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October 2, 2003
Industry SurveysChemicals: Specialty
THIS ISSUE REPLACES THE ONE DATED APRIL 3 , 2003 .THE NEXT UPDATE OF THIS SURVEY IS SCHEDULED FOR APRIL 2004 .
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MediaJohn [email protected]
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Richard O’Reilly, CFAChemicals Analyst
CURRENT ENVIRONMENT..................................................................1Industry faces difficult environment
Recent results variedMixed outlook for profit variablesEnd markets likely to be strong in 2004Chemical trade deficits continue
INDUSTRY PROFILE...............................................................................6An era of mergers and acquisitions
INDUSTRY TRENDS ..................................................................................7M&A: forging chemical bonds
HOW THE INDUSTRY OPERATES ..............................................................13Industry overviewHeavy regulationPaints and coatingsPesticidesAdhesives and sealantsCatalystsPlastics additives
KEY INDUSTRY RATIOS AND STATISTICS...................................................23HOW TO ANALYZE A SPECIALTY CHEMICAL COMPANY .............................23
The nature of specialty chemicalsUnique company characteristicsThe income statementBalance sheet dataCash flow
INDUSTRY REFERENCES.....................................................................29
COMPARATIVE COMPANY ANALYSIS ..............................................32
Editor: Eileen M. Bossong-MartinesCopy Editor: Carol A. WoodProduction: GraphMediaStatistician: Sally Kathryn NuttallProduction Coordinator: Paulette Dixon
Subscriber relations: 1-800-852-1641Copyright © 2003 by Standard & Poor’sAll rights reserved.ISSN 0196-4666USPS No. 517-780Visit the Standard & Poor’s web site:http://www.standardandpoors.com
STANDARD & POOR’S INDUSTRY SURVEYS is published weekly. Annualsubscription: $10,500. Reproduction in whole or in part (includinginputting into a computer) prohibited except by permission of Standard &Poor’s. Executive and Editorial Office: Standard & Poor’s, 55 Water Street,New York, NY 10041. Standard & Poor’s is a division of The McGraw-HillCompanies. Officers of The McGraw-Hill Companies, Inc.: Harold McGrawIII, Chairman, President, and Chief Executive Officer; Kenneth M. Vittor,Executive Vice President and General Counsel; Robert J. Bahash,Executive Vice President and Chief Financial Officer; Frank D. Penglase,Senior Vice President, Treasury Operations. Periodicals postage paid atNew York, NY 10004 and additional mailing offices. POSTMASTER: Sendaddress changes to INDUSTRY SURVEYS, attention Mail Prep, Standard &Poor’s, 55 Water Street, New York, NY 10041. Information has beenobtained by INDUSTRY SURVEYS from sources believed to be reliable.However, because of the possibility of human or mechanical error by oursources, INDUSTRY SURVEYS, or others, INDUSTRY SURVEYS does notguarantee the accuracy, adequacy, or completeness of any informationand is not responsible for any errors or omissions or for the resultsobtained from the use of such information.
VOLUME 171, NO. 40, SECTION 2 THIS ISSUE OF INDUSTRY SURVEYS INCLUDES 2 SECTIONS.
Standard & Poor’s Industry Surveys
The specialty chemicals industry had disap-pointing financial results for the secondquarter of 2003, continuing a roller coasterperformance for the industry over the pasttwo years. The specialty chemical industrywas hurt by softer demand, caused largelyby a sluggish manufacturing sector. Higherenergy and raw material costs also took atoll. In early 2003, oil and natural gasprices surged to the highest levels in twoyears, while the producer price index forchemicals, a proxy for raw material costsfor specialty chemicals, hit a record high.Unusually wet weather in the eastern UnitedStates for much of the second quarter alsohurt demand for seasonal products such asarchitectural paint.
For the 23 specialty chemicals companiesin the Standard & Poor’s SuperComposite1500 Index that reported financial results forquarters ending in either May, June, or July2003, aggregate sales rose 2.7% from thesame period in 2002, while net income fellby 38%. This performance contrasts to thatof the second quarter of 2002, when earn-ings for the same group of companiesclimbed by just over 50% from the compara-ble weak 2001 quarter, as the vast majorityof the companies posted higher earnings.
As is typical for the industry, companiesreported a mix of financial results for thesecond quarter of 2003. The variancestemmed largely from the companies’ broadarray of products, which often experiencedifferent market conditions. Factors uniqueto each company, such as acquisitions or di-vestitures and special gains or charges, alsoplayed a role.
Twelve of the 23 companies in the groupreported lower net income in the secondquarter of 2003 versus the comparable 2002period. Of the remaining 11 companies, 10had higher net income against the 2002 peri-od, while the remaining company had net in-come that was essentially unchanged. Anumber of companies had warned that earn-ings would be worse than expected.
