Last week's second-quarter earnings reports contain no more definitive answers about the industry's state than July's reports. Sales figures have been down across the board, with particular declines in commodity chemicals due to lower selling prices. Volumes have held steady or increased, but some specialties sectors—particularly those tied to ag or energy—report lower volumes.
One silver lining is that a number of recent headwinds are showing signs of moderating. With a couple of exceptions, US companies are no longer reporting drastic negative currency impacts (although the inverse is true in Europe, and Brazil's Braskem continues to be hit by the weak real). There are signs that the energy and ag markets are bottoming out, with Ecolab Inc.—a major oilfield chemicals supplier—expecting stronger year-on-year (YOY) comparisons for its energy business in the second half and a gradual recovery taking hold next year. Also next year should be “an increasingly evident ... turn in end market demand” for agchems-heavy FMC Corp., according to Laurence Alexander, an analyst with Jefferies LLC (New York, New York).
Beyond earnings, Huntsman Corp. has sold its European surfactants business to Innospec Inc. for an estimated $225 million. The sale, two years after Huntsman exited commodity surfactants in Europe, reinforces a trend: the slimming down of diversified chemical manufacturers outside the top tier. While Huntsman remains committed to the surfactants business in the United States and Australia, it is also spinning off its titanium dioxide, pigments, and textile effects divisions. Huntsman has been open about its theory that the spin-off will result in higher valuation multiples from equity markets, a common argument made by the investment community in favor of diversified manufacturers' slimming down. Proceeds from the surfactants divestiture will go toward paying down debt, but the deal is yet another example of the ways in which the industry's “middle class” is hollowing out and rearranging itself.