Earnings disappoint again, as companies face challenge of slowing global growth

Most of today’s executives and policymakers grew up during the SuperCycle.  Many therefore continue to believe that a return to constant growth is somehow inevitable.   Sadly, of course, they are doomed to disappointment.     flat arrow

And disappointment is the predominant message from the blog’s usual quarterly review of company results.  Thus BASF note that “achieving our earnings target is significantly more challenging today than we had expected”.  Equally, there is a widespread reluctance to accept that today’s economic downturn is secular and not just cyclical.

Most companies thus see the world as being in separate silos, and assume that weakness in Europe, for example, is somehow separate from the slowdown in China.  In reality, of course, they are cause and effect – ageing European populations no longer to need to buy from China’s export-orientated economy.  So China’s growth is inevitably slowing, and for the next 5 – 10 years it will remain slow, whilst it goes through the painful and difficult task of refocusing on domestic demand.

US-based companies have the hardest job in accepting this New Normal.  The short-term demands of financial markets mean they have to run hard just to stand still.  Sadly, therefore, many are using the windfall of lower natural gas prices to boost earnings today, rather than investing for the future.  So they are ferociously continuing to cut costs and restructure.  The alternative, of building new revenue streams for the future, would require increased spending to produce the new products and services that will be required – and therefore lower earnings today.

Air Liquide. “Costs associated with restructuring and layoffs in western Europe weighing on profitability”
Akzo Nobel. “Conditions remain tough and, as we have previously indicated, we do not expect an early improvement in the external trends our businesses are facing.”
Arkema. “Market conditions in Europe are challenging, in particular in France where growth prospects have deteriorated”
Ashland. “Sharply lower guar shipments for oil drilling”
Axiall. “This is clearly a different environment than we expected at the beginning of the year”
BASF. “Achieving our earnings target is significantly more challenging today than we had expected at the beginning of the year”
BP. “Margins and volumes are expected to remain under pressure for the rest of the year”
Bayer. “North American growth offset slumps in most other regions”
Braskem. “A rise in sales volume growth and a recovery in international resins spreads”
Brenntag. “We do not see the promise of any significant improvement in the macroeconomic environment”
Celanese. “Much of China’s industrial chemical market is in turmoil because demand has just not grown”
ChevronPhillips. “Plant outages and turnaround activity”
Clariant. “Expects stability in mature markets but rising uncertainties in emerging economies”
Croda. “Challenging trading environment has inevitably held back certain parts of the business”
DSM. “Nutrition business generated €249m in earnings, up 28% year on year”
Dow.  “US continues to be a bright spot among the economies of the world”
Dow Corning. “Significant oversupply and high raw materials costs”
DuPont. “Considering alternatives for the performance chemicals business but had not yet made any decisions”.
Eastman. “Greater volumes from acquisition of Solutia”
Evonik. “Market conditions during the quarter were far more difficult than expected”.
ExxonMobil. “Volume and mix effects increased second-quarter chemical earnings by $120m”
Huntsman. “Many areas of the global economy continue to moderate or languish”
Kemira. “Net profit fell 88% partly as a result of €27m in restructuring fees and efficiency savings writedowns”
Kronos. “Continue to focus on initiatives to improve our global production efficiencies and manufacturing flexibility”
LG Chem. “Expects seasonal demand growth and the gradual recovery in the global economy”
Lanxess. “Trading conditions for our businesses remain tough and the fragile sentiment in Europe is now evident in other markets that are important for us, such as China and Brazil”
Linde. “An environment which is proving challenging to everyone”
LyondellBasell. “The environment for the rest of the year remains highly changeable”
Marubeni. “Deterioration of profits in the petrochemical product business”
Methanex. “Higher sales volumes and prices of methanol”
Mitsubishi Chemical. “Recovering domestic demand and improved export environment”
Nova. “Lower margins in olefins, partially offset by higher margins and increased sales volumes in polyethylene”
OMV. “Higher margins, lower sales”
Oxychem. “Continued weak economic conditions in Europe and slowing demand in Asia”
PPG. “Sales volume results were also mixed, similar to the respective regional trends”
Praxair. “Our on-site business continued to be very strong”
SABIC. “Cost cuts propped up margins even though sales revenue declined”
Siam Cement. “Strong performance in its chemicals business”
Shell. “Contributions from chemicals were lower as a result of the industry environment in Europe”
Shin-Etsu.  “Robust PVC shipments by its US subsidiary to central and South America”
Solvay. “Decisions by some of our customers to delay investments”
Tosoh. “Production and domestic shipments of olefin products including ethylene and propylene increased”
Tronox. “Selling prices are showing signs of stabilising”
Versalis. “Weak commodity demand impacted by the current economic downturn as well as declining benchmark cracking margins”
Wacker. “Persistently difficult market and competitive environment”
Wanhua. “Expecting higher revenues following completion of technical upgrade of MDI plant in Ningbo”

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