Of the 18 companies in the group that re-ported results for the first six months of2003, aggregate sales increased 5%, year toyear, while net income declined 16%. Basedon our outlook for the second half of theyear, the group’s earnings will likely be downfor full-year 2003 at a rate similar to the firsthalf. We project aggregate earnings growthwill resume in 2004, however, as the econo-my is expected to gain steam and the outlookis favorable for most major end markets.
Recent results varied
Below we give a review of recent resultsfor the larger companies (in terms of sales) inthe specialty chemicals industry.
◆ Rohm & Haas Co. The largest domes-tic specialty chemicals company in terms ofsales, this company reported a loss of $3million in the second quarter of 2003,which includes special charges of $94 mil-lion for restructuring and asset writedowns.This loss compares to net income of $92million in the second quarter of 2002. Salesof almost $1.6 billion in the second quarterof 2003 were 8% higher than for the 2002period, driven by favorable currency ex-change rates and contributions from acqui-sitions, which together outweighed a 3%decline in sales volumes. The company saidthat its North American sales eased 3%,citing overall weakness in the general econ-omy and poor weather in parts of theUnited States.
◆ Ecolab Inc. The leading maker of insti-tutional cleaning and maintenance productshad record sales of $947 million in the sec-ond quarter of 2003, up 13% from 2002, ledby solid growth in domestic sales (nearly60% of the total), while its foreign salesclimbed 21%. Net income for the 2003quarter increased 30% to $67 million. Thecompany reaffirmed its expectations of an-other record year of results in 2003.
CURRENT ENVIRONMENT
Industry faces difficult environment
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◆ PolyOne Corp. Sales for this companytotaled $651 million in the second quarterof 2003, a decrease of 3% from the 2002period. The company said that as end mar-ket demand faltered, many customers re-duced purchases in order to lower theirown inventories. The company had a netloss of $6 million, compared to net incomeof $5 million, as margins were squeezed byhigher raw material costs. PolyOne expect-ed sales in the third quarter would be simi-lar to the second quarter and said thatearnings before special items would be nobetter than its loss in the second quarter.The company was considering further plantshutdowns and other job eliminations.
◆ Valspar Corp. The large paint companyposted a 4% sales increase for the quarterended July 2003, aided by contributionsfrom currency rates. Valspar saw growth inits architectural and packaging coatingsproducts, but noted that retail demand wassoft for architectural paint until July. Net in-come rose 5.5%, aided by lower interest ex-pense and despite higher raw material costs.
◆ RPM Inc. Sales for this major special-ty coatings company were up 6% in its fis-cal fourth quarter (ended May 2003) versusyear-earlier levels, driven by contributionfrom acquisitions and gains in industrial-re-lated products. RPM posted a net loss of$43 million for the quarter, which includedan $88 million after-tax charge for as-bestos-related liabilities. Excluding thecharge, net income was $44 million, an in-
crease of 19% from the $37 million in the2002 period.
◆ Crompton Corp. This diverse specialtychemical company posted a loss of $19.4million from continuing operations in thesecond quarter, wider than the loss of $16.9million in the 2002 period. These losses ex-clude profits in both periods from the com-pany’s silicone business that was sold inlate July 2003. Sales in the second quarterdeclined 7%, year to year, reflecting the ab-sence of a business sold in 2002 and mod-estly lower volumes. Results for the 2003period were hurt by the soft demand, high-er raw material costs, and legal costs relat-ed to several anti-trust investigationsinvolving the company.
◆ Lubrizol Corp. The world’s largestproducer of additives for use in lubricantsand fuels, Lubrizol reported that its salesfor the second quarter rose 1%, year toyear. Higher prices and favorable exchangerates offset a 9% decline in volumes that inpart was caused by lost business from onemajor customer. Penalized by the lower vol-umes and higher feedstock costs, net in-come fell 15% from the 2002 period, to$29.4 million.
◆ International Flavors & Fragrances.The largest supplier of specialty ingredientsfor food and personal care goods reportedthat sales for the second quarter of 2003rose 1.3% from the 2002 period. Excludingdivested businesses, sales were up 2.2%,helped by favorable currency exchangerates, which added 7% to sales. The com-pany noted that order activity slowed nearthe end of the quarter. Net income for thesecond quarter was $51.4 million, up 13%from the 2002 period. Excluding specialcharges, net income would have risen 8%to $55.8 million. The company forecasts aprofit gain for full-year 2003.
◆ Great Lakes Chemical Corp. Thiscompany had net income of $16.9 million,down from $22.1 million in the secondquarter of 2002, reflecting higher raw ma-terial costs and lower sales volumes. Salesrose 2%, year to year, driven by favorablecurrency exchange rates and acquisitions.However, ongoing sales were off 2% due to
INDUSTRIAL PRODUCTION INDEXES(Year-to-year % change)
*As of July.Source: Federal Reserve Board.
10
8
6
4
2
0
-2
-4
-6
1981 83 85 87 89 91 93 95 97 99 01 2003*
Total index
Chemicals & allied products
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reduced demand for plastic additives andthe adverse impact of cool weather on thecompany’s pool chemicals business.
