IHS Chemical Week


Mixed Signals

5:56 PM MDT | August 8, 2011 | By ROB WESTERVELT

You wouldn’t know that there are dire concerns about the economic outlook judging from second-quarter earnings results posted by chemical makers over the past few weeks. Growth has slowed but chemical makers say they have enough momentum to carry them through the second half. Market activity last week told a different story as fears about the debt crisis in Europe and a possible tip back into recession sparked a broad market sell off. Chemical stock indexes fell about 10% in the seven-day period ended August 4, worse than the rout in global stock market indexes.

Producers and analysts have not made much adjustment to second-half outlooks. Over the 30 days ending August 1, Dow Chemical’s full-year estimate was cut 1.5%, to $2.98/share, according to a survey of analyst estimates by Thomson Reuters (New York). BASF was cut 1% to €6.37($8.98)/share. DuPont’s estimate held flat. Expectations for industrial gas majors in Europe and U.S., a decent proxy for chemical and manufacturing expectations, were essentially unchanged. Air Liquide and Praxair each saw estimates raised by a penny, while Air Products and Linde were each down one penny, according to Thomson Reuters data.

BASF says it expects growth to continue but “be less dynamic, as could be observed toward the end of the second quarter.” BASF CEO Kurt Bock said that the debt situation in the U.S. and Europe are a concern. “Added to this is the persistently high oil price, which is having a negative impact on margins across our value chains and is leading to some customers being more cautious in their orders,” Bock adds.

Demand in fast-growing emerging geographies, including Latin America, Eastern Europe, and Asia, remain robust, says Dow Chemical CEO Andrew Liveris. “In the developed markets, we see growth continuing to gain traction,” Liveris says. “This growth may be at a somewhat jagged pace given persistently high unemployment in the United States and sovereign debt concerns in Europe, both of which will likely continue for some time.” Dow noted last week that these are “temporary uncertainties, and once resolved, more stable global economic growth will emerge.”

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