No Se Que Mamas

facts & f igures

recession takes Bite out oF earnings
Good full-year data for shipments belie the messy picture of finances at companies worldwide
From the vantage point of 2009,

it’s incredible that, in both the U.S. and Canada, chemical prices and shipments increased in 2008. Corporate data paint a more accurate picture of the year. High prices and healthy shipments were not strongenough to protect profits for most of the world’s chemical firms. By the fourth quarter, massive inventory destocking pummeled demand, and it was not clear when—or whether—it would return to prior levels. In the first half of 2008, the global chemical industry battled high energy and feedstock prices and flat or shrinking demand in the U.S. and Europe. Industry leaders looked to the buying power ofemerging markets in Asia and South America to supply revenues. As the year wore on, the economic slowdown hit the chemical industry in waves.

The market for construction materials was the first to fail, because of the bursting of the real estate bubble. Then demand for products aimed at the automotive and electronics markets declined toward the end of the year as consumer spending eroded. Evenhigh-growth economies such as China cut back on industrial production. Companies supplying the agriculture sector bucked the trend of falling demand. High prices for food commodities drove farmers to invest in their land to increase output. Strong demand for fertilizers and agricultural chemicals boosted profits for firms such as Terra Industries, whose 2008 earnings tripled compared with 2007.Although conditions worsened as 2008 went on, broad economic data suggest that the business of chemistry was reasonably strong for the year as a whole. In the U.S., overall chemical shipments jumped by

9.6%, compared with 9.0% in 2007. Agricultural chemicals led the pack with a 29.8% increase. On the other hand, shipments of coatings and adhesives, which were hurt by the construction slowdown,declined by 8.8% compared with an increase of 8.2% in 2007. Prices rose for all chemicals, especially agricultural products, whose prices soared by 54.0%. In Canada, chemical shipments rose 4.1% compared with 2007. Again, the strongest gain was in agriculture, with shipments up 31.7%. Canadian chemical prices jumped by 10.2%. In Europe, growth of chemical shipments slowed but stayed positive inBelgium, Germany, the Netherlands, and Spain. Still, the earnings picture was a mess. The sharp drop in demand resulted in lousy third- and fourth-quarter earnings that wiped out previous gains for a large portion of the chemical enterprise. In the U.S., 16 of 29 companies surveyed by C&EN saw full-year earnings decline from 2007. Similarly, two of the four Canadian companies surveyed had worse resultsthan in the previous year. Not surprisingly, Canadian fertilizer companies Agrium and PotashCorp saw huge earnings increases.
the picture was worse in Europe,

DemanD anD Prices
u.s. chemical shipments jumped by 9.6%, and canada’s increased by 4.1% …

$ Billions $ Billions 800
800 U.S. U.S. 600 600 400 400 200 200 0 0 1998 99 00 01 02 03 04 05 06 07 08 1998 99 00 01 02 03 04 05 06 07 08$ Billions $ Billions 60

60 Canada Canada 40 40 20 20 0 0 1998 99 00 01 02 03 04 05 06 07 08 1998 99 00 01 02 03 04 05 06 07 08

… while u.s. and canadian prices surged by 14.4% and 10.2%, respectively

Price index, 2004 = 100 Price index, 2004 = 100 160
160 U.S. U.S. 140 140

Price index, 2004 = 100 Price index, 2004 = 100 140
140 Canada Canada 120 120

120 120 100 100 80 80 1998 9900 01 02 03 04 05 06 07 08 1998 99 00 01 02 03 04 05 06 07 08

100 100 80 80 1998 99 00 01 02 03 04 05 06 07 08 1998 99 00 01 02 03 04 05 06 07 08

sOUrces: U.S. Departments of Labor and of Commerce, Statistics Canada

with 2008 profits shrinking at 11 of 19 firms that C&EN surveyed. Fiscal-year reports from Japan showed a total wipeout, with all 12 firms tracked by C&EN suffering...