◆ OM Group Inc. This company raninto financial problems in 2002 and wasthus forced to sell a major portion of itsbusinesses. The downsized company hadsales of $197 million in the second quarterof 2003, with results of its former preciousmetals and metal management businesses,sold in July 2003, reported as discontinuedoperations. For the year ended December31, 2002, the combined sales of these busi-nesses, which OM Group purchased in2001, totaled $4.4 billion (about 90% ofthe company’s total). Including these sales,OM Group previously ranked as high assecond on the S&P 1500 SpecialtyChemicals index, in terms of sales.
Mixed outlook for profit variables
Standard & Poor’s expects the specialtychemicals industry to face challenging condi-tions for the rest of 2003. While we predictthat overall economic growth will be greaterin the second half of 2003 than in the firsthalf, high commodity chemicals and energycosts will continue to squeeze the industry’sprofit margins.
Many chemical companies in 2003 arefacing higher expenses for pension and otherpost-retirement benefits, because returns onpension assets were hurt by declines in thestock markets since early 2000 and low in-terest rates. Expenses for insurance and em-ployee benefits are also running higher. On
the positive side, the U.S. dollar has declinedin value over the past year versus the euro.This should help to boost reported sales andnet income from companies’ foreign opera-tions, while improving the competitive tradepositions of U.S. chemical producers in thelonger term.
Standard & Poor’s economists currentlyforecast U.S. economic growth of 2.7% in2003, as measured by real gross domesticproduct (GDP), up from the 2.4% growth for2002. Although this projected growth com-pares favorably with the miniscule rise of 0.3%seen in 2001, it still represents a decline fromprevious years: for the four years through2000, growth averaged over 4% annually.
The U.S. economy grew at a 3.1% rate(annualized) in the second quarter of 2003,stronger than previously estimated and abovethe 1.4% rate for the first quarter. Standard& Poor’s currently believes that growth willaccelerate during the second half of 2003and into 2004, stimulated by recent tax cuts.We look for GDP growth of 4.7% in 2004.
End markets likely to be strong in 2004
◆ Manufacturing. After softening sincelate 2002, the manufacturing sector shouldbegin to recover soon, in our view, helpedby increased capital spending. As of August2003, the Federal Reserve Board’s industri-al production index was at 110.2(1997=100), down 1.0% from its year-ear-lier level. This reading was also down fromthe recent high in July 2002 and the all-time peak of 116.2 attained in June 2000.The manufacturing subindex was at 110.7in August 2003, down 1.4% from a yearearlier.
On average, the industrial production in-dex declined in both 2001 and 2002. Wepredict that the average for the index will bevirtually unchanged in 2003, but will see astrong gain in 2004, helped by increasedspending on capital equipment.
A stronger manufacturing sector would bepositive for the specialty chemicals industry,as industrial customers are major users oftheir products. Nearly half of the output ofthe overall chemicals industry goes to U.S.manufacturing industries for use as raw ma-terials in production processes.
Despite an expected pickup in industrialproduction next year, we feel that the U.S.
CHEMICAL PRODUCER PRICE INDEXES(1982 = 100)
Source: Bureau of Labor Statistics.
175
165
155
145
135
125
1151991 92 93 94 95 96 97 98 99 00 01 02 2003
Chemicals & allied products
Paints
Adhesives & sealants
Agricultural chemicals (excl. fertilizers)
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manufacturing sector will continue to experi-ence the long-term shift of production capac-ity overseas to lower-cost regions such asAsia. This trend will continue to hurt thespecialty chemical industry.
◆ Construction markets. We expect resi-dential construction markets to remainstrong through 2003, despite some rise inmortgage interest rates over the past fewmonths after being at the lowest levels inmore than 40 years. Standard & Poor’scurrently projects domestic housing startswill total about 1.739 million units in2003, up 1.7% from 1.710 million units in 2002. The total for 2002 was the highestsince 1986, when 1.81 million units werestarted. Mortgage rates remain relatively lowby historical standards, although they havebeen rising. As a result, we expect housingstarts to ease by 5.1% in 2004.
The pace of existing home sales is also expected to remain historically strong into2004, despite some easing from levels of recent months. In September 2003, theNational Association of Realtors (NAR)projected that sales of existing homes wouldset a new record in 2003 for the third con-secutive year, reaching 5.76 million, up3.5% from 2002. The NAR predicted thatsales would slow only modestly in 2004.
Home construction and buying consumessynthetic materials, such as the plastics usedin pipes and siding. It also stimulates de-mand for appliances, carpeting, furniture,and other items with significant chemical-re-lated content, such as plastics, fibers, adhe-sives, and paints. The manufacture of thoseproducts consumes specialty chemicals suchas additives and dyes.
◆ Automobiles. Car manufacturing is im-portant to chemical companies because itconsumes such materials as plastic compo-nents, rubber tires and hoses, fibers, andpaint. Standard & Poor’s anticipates thatsales of light vehicles (cars and light trucks)will ease in 2003 to a relatively healthy 16.6million units, down from the 16.8 millionsold in 2002. We look for a pickup in 2004to 17.4 million vehicles, which would matchthe previous record set in 2000.
