Chemical companies highlight increased uncertainty and volatility in Q1 results

Question markVolatility creates uncertainty.  And uncertainty can easily lead to paralysis, if a company hasn’t planned ahead for the range of potential scenarios that might develop.  This is the risk highlighted in my usual analysis of quarterly results.

A key warning sign is the divide that has developed recently in performance in different regions and industry sectors, as the detailed reports below confirm:

  • Several companies use words such as “challenging”, “volatile” and “uncertainty” to describe the outlook
  • Middle Eastern companies focused on their lower profits due to the fall in global market prices
  • And PPG, industry leader in paint and coatings, mirrored Akzo Nobel in highlighting a more difficult world.

But US petrochemical companies have, on the contrary, been encouraged by the recent rebound in crude oil prices to believe their shale advantage might continue.   And China’s majors happily reported further expansions in production, despite confirming weak demand in their domestic market.

Nobody can be sure what the rest of Q2, and H2 will bring.  We can all hope that it will finally bring the sustained recovery promised by policymakers for the past 6 years.  Stability in feedstock prices would be very welcome too.

But what happens if, as I suspect is more likely, Phase 2 of the Great Unwinding gathers momentum – causing interest rates to rise, and stock markets to weaken?

We have already seen some remarkable increases in Western interest rates.  And the increase in stock market volatility would normally be a warning sign that a change in trend was underway.

Knowing that we don’t know the answer, and planning ahead for a range of potential scenarios, is likely to be the best strategy for survival.

Air Liquide. “Growth in the next few years will be supported by the recent major new contract signings”
Air Products. ““Despite economic uncertainty, we remain laser focused on the things we can control and are maintaining our full-year guidance”
Akzo Nobel. “Overall market conditions remain challenging”
Arkema. “Positive foreign exchange will remain a key determinant”
Axiall. “Lower PVC prices and lower ECU values for the combined value of the caustic soda and chlorine”
BASF. “In a volatile and challenging environment, BASF aims to perform well and slightly increase sales in 2015″
BP. Resetting and rebalancing BP to meet the challenges of a possible period of sustained lower prices”
Bayer. “Raising its group sales forecast to between €48bn-49bn from €46bn previously, largely on account of positive exchange rate development”
Braskem. “Restocking trend in the plastics processors chain and strong demand from the domestic consumer goods and agribusiness sectors”
Brenntag. “Macroeconomic environment characterized by moderate recovery”
CP Chem. Margins fell because of lower polyethylene prices, as well as planned turnarounds”
Celanese. “Lower expenses and taxes led profit upwards”
Clariant. “Growth in Europe is expected to remain weak due to the appreciation of the Swiss franc with the weakening of the euro”
DSM. “Impairment charge following announced partnership with CVC and restructuring and related expenses”
Dow. “Looking ahead, we expect geopolitical and economic uncertainty throughout 2015″
Dow Corning. “Despite the headwinds caused by the strengthening US dollar we saw significant growth in our most profitable product lines”
DuPont. “Income fell by 28% year on year as negative currency effects and portfolio changes impacted sales”
Eastman. “We face increasing challenges including global economic uncertainty, the strengthening US dollar, and the impact of volatile oil prices”
Evonik. “Positive business trend in Q1″
ExxonMobil. “We remain focused on business fundamentals and competitive advantages that create long-term shareholder value”
Honeywell. “We will continue to plan conservatively as the global economic environment continues to evolve”
Huntsman. “We have taken aggressive self-help measures to deliver $175m of expected incremental synergies and restructuring savings by the middle of 2016″
Indorama. “Predicted inventory gains for Q2 on the back of stronger pricing for PTA and MEG
LG Chem. “Profit fell by 14% amid a double-digit decline in sales”
Lanxess. “Costs and exceptional charges caused by the ongoing restructuring of the business”
LyondellBasell. “Planned and unplanned industry downtime has continued to support polyolefins pricing”
MOL. “A much better petrochemicals contribution due to the smooth operation of Slovnaft’s units”
Olin. “Income fell by 56% on chlorine and caustic soda sales and costs related to a planned acquisition”
Oxychem. “Margin improvement across most of OxyChem’s product lines”
PKN Orlen. “Constraints on suppliers in western Europe having opened up market opportunities”
PPG. “A weak overall global economy and unfavourable currency effects”
PTT. “Prices of petrochemical products slumped in tandem with crude oil”
Perstorp. “A combination of positive currency effects, positive effects from improved margins and increased volumes”
PetroChina. “Production of ethylene grew by 8% and that of synthetic resins was up by 12%
PetroRabigh. Lower profit margin on petrochemicals, despite the relatively stable operations”
Polyone. “The sharp drop in prices for raw materials caused customers to destock their inventories”
Praxair. “Growth headwinds persist from the strength of the U.S. dollar and the impact of lower commodity prices on our customer base”Reliance. “Profit fell 7%, while sales at the division declined 18%”
SABIC. “Decrease in net income is attributable to lower average sales prices despite the reduction in cost of sales”
Saudi Kayan. “Swung to a net loss due to a drop in prices, production and sales”
Shell. “Chemicals earnings were buoyed by improved conditions in the intermediates industry which were more than offset by the impact of unit shutdowns at the Moerdijk chemical site in the Netherlands and weaker base chemicals industry conditions”
Sherwin Williams. Sales increased 3.5%n due primarily to higher paint sales volume in the groups Paint Stores and Consumer Groups, but unfavourable currency translation rate changes decreased consolidated net sales 3.1%”
Sinopec. “Ethylene production during the quarter rose 7% year on year while synthetic resin production expanded by 7.6%”
Sipchem. “Increased production volumes and sales”
Solvay. “Better margins and favourable foreign exchange development”
Slovnaft. “Demand was supported by lower product prices”
Synthomer. “Asian nitrile business continued to be the strongest performer as margins firmed and demand increased throughout the quarter”
Tasnee. “Decline in product prices outweighed the increase in the quantities produced and sold”
TOTAL. “Structural overcapacity in Europe is expected to weigh on margins in the medium term”
Trinseo. ““We are pleased to report break-even results for the first quarter, driven by our restructuring efforts”
Unipetrol. “very high market demand for polymers due to favourable GDP dynamics, limited imports to and higher exports from Europe (a weaker euro against the US dollar and a lower crude oil price were factors here) and force majeures at several European players”
Wacker. “Higher sales volumes, especially for solar silicon and semiconductor wafers, and the weaker euro helped boost sales”
Westlake. “Sales prices were negatively impacted by the significant decline in crude oil prices”

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