Global chain reaction: Hope for the chemical industry: Which chemical stocks promise potential | message
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by Klaus Schachinger, Euro am Sonntag
GGigantic: ten square kilometers of space, around 200 plants, more than 100 production plants, almost 300 kilometers of pipelines, 100 kilometers of road and 230 kilometers of rail network. 35,000 people work on the site in a small town format. Our own power plants provide the electricity. The BASF plant in Ludwigshafen is the largest chemical site in the world.
The world’s largest chemical company has developed the close networking of production and logistics into a competitive advantage. The efficient use of energy and raw materials as well as the optimized logistics at the six global Verbund sites save one billion euros annually, according to the group. Ludwigshafen should make its own 5G mobile network even more efficient.
During this time, the DAX group is building Verbund site number 7 in Zhanjiang, the important port city in the Chinese province. For the first time, BASF will operate a production site in China on its own. With ten billion dollars in investment, the project started in November 2019 is the largest in the company’s history.
China factor is getting stronger
The chemical industry with its variety of products, from petrochemical raw materials, oils and fats to specialty plastics and adhesives, is a key economic factor. With its production network, Primus BASF is therefore preparing itself for the fact that China, with its enormous demand, will have half of the demand in the global chemical industry in 2030. BASF estimates the current share at 40 percent.
The world market leader therefore wants to be big enough on site in good time. Group leader Martin Brudermller does not want to be put off by economic downturns or China’s trade dispute with the USA. A few months after the groundbreaking in Zhanjiang, however, the global spread of the pandemic had led to a downturn in the economically sensitive industry. Despite the difficult business development in 2020, BASF paid shareholders a dividend at the previous year’s level and mastered the difficult year better than expected. The provisional figures prove this.
Meanwhile, China’s robust economy is fueling the hopes of Brazilians for a global cyclical recovery. As a supplier to many industries, the chemical industry would benefit early.
Industry barometers such as the Bloomberg World Chemical Index and the Stoxx Europe Chemicals have already risen sharply: Mit more than 20 and 13 Percent during the past twelve months they performed significantly better than the DAX and the broad US S&P 500 index two percent and six percent plus. To the ten values with the highest, percentage three-digit Some Chinese corporations have made increases in the global chemical index. The Middle Kingdom is also strongly represented in the world league of chemical giants by sales.
Restrained confidence in Europe
A development that will continue in the new year. For European corporations, analysts expect positive surprises for the fourth quarter and the year as a whole, but cautious forecasts for 2021. Lockdowns and the shortage of vaccines are temporarily holding back the sector’s price fantasy. The industry association VCI expects that the demand for chemicals in this country will only recover slowly. The level of 2019 will not be reached until the end of next year.
In this environment with customer industries that are affected to varying degrees by the pandemic, Brenntag, the world’s largest independent chemical distributor, is one of the favorites of the Brenntag people. Christian Kohlpainter, who has been head of the Essen group since the beginning of last year, now wants to significantly increase the return after a detailed analysis of the company’s structures. Chemicals whose composition and delivery quantity Brenntag adapts to the requirements of the respective industrial customer offer potential for higher margins.
Since the beginning of the year, the company has realigned its business with two areas: the Essentials department for bulk business and Specialties, which will bring around a third of an estimated 11.8 billion revenue for 2020. The previous organization according to the four regions of Europe, North America, Latin America and Asia / Pacific evidently did not promote the dealer’s competencies sufficiently.
Ilham Kadri, head of the specialist group Solvay since March 2019, is also building the Belgian family company on a large scale. Areas that generate around eight percent of sales are available for planning. The plans are well received at the stock exchange. The share, which is still cheap, has risen significantly since the end of October.
For their first plant, which opened in Charleroi near Brussels in 1863, Alfred and Ernest Solvay had developed their own process for potassium carbonate. The raw material is still needed to manufacture glass today. The Belgians are still world market leaders in this raw material, also known as potash.
The industry is reinventing itself
Solvay’s potassium carbonate business is above average profitable with operating margins of more than 20 percent and delivers high inflows of funds. Investments in the most important division, Composite Materials, were increased from 40 to 60 percent of the total budget. The goal is more innovative products, such as membranes made from ion-conducting polymers that are used in the production of hydrogen. Polymers made by the Belgians are also needed for batteries in electric and hybrid vehicles. Six kilograms of specialty substances from Solvay are built into a car with a conventional engine, eight kilograms for electric vehicles and twelve kilograms for cars with hybrid drives. The change in the auto industry offers Solvay a lot of potential. Plastics made by the Belgians are also used in aircraft for lightweight construction.
For boss Kadri, who appreciates the enthusiasm of environmental activist Greta Thunberg, it is clear that the chemical industry “has to reinvent itself”. As one of the major emitters of the greenhouse gas carbon dioxide, the industry is an essential part of the problem of climate change. However, because the chemical industry is also the “mother of all industries”, it has to play a “major role” in sustainable solutions to mitigate climate change, says Kadri. With her realignment of Solvay she wants to combine economic success with environmental protection and the conservation of resources.
With an estimated turnover of almost ten billion euros in 2020, the Belgian family company is one of the industry leaders in Europe. Chef Ilham Kadri, a native Moroccan, believes that you cannot afford to waste resources. According to this motto, Kadri is realigning Solvay with ambitious growth targets. That goes down well with analysts. The share is comparatively inexpensive with an attractive dividend yield.
In the final quarter the growth in sales and profit was remarkable. The volume rose by eight percent to 15.9 billion euros, and the operating result by 30 percent to 1.11 billion euros – that exceeded expectations. The full report and the outlook will be available on February 26th. The dividend for 2020 is estimated at the previous year’s level of 3.30 euros, a strong performance after a difficult year. To buy.
Since the beginning of the year, the business of the world’s largest independent chemical distributor has been divided into the two divisions Essentials and Specialties. Essentials provides two thirds of sales. For 2021, analysts expect five percent growth to 12.4 billion in sales and around seven percent more profit with 502 million euros. Promising.
More news about Solvay S.A.
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