◆ Electronics. The electronics industryseems to be recovering from a severe down-
turn in 2001 that was caused by slower eco-nomic activity and by excess inventory in in-formation technology markets. According tothe Semiconductor Industry Association(SIA), a trade group based in San Jose,California, worldwide sales of semiconduc-tors totaled $141 billion in 2002, versus$139 billion of 2001. In 2000, by contrast,global semiconductor sales climbed 37% to$204 billion.
In June 2003, the SIA projected thatworldwide sales would climb by 10% for theyear, to about $155 billion, followed by astronger 17% gain in 2004. The SIA notedthat the recovery is broad-based, with gainsacross computer, consumer, and communica-tions applications. For the second quarter of2003, semiconductor sales totaled $37.6 bil-lion, up 10.4% from the $34.1 billionrecorded in the second quarter of 2002.
The recovery in electronics and in relatedindustries such as telecommunications willincrease sales of chemicals and materials (in-cluding photoresists, polymers, and specialtygases) that are sold to those markets.
Chemical trade deficits continue
The U.S. chemical industry, the nation’slargest exporter, has seen its trade balancedeteriorate. In industry’s trade balance (in-cluding commodity and specialty chemicals)fell from a surplus of $1.2 billion in 2001 toa deficit of nearly $5.0 billion in 2002 — theindustry’s first annual trade deficit since the1920s. Chemical exports in 2002 rose 1.2%to about $81.2 billion, while imports rose ata more rapid clip to $86.1 billion. The ACCnoted that an overvalued U.S. dollar andslow economies overseas may have damp-ened demand in 2002. The chemical tradesurplus peaked at $20.4 billion in 1995.
In August 2003, the ACC projected that ex-ports would increase 9% to $88.5 billion for2003, due in part to higher selling prices result-ing from increased energy costs. The decliningvalue of the dollar will improve U.S. export po-tential over the longer run, but the ACC notesthat faster growth overseas is needed for ex-port volumes to grow appreciably.
However, imports will continue to gain in2003, most likely at a faster pace than in2002, reaching about $98 billion. Thus, thetrade deficit in chemicals is projected to al-most double to $9.5 billion in 2003. The
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ACC also predicted that these trends wouldcontinue in 2004 with the industry’s tradedeficit reaching $11 billion for the year.
For specialty chemicals alone, the pictureis a bit brighter. Exports climbed 14% in thefirst six months of 2003 from the compara-ble 2002 period, with gains in many majorcategories, while imports rose only 2%. Thesector’s trade deficit for the first six monthsdeclined to $3.1 billion, from $3.8 billion inthe comparable 2002 period. ■
INDUSTRY PROFILE
An era of mergers and acquisitions
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The specialty chemicals industry comprises abroad array of product lines and categories.For this reason, estimates of the industry’ssize are varied. The American ChemistryCouncil (ACC), an industry trade groupwhose member companies account for morethan 90% of U.S. industrial chemical capaci-ty, tallies industry sales at $110.1 billion for2002, up 1.4% from 2001. According to theACC definition, the industry includes adhe-sives and sealants, catalysts, coatings, elec-tronic chemicals, industrial gases, plasticadditives, water management chemicals, andlubricant additives. Thus, its sales total ex-cludes crop protection chemicals (classifiedwithin life sciences) and consumer products(such as detergents and personal care).
The industry can also be viewed as acollection of specialty chemical companiesthat is dominated by publicly traded firmssuch as Crompton Corp., Ecolab Inc., W.R. Grace & Co., Hercules Inc., Lubrizol Corp.,PolyOne Corp. (formed in 2000 by the merg-er of Geon Co. and M.A. Hanna Co.), Rohm& Haas Co., and Valspar Corp. The 23 compa-nies in the Specialty Chemicals subindex of theS&P 1500 SuperComposite stock index — arepresentative but not comprehensive group —had total sales of $39.8 billion in 2002.
For a description of some of the industry’slargest companies, see the “Top U.S.Producers of Specialty Chemicals” table.Product categories are explained in this sur-vey’s “How the Industry Operates” section.
