IHS Chemical Week


Chemical industry weekly news roundup, 21 February

11:40 AM MST | February 21, 2014 | By LINDSAY FROST

This Week in CW:

The tail-end of earnings season was this week. In the US, Ecolab reported net income up 24% year-on-year (YOY), to $287.1 million, or 93 cts/share, on sales up 17%, to $3.56 billion. Westlake Chemical reports fourth-quarter net income of $171 million, up 80% year-over-year (YOY), and sales of $952 million, up 19% YOY. Westlake attributes the gains to higher prices for polyethylene, styrene and polyvinyl chloride (PVC) resin and stronger volumes. Axiall reported fourth-quarter net income of $57 million, up 78% year-over-year (YOY). Net sales of $1.1 billion for the quarter were up 44% YOY. The company attributes the gains primarily to the merger with PPG’s chemical’s business. Weak fertilizer prices pushed CF Industries’ earnings lower in the fourth quarter, with the company reporting net income of $325.8 million, down 30% year-over-year (YOY). In Europe, Clariant reported flat fourth-quarter net profit from continuing operations of 85 million Swiss francs ($95.7 million) on 8% higher sales, SF1.56 billion, of which 7% is due to higher volumes and 1% to prices. Air Liquide reported net profit in 2013 5.5% higher, at €1.64 billion ($2.25 billion), adjusted for currency and natural gas impacts, on revenue up 3.7%, to €15.23 billion.

Ashland announced on Tuesday that it has agreed to sell its water treatment business to private equity firm Clayton, Dubilier & Rice (CD&R; New York) for $1.8 billion, ending a months-long divestiture process. The deal will result in $1.4 billion in net proceeds to Ashland, of which $1.35 billion will go towards a new share repurchase program. The water treatment business generates $1.7 billion/year in revenues, 67% of which is derived from pulp and paper sales and 33% of which is from industrial and municipal water treatment sales. The water treatment business, among the largest operations in its sector, has 31 manufacturing facilities spread across 17 countries and over 3,000 employees.

Hedge fund FrontFour Capital (New York) said on Wednesday that it would nominate four directors for Sensient Technologies’ board, raising the possibility of a proxy battle. FrontFour also sent a letter to Sensient investors noting “serious concerns about the company's continued operational shortfalls in the flavors & fragrances (F&F) division, suboptimal capital structure resulting in poor returns on equity, and invested capital and significant corporate governance shortfalls.” FrontFour has not yet filed a proxy statement with SEC with regard to Sensient's annual meeting. FrontFour says it owns 733,435 Sensient shares, a roughly 1.5% stake. Sensient shares rose 1.2% on 19 February, closing at $50.99/share.

The American Chemistry Council (ACC) announced that announced US chemical industry investment linked to shale gas now tops $100 billion. As of this month, 148 projects valued at $100.2 billion have been announced, ACC says. These projects, including new factories, expansions and process changes to increase capacity, could potentially lead to $81 billion/year in new chemical industry output and 637,000 permanent new jobs by 2023, ACC says. Over half of the investment is by firms headquartered outside of the United States.

Around the Web:

Concerns about synthetic chemicals in packaging and plastic bottles contaminating food and drink are largely misplaced, scientists have said in response to calls for greater monitoring of the long-term effect on human health, writes The Guardian. Food packaging is increasingly the subject of suspicion from some environmental scientists and campaigners. In a commentary in the Journal of Epidemiology and Community Health, Dr. Jane Muncke, of the Food Packaging Forum Foundation in Zurich, Switzerland, and colleagues from the US and Spain argue that lifelong exposure to such chemicals is a cause for concern. They call for "population-based assessment and biomonitoring" to try to figure out whether it is doing any harm. Food contact materials, they say, "are a significant source of chemical food contamination, although legally they are not considered as contaminants".

According to Reuters, US manufacturing activity accelerated in February at its fastest pace in nearly four years due in part to growth in new orders, an industry report showed on Thursday. Financial data firm Markit said its "flash" or preliminary US Manufacturing Purchasing Managers Index rose to 56.7 in February, its highest since May 2010, compared to 53.7 in the final reading for January. Readings above 50 indicate expansion. The new orders component jumped to 58.8, the highest since May 2010, while output rose to 57.2 from 53.5 in January.

Tea Leaf Nation, a China-focused e-magazine, says China is becoming an R&D machine, and now that three-plus decades of China’s so-called one-child policy has helped create what the International Money Fund calls a “sharp decline” in the pool of extra labor, Beijing is urgently looking for ways of designing its own products rather than manufacturing someone else’s. A recent report by a respected US federal agency—which shows Chinese high-tech output nearing that of the United States, China committing an increasingly large portion of its wealth to R&D, and a huge jump in the number of Chinese graduates with engineering degrees—suggests it may soon have that chance to catch up. A new report by the National Science Board (NSB), which sets policy for the US government’s National Science Foundation, details what the innovation shift to China actually looks like.

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