15.2 12.0 11.7
44.5 100.0 100.0
6.3 27.1 11.9
5,695 8,759 2,954
59.8 100.0 100.0
4.4 12.3 12.8
15.3 1,000.0 nm nm 14.1 269.2
100.0 100.0 100.0 nm 100.0 100.0
17.3 2.9 8.6 def 10.9 9.9
3,320 468 2,886 4,271 2,913 3,674
100.0 100.0 100.0 23.9 100.0 100.0
16.2 18.8 8.6 def 10.3 7.4
374 336
31.9 52.3
100.0 76.8
14.0 12.7
4,272 3,765
100.0 82.4
8.8 8.9
Richmond, Va. Atlanta Cleveland St. Louis Richmond, Va. Houston Wayne, N.J. Dallas
422 138 165 329 287 81 na 179
100.6 42.7 292.6 41.2 9.5 359.3 na nm
100.0 90.4 100.0 100.0 100.0 100.0 na 100.0
17.9 6.1 7.8 16.9 16.1 4.8 na 12.3
3,068 1,095 1,434 3,537 1,063 871 na 1,708
100.0 65.7 100.0 100.0 100.0 100.0 na 100.0
13.7 12.6 11.5 9.3 27.0 9.3 na 10.5
Northfield, Ill. Norwalk, Conn. St. Louis St. Paul Houston Akron, Ohio Philadelphia Cleveland Clayton, Mo. Research Triangle Park, N.C. Pittsburgh Cranbury, N.J. Oklahoma City
108 110 na 104 185 na 23 155 117 na
2.9 29.9 na -2.7 146.8 na 2,200.0 490.1 -6.5 na
100.0 100.0 na 100.0 100.0 na 5.9 96.8 65.0 na
7.5 8.0 na 7.7 15.0 na 2.1 14.3 11.3 na
811 1,238 na 1,154 1,081 na 616 1,402 1,131 na
100.0 100.0 na 100.0 100.0 na 4.6 79.1 55.2 na
13.3 8.9 na 9.0 17.1 na 3.7 11.1 10.4 na
78 95 121
32.6 -24.8 173.9
78.4 100.0 100.0
9.8 13.4 17.2
447 627 1,213
66.9 100.0 100.0
17.3 15.2 10.0
a Operating profit is sales less administrative expenses and cost of sales. b Operating profit as a percentage of sales. c Chemical operating profit as a percentage of identifiable assets. d Profits and profitability ratios are after tax. e Sales include a significant amount of nonchemical products. f Fiscal year ended Sept. 30. g Fiscal year ended May 31. h Fiscal year ended Aug. 31. i Fiscal year ended June 30. j Fiscal year ended Nov. 27. def = deficit. na = not available. nm = not meaningful.
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BUSI NESS
nylon maker Ascend Performance Materials, didn’t report results for 2010. SK’s website, though, says its revenues “exceed $2 billion.” Several other companies would probably have enough chemical sales to make the
MARKET CAPITALIZATION Chemical stocks had another strong year in 2010
RANK 2010 2009
1 2
2 1
3 4 5
3 4 5
6
6
7
10
8
7
9 10 11
8 9 11
12 13 14 15
12 14 13 16
16
19
17
22
18 19
23 18
20 21 22
17 21 27
23
20
24 25 26 27 28
24 29 26 25 —
29
28
30
31
31 32 33
32 30 —
COMPANY
DuPont Dow Chemical Mosaic Praxair Air Products PPG Industries CF Industries SigmaAldrich Lubrizol Celanese Eastman Chemical FMC Corp. Albemarle Nalco Huntsman Corp. Rockwood Specialties Westlake Chemical Solutia Cytec Industries W.R. Grace Cabot Corp. Kronos Worldwide NewMarket Corp. Olin Ferro Corp. OM Group H.B. Fuller Kraton Polymers Arch Chemicals Georgia Gulf Innophos Stepan Koppers
MARKET CAP. CHANGE ($ MILLIONS) FROM 2010 2009
$45,755 39,848
50.4% 25.4
34,064 29,023 19,545
28.1 17.9 13.6
13,485
39.0
9,636
118.4
8,120
31.7
6,840 6,414 5,944
37.1 38.4 36.3
5,712 5,109 4,420 3,696
41.3 53.5 25.4 39.9
ranking but don’t publicly disclose results. They include Koch Industries, Procter & Gamble, Baker Hughes, and 3M. Besides Momentive, four new firms made the C&EN ranking. Styron, the former Dow styrenic polymers unit, joins at number 15. The firm, which is soon to be known as Trinseo, is owned by Bain Capital and is a possible IPO candidate. After a long absence from the C&EN ranking, Goodyear Tire & Rubber returns at number 43 because it is once again breaking out chemical sales. Coal tar chemical giant Koppers had been stalking the list for years. It finally has enough chemical sales to make it at number 48. Titanium dioxide producer Tronox, which is emerging from bankruptcy, eased into the last spot on the list. ON THE STOCK MARKET, chemical companies had another good year in 2010. The combined market capitalization of the 33 publicly listed companies jumped 34.9% over the course of 2010. At the end of the year, investors had a total of $268.2 billion invested in these companies. Nevertheless,
BIG TURNAROUND Foreign-owned firms had a much improved year in 2010 U.S. CHEMICAL SALES ($ MILLIONS) 2010
RANK
2,969
69.8
2,882
75.2
2,813 2,621
82.5 47.8
2,568 2,462 2,460
40.1 43.8 209.0
1,727
-1.0
1,633 1,262 1,175 1,010 972
18.5 77.9 23.5 -8.9 141.3
952
23.3
818
39.7
776 770 737
58.5 20.1 18.1
NOTE: Based on share prices on Dec. 31, 2009, and Dec. 31, 2010. These 33 companies are firms on the Top 50 list that generate more than half of their revenues through chemical manufacturing.