TOP U.S. PRODUCERS OF SPECIALTY CHEMICALS(Ranked by 2002 revenues)
REVENUES (MIL. $)COMPANY PRIMARY PRODUCTS 2001 2002
Rohm & Haas Specialty polymers, plastic additives, electronic materials 5,666.0 5,727.0OM Group Metal-based chemicals and powders 2,236.9 4,909.4Engelhard Corp. Catalysts, pigments, additives 5,096.9 3,753.6Ecolab Institutional cleaning products 2,320.7 3,403.6Crompton Corp. Polymer additives, polymers, pesticides, silicones 2,718.8 2,546.9Polyone Plastics compounding, distribution 2,581.1 2,498.2Valspar Consumer & industrial coatings 1,921.0 2,126.9RPM Inc. Coatings 1,986.1 2,007.8Lubrizol Corp. Petroleum additives 1,839.2 1,980.3International Flavors & Fragrances Flavors, fragrances 1,843.8 1,809.2W.R. Grace Catalysts, construction products 1,597.4 1,723.2Hercules Inc. Paper chemicals, specialty polymers 2,620.0 1,705.0Ferro Corp. Coatings, polymer additives 1,246.5 1,528.4Great Lakes Chemical Plastic additives, water treatment chemicals 1,352.8 1,401.5Cytec Industries Water treatment, paper, specialty resins 1,387.1 1,346.2H.B. Fuller Adhesives, coatings 1,274.1 1,256.2Sigma-Aldrich Laboratory chemicals 1,114.5 1,207.0Albemarle Polymer additives, intermediates 916.9 980.2Schulman (A.) Plastics compounding 975.2 966.6Arch Chemicals Electronics chemicals, pool chemicals 920.8 939.4Minerals Technologies Specialty minerals & products 684.4 752.7MacDermid Metal and plastic finishing, electronics, and graphic arts chemicals 745.6 687.6Omnova Emulsion polymers 737.0 681.2Ethyl Corp. Petroleum additives 724.5 656.3Cambrex Corp. Pharmaceutical ingredients and intermediates 499.2 522.2
Source: Company reports.
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INDUSTRY TRENDS
The foremost trend in the specialty chemi-cals industry is consolidation within productlines through mergers and acquisitions. Atthe same time, some specialty companies areslimming down to focus on their core chemi-cals businesses.
M&A: forging chemical bonds
Most industry merger and acquisition(M&A) transactions are relatively small, in-volving individual product lines or plants. Inrecent years, however, major deals have oc-curred in a number of specialty chemicalproduct lines, sometimes radically shifting acompany’s competitive position within an in-dustry segment. Faced with slow growth andpricing pressures, companies are realizingthat they must make major acquisitions toboost top-line results. In addition, potentiallysignificant savings on overhead and manu-facturing costs can be achieved through con-solidation. Production and marketingefficiencies are other incentives.
Customers are increasingly looking forstrong, long-term relationships with a fewkey suppliers that can help them reducecosts, improve product performance, or sup-port new product development. To satisfythese growing customer requirements, spe-cialty firms must spend more on researchand development (R&D). This need for addi-tional R&D, which sometimes arises at atime of slow market growth, has contributedto the pressure to consolidate. Conversely,firms that are unwilling to make the capitaland R&D commitments necessary to remaincompetitive or that wish to focus on otherareas are divesting certain businesses.
Major acquisitions and divestitures havealso been driven by the poor stock marketperformance for the specialty chemicals in-dustry. Looking for better stock market re-turns, investors have demanded thatcompanies improve their performance bymerging. However, instances in which suchmergers have actually resulted in higherstock prices are hard to find.
The pace of merger activity has slowedsince early 2001. According to Young &Partners LLC, an investment banking firmfocused on the chemical and life science in-dustries, the value of worldwide chemical in-
dustry merger transactions totaled $23 bil-lion in 2002, down from 2001’s total of $35billion, which was comparable to totals forthe previous four years. However, 2001 in-cluded Dow Chemical Co.’s delayed purchaseof Union Carbide Corp. for $7.1 billion. In2002, 74 deals were transacted, almost 10%fewer than in each of the previous threeyears. Young & Partners reports that justover half of those deals involved specialtychemical businesses.
The value of deals continued to decline inthe first half of 2003 to $7 billion, from $16billion in the comparable 2002 period, dueto fewer large deals, according to Young &Partners. The number of transactions world-wide totaled 36, versus 29, as the number ofsmall-sized deals increased. Specialty chemi-cals accounted for 56% of all transactions inthe first half of 2003.
The biggest specialty chemicalsmerger in the world...
The largest specialty chemicals industrytransaction to date — in terms of both salesvolume and deal value — was completed in1997. As part of a total transformation to aspecialty chemicals company, ImperialChemical Industries plc (ICI), a major Britishchemicals firm, acquired the specialty chemi-cals businesses of Unilever Group, a majorBritish-Dutch company, for $8.0 billion.Unilever sold these divisions in order to fo-cus on its consumer products businesses.
The four businesses that ICI bought(with total 1996 sales of about $4.9 bil-lion) had leading global positions and sig-nificant shares in their respective markets.They were: National Starch & Chemical, aU.S. producer of adhesives, resins, andstarches; Quest International, a Europe-based maker of food ingredients, flavors,and fragrances; Netherlands-basedUnichema, a leading maker of oleochemi-cals; and Crosfield, a U.K. producer of cat-alysts and detergent chemicals.
By early 2001, ICI had sold most of itscommodity businesses as part of its shift tobecoming a specialty chemicals maker.Thus, about 88% of its approximately $9.4billion of sales in 2001 came from specialtychemicals and paints, compared with lessthan 30% in 1996. The remaining 12% ofICI’s sales were generated by regional andtrading businesses.
