I went back to compare the leaders today (our 2007 report based on 2006 annual year-end reporting data) with those from our 2002 report (based on 2001 annual year-end data) to see what difference five years has made. The top four global leaders have stayed in the same position and have all showed healthy gains in the past five years. In 2001, Akzo Nobel had estimated global coatings sales of $4.977 billion compared to $8.195 billion today (2006 year end). A healthy increase indeed for a five-year period. PPG and Sherwin Williams also showed healthy increases from five years ago ($4.412 and $4.002 billion respectively in 2001). DuPont maintained its number-four position but did not show the same percentage gains over the past five-year period.
ICI dropped from the number five position in 2002 to the number eight spot in 2007 ($3.247 billion in 2001 compared to $2.414 billion in 2006). BASF, Valspar, SigmaKalon, RPM and Nippon Paint also showed good gains and maintained their standings in the Global Top 10.
Much growth can be attributed to the architectural/construction sectors of the industry, which showed phenomenal growth over the past couple of years. The global nature of the top companies also contributes significantly to their sales/profit margins as they all have significant interests in the growth areas – the Far East, Eastern Europe, India and Brazil.
According to market reports, the U.S. chemical industry slowed a bit in the first quarter of 2007 but of course this is relative (based on comparison to past quarters). Based on some of the top chemical companies, the first quarter of 2007 showed a combined sales increase of only 5+% and an earnings increase of less than 1% as compared to rather significant 2006 quarter increases. There appears to be some slowdown in domestic demand, which may coincide with the slowdown in construction. However first quarters are sometimes known for slow starts because of weather-related circumstances, so this could change a bit when the second quarter data starts to come in.
All in all, some of the chemical industry leaders such as Air Products, Albemarle, Celanese, DuPont, FMC, Praxair, Rohm & Haas and Sigma-Aldrich showed good first quarter 2007 profit margins (after-tax earnings as a percentage of sales).
Our prognosis is good, but of course a lot depends on the price of oil, as feed stocks are heavily dependent and subsequent raw material price increases could change the economic outlook for 2007. As of now, things look good but caution is in order.