the gains weren’t quite as strong as they were in 2009, when market capitalization rose by 65%. Last year’s market capitalization leader, Dow, posted only a 25.4% increase in value and was eclipsed by DuPont. The Wilmington, Del., firm’s 50.4% increase, to a value of $45.8 billion, allowed it to regain the top spot. DuPont had a banner year in 2010. In addition to a strong jump in revenue, it had an 85.0% gain in operating profits, to $4.6 billion. And just after the year ended, DuPont signed an agreement to buy Denmark’s Danisco for $6.3 billion, a move meant to firmly entrench industrial biotechnology in its chemical mix. “We will look back on 2010 as the year we benefited from recovery, created our own momentum, and emerged as a stronger, well-positioned company,” DuPont Chief Executive Officer Ellen J. Kullman said at a recent analyst meeting. DuPont isn’t alone in making large chemical acquisitions. A few deals have been signed that will make a mark on future rankings. Solvay, number 23 on the list of
2010 2009
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
1 2 3 4 6 5 7 9 10 16 11 12 8 15 — 14 19 17 21 13 20 22 18 25 24
COMPANY
BASF LyondellBasell Agriuma Total Bayer AkzoNobel Air Liquide Evonik Industries Syngenta Arkema Nova Chemicals Linde Shin-Etsu Chemicalb PotashCorp Braskem Sasolc Alfa Group DSM Lanxess DICb Yara Rhodia Solvay Wacker Chemie Lonza
$17,565 12,589 7,899 5,566 4,717 4,076 3,644 3,343 2,383 2,270 2,182 2,168 2,120 2,074 1,848 1,598 1,596 1,581 1,557 1,463 1,458 1,286 1,272 1,034 977
CHANGE FROM 2009
40.9% 46.1 10.5 29.6 16.1 -2.9 20.8 33.7 -7.2 60.4 8.2 13.5 -34.8 33.0 283.5 -13.7 14.3 26.1 50.3 -21.4 14.2 26.8 13.4 30.1 8.5
U.S. CHEMICAL SALES AS % OF TOTAL U.S. SALES
100.0% 58.9 100.0 33.8 43.2 100.0 100.0 100.0 66.2 100.0 100.0 90.8 100.0 100.0 100.0 100.0 50.4 100.0 100.0 100.0 100.0 100.0 89.8 100.0 100.0
COUNTRY
Germany Netherlands Canada France Germany Netherlands France Germany Switzerland France Canada Germany Japan Canada Brazil South Africa Mexico Netherlands Germany Japan Norway France Belgium Germany Switzerland
NOTE: Figures from companies that report in native currencies were converted to dollars at average annual exchange rates from the Federal Reserve. a Sales include a significant amount of nonchemical products. b Fiscal year ended March 31. c Fiscal year ended June 30.
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foreign firms, is buying number 22, Rhodia. The U.K.’s Ineos is taking over its Ineos Nova styrenics joint venture, number 23 in the U.S. ranking. Berkshire Hathaway is buying Lubrizol, which is currently number 14. It isn’t difficult to understand why Berkshire CEO Warren Buffett was interested in the company. Lubrizol’s profit margins are the highest among surveyed firms that aren’t in the perennially profitable industrial gas business or the currently hot fertilizer sector. MERGERS AND ACQUISITIONS (M&A)
activity will remain vibrant in the near term, says Christopher D. Cerimele, head of the chemicals practice at the investment banking firm Houlihan Lokey. “There is a confluence of things that are encouraging M&A right now,” he says. One is that financing markets have come back to life after the credit crunch. Another factor is the improving economy. “People have more confidence in their own businesses,” Cerimele says. “One of the things that hurt M&A activity over the past two to three years was that there was so much uncertainty.” In addition, after staying conservative during the downturn, companies have a lot of cash on their balance sheets now that business has turned around. Instead of clamoring for special dividends and stock buybacks, Cerimele points out, institutional investors that own chemical stocks are encouraging companies to invest in growth. This means more acquisitions and production capacity increases. Finally, there is pent-up demand because both private equity firms and chemical makers that wanted to buy coveted operations or divest unwanted ones haven’t had the opportunity to do so for several years. Such an environment is conducive to transactions involving midsized chemical businesses. The sale of Cytec Industries’ building-block chemicals unit to H.I.G. Capital is an example. “There is a whole population of companies that held off selling in the past few years and are reconsidering their options in the currently strong M&A environment,” Cerimele says. Only time will tell whether any of those transactions are big enough to reshuffle the U.S. Top 50 next year. But the push toward growth will likely have an impact on the chemical industry for several years to come. ■
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