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...and in the United StatesIn June 1999, Rohm & Haas acquired
Morton International Inc. in the largest U.S.specialty chemicals merger to date. Valuedat about $4.9 billion, the transaction ex-panded Rohm & Haas’s annual sales from$4.0 billion to almost $7.0 billion, placingit among the leaders of the global specialtychemicals industry.
The acquisition boosted Rohm & Haas’selectronic materials, adhesives, plastic addi-tives, and biocide businesses. The companywas able to achieve merger-related cost sav-ings of $200 million in 2000. The deal alsoincluded Morton’s salt business, the largestin North America with sales of $706 millionin 2002.
Also bringing together two large specialtychemicals businesses was the purchase byDow Chemical Co. of Union Carbide Corp.in February 2001, for Dow Chemical stockvalued at $7.1 billion. Both companies hadlarge specialty chemicals operations. About50% of Dow Chemical’s sales before themerger were in specialty chemicals, plastics,and pesticides. Together, these specialty busi-nesses accounted for about 54% of the newDow Chemical’s total sales of $27.4 billionin 2002. Dow reports that by 2003, it hadachieved annual cost savings of $1.2 billionfrom the integration of Union Carbide.
Large private buyoutsYoung & Partners reported that financial
investors accounted for one-fifth of all trans-actions in 2002. For example, in October2002, Bain Capital LLC agreed to acquireSigmaKalon, the paint business of Total FinaElf S.A., for an undisclosed price.SigmaKalon is the second largest maker ofdecorative paint in Europe and one of thetop 10 paint companies in the world, withannual sales of about 1.7 billion euros ($1.6billion). The transaction was completed inFebruary 2003.
Mergers within sectors: paintAccording to the National Paint &
Coatings Association, an industry tradegroup, about 800 companies produce paintand coatings in the United States. Mosthave fewer than 50 employees, which leadsmost industry consultants to conclude thatthis relatively fragmented industry willconsolidate further.
Among the factors fueling consolidationare the business’s maturity and manufactur-ers’ need for greater technical and financialresources. Also important is the growingdominance of mass merchandisers (such asWal-Mart Stores Inc.) and do-it-yourselfhome retailers (such as the Home DepotInc.), which have gained pricing power overproducers. Globalization, a more demandingcustomer base, and the burden of complyingwith government regulations also contributeto the trend.
Significant recent deals within the paintindustry include the following:
◆ Akzo Nobel N.V. The biggest transac-tion in the paint industry occurred inSeptember 1998, when Akzo Nobel ac-quired Courtaulds, a U.K.-based paint andfiber producer, for about $3.0 billion. Thedeal made Netherlands-based Akzo Nobelthe world’s largest producer of coatings.Courtaulds’s coatings and sealants businesshad annual sales of about $1.6 billion, withleading positions in numerous industrial,packaging, and marine coatings markets on aworldwide basis. The purchase complement-ed Akzo Nobel’s existing business, both interms of industry segments and geographiccoverage. Akzo Nobel merged its fibers busi-nesses with those of Courtaulds and sold thenew company, named Acordis, at year-end1999 in a management-led buyout.
Akzo has also expanded some of itscoating businesses through acquisitions. InSeptember 2002, it paid $73 million to ac-quire Ferro Corp.’s U.S. and Asia-Pacificpowder coatings businesses (2001 sales of$100 million). Akzo thus became one of thetop three powder coatings companies in theUnited States — the world’s largest marketfor this growing product. With paint sales ofabout 5.5 billion euros in 2002 (US$5.2 bil-lion), Akzo Nobel aims to double the size ofits paint business in five years.
◆ Valspar Corp. In December 2000,Valspar — a maker of consumer, packaging,and industrial coatings, with annual sales of$1.5 billion — acquired Lilly Industries Inc.for nearly $1.0 billion. Lilly, with sales of$670 million in 2000, was one of the largestmakers of industrial coatings, including coat-ings for wood, metal, and composite prod-ucts. (In 1996, Lilly Industries acquired
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Guardsman Products, an industrial coatingsproducer with 1995 sales of $251 million.)
Valspar’s annual sales of industrial coat-ings jumped to about $1.0 billion. In fiscal2002 (ended October) — the first full year inwhich it owned Lilly — Valspar achieved to-tal sales of $2.13 billion, with 25% fromoutside the United States.
Its March 1999 purchase of DexterCorp.’s packaging coatings business (1998sales of $212 million) significantly increasedValspar’s presence in Europe. Dexter indicat-ed that it did not want to make the invest-ments necessary to remain competitive in thepaint industry.
◆ PPG Industries Inc. One of the world’slargest makers of coatings, PPG made 18acquisitions within the sector (primarily inthe automotive aftermarket, industrial, andpackaging areas) in the Americas andEurope from early 1997 through 2000. Theacquired companies had combined annualsales of about $1.7 billion; including the ac-quisitions, PPG’s coatings business had totalsales of $4.4 billion in 2001, up from $3.5billion in 1998.
The purchases reduced PPG’s dependenceon original equipment durable goods mar-kets such as autos, and put more emphasison the aftermarket and nondurables indus-tries. PPG is now focusing on achieving costsavings and improving the financial returnsfrom its investments.
Adhesives M&AMerger activity in the adhesives area con-
tinues. In early 2003, Einhorn AssociatesInc., an industry consulting firm, was quotedin Chemical Week as expecting to see moreacquisitions in 2003 than in 2002.
◆ Avery Dennison Corp. This global pro-ducer of pressure sensitive products, with an-nual sales of $4.0 billion, has made severalacquisitions over the past two years. Themost recent was the May 2002 purchase ofJackstadt GmbH, the world’s largest private-ly held maker of pressure-sensitive material,with sales of $400 million in 2001. In early2001, Avery purchased Dunsire Industries, asupplier of non–pressure-sensitive materialswith sales of $60 million, and CD Stomper, amaker of CD and DVD labels and labelingsystems, with sales of $20 million.
◆ Forbo Holding AG. This Switzerland-based global adhesives company in April 2002acquired the Swift adhesives business (sales of$250 million) from Reichhold Inc. for $210million. The purchase nearly tripled Forbo’sadhesives sales and turned it from a Europeanproducer into a global player in the adhesivesindustry. Reichhold intends to focus on itscomposites and coatings businesses.
◆ Total Fina Elf. The early 2000 mergerof the French oil companies Elf Aquitaine andTotalFina to form Total Fina Elf S.A. alsobrought together two leading adhesive compa-nies: Ato Findley of Elf Aquitaine and theBostik unit of TotalFina. The new company isthe fourth largest adhesive producer in theworld, with Europe accounting for about 60%of its annual sector sales of $1.1 billion.
◆ Rohm & Haas Co. The purchase ofMorton International in June 1999 created aleading specialty adhesives and sealants com-pany, with sales of $706 million in 2002.Morton was a leading maker of packaging ad-hesives with expertise in polyurethanes, whileRohm & Haas is a leader in acrylic polymersfor use on tapes and labels.
Water treatment chemicalsMergers and acquisitions in the late 1990s
transformed the water treatment chemicalsindustry, which at the time was experiencingmargin pressures. In late 1998 through late1999, the three biggest producers of watertreatment chemicals — Nalco Chemical Co.,BetzDearborn Inc., and Calgon Corp. —were acquired by other companies. Since1996, almost all of the top water chemicalcompanies have been acquired.
Industry analysts feel that there are fur-ther consolidation opportunities. TheFreedonia Group, a research and consultingfirm, estimates that more than 300 watermanagement companies exist in the UnitedStates, providing opportunity for the largercompanies to make acquisitions. The majordeals include the following:
◆ General Electric Co. In February 2003,GE completed its acquisition of OsmonicsInc., a global manufacturer and marketer ofhigh-technology water purification, filtration,and water handling systems. In April 2002,General Electric Co. purchased the water
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treatment business of Hercules Inc.’sBetzDearborn division (annual sales of $1.0billion) for $1.8 billion. BetzDearborn was theworld’s second largest maker of water treat-ment chemicals. GE expects its new $1.4 bil-lion water technologies business to grow 15%annually, reaching $3 billion in sales in 2006.
◆ Suez. In 1999, Suez Lyonnaise des EauxGroup S.A., a leading supplier of water andwaste water services, purchased NalcoChemical and Calgon Corp., the first andthird largest water treatment chemical com-panies, respectively. Between June 1996 andDecember 1999, Nalco completed acquisi-tions with combined annual sales of morethan $300 million, largely in water treatmentchemicals. Nalco’s largest purchase was theDiversey water chemicals unit of MolsonCos., which it bought for $82 million in June1996. Suez Lyonnaise des Eaux renamed it-self Suez in 2001.
Flavors and fragrances◆ Bayer AG. In September 2002, Bayer
sold its Haarmann & Reimer unit, theworld’s fourth-largest flavor and fragranceproducer (sales of 980 million euros, orUS$877 million, in 2001), for 1.66 billioneuros (US$1.62 billion). The buyer, a privateinvestment firm, announced plans to mergeHaarmann & Reimer with Dragoco, a small-er privately owned German company. (Thenew company’s combined 2001 sales wouldhave been 1.25 billion euros.)
◆ International Flavors & Fragrances Inc.In late 2000, International Flavors &Fragrances (IFF), the world’s leading makerof such products, acquired Bush Boake AllenInc. (1999 sales of nearly $500 million) for$970 billion. The purchase boosted IFF’s an-nual sales to nearly $2.0 billion, making itthe world’s largest flavors company, whileenhancing its No. 1 position in fragrances.Bush Boake Allen also expanded IFF’s do-mestic flavors business, which had a sales de-cline in 2000. International Paper Co., whichhad owned 68% of Bush Boake Allen, want-ed to divest its interest in the company.
Catalysts◆ Johnson Matthey plc. In late 2002,
Johnson Matthey acquired the Synetix cata-lyst business from Imperial Chemical for a
total of £260 million (US$413 million).Synetix produces catalysts for a range of in-dustries, including gas processing, chemicals,oleochemicals, and edible oils; its sales in2001 were about $200 million. JohnsonMatthey said that the acquisition representsfurther progress in its strategy of growing itscatalyst and chemical division. The divisionhad annual sales of nearly £600 million(US$900 million) in 2001. When it put thebusiness up for sale in early 2002, Imperialsaid that it had decided not to participate inthe industry’s consolidation.
◆ W.R. Grace & Co. In early 2002, Graceacquired a polyolefin catalysts business ofBorealis A/S of Sweden. In February 2000,W.R. Grace purchased the Crosfield petrole-um hydroprocessing catalyst business fromImperial Chemical Industries. The businesshad sales of $14 million in 2000. Grace hasa leading position in the residuum hydropro-cessing segment, and the acquisition allowedit to enter the light-oil processing segment.
Lubricant additivesThe additives field continues to see rapid
changes in technology and business practices,reflecting rising performance standards andstricter environmental regulations for lubri-cants. Industry analysts note that there hasbeen virtually no growth in U.S. demand forlubricant additives over the past few years,which has intensified competition.
Lubricant additives makers have re-sponded to limited demand growth and rising R&D costs by merging and by re-ducing costs to improve their profit mar-gins. The major mergers occurred in thelate 1990s: in 1998, Lubrizol Corp. ac-quired the Adibus business of the BPGroup; in 1999, Exxon Corp. (now ExxonMobil Corp.) and Royal Dutch/Shell com-bined their petroleum lubricant businessesto form Infineum, the world’s second-largest producer behind Lubrizol.
At present, there appear to be no otherlarge acquisition candidates available in thelubricant additives industry, though compa-nies continue to make small purchases in se-lect niches. For example, from May 1997through early 2000, Lubrizol acquired threeproducers of additives for metalworking flu-ids and industrial lubricants. These firms hadcombined annual sales of about $45 million,
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and Lubrizol now claims the leading share inthis market.
Plastic additivesThis sector has been under financial
pressure in recent years and has seen sever-al mergers.
◆ Crompton Corp. In July 2003, CromptonCorp. and General Electric Co. completed atransaction in which Crompton sold its sili-cones business to GE in return for GE’s spe-cialty chemicals business and cash. The GEspecialty chemicals business was a majorsupplier of antioxidant and impact modifiers,with annual sales of $165 million. Cromptonsaid that its polymer additives business nowaccounts for about 60% of its annual salesof nearly $2.2 billion. The company believesit is the world’s largest supplier of additivesused in polyvinyl chloride resins.
◆ Albemarle Corp. This major maker offlame retardants has expanded its business inrecent years. In July 2003, the company ac-quired Rhodia S.A.’s phosphorus flame retar-dant business, which had annual sales of $65million. In mid-2001, Albemarle acquired amaker of mineral-based flame retardants,complementing its existing bromine- andphosphorus-based products. Albemarle be-lieves it is now the largest flame retardantproducer in the world.
Pesticide & agricultural firmsA maturing market and enormous R&D
costs spurred numerous mergers and acqui-sitions in the pesticides segment over thepast decade.
Because pesticides are applied on virtuallyall major U.S. crops, the domestic pesticidemarket is generally mature. Growth is expect-ed to be higher in developing countries suchas China, India, and Brazil, which are tryingto boost crop production and reduce the lossof grains to disease, insects, and animals.
Industry participants estimate that thecost of developing a new product and bring-ing it to market can exceed $50 million. Alsohelping to drive up R&D costs is the grow-ing use of biotechnology to alter crops genet-ically, which can boost their resistance toinsects or disease and increase their toleranceof herbicides. To support its R&D program,a company needs a critical mass of at least
$1.0 billion in worldwide pesticide sales.Reaching this lofty level often means joiningforces with others in the industry.
Currently, greater competitive pressures,arising largely from the use of new seeds de-veloped through biotechnology and lowercrop commodity prices, are spurring anotherround of mergers. These market conditionsare shifting or reducing farmers’ demand forcertain pesticides, reducing sales and profitsfor many major companies. This has forcedsome to decide to withdraw from this indus-try. Wall Street’s present dislike of life sci-ences firms that make both drugs andagricultural chemicals is also driving divesti-tures and mergers.
◆ Bayer AG. In June 2002, Bayer pur-chased the Aventis CropScience business,owned by Aventis and Schering, for 7.25 bil-lion euros (US$6.93 billion). Bayer said thatcombined sales of its existing crop protectionbusiness and annual sales of its newCropScience business totaled about 6.5 bil-lion euros (US$6.21 billion), making Bayerthe second largest pesticide company behindmarket leader Syngenta AG. The new busi-ness includes agrichemicals and biotechnolo-gy and seeds. In March 2003, Bayer sold agroup of insecticides and fungicides with an-nual sales of 500 million euros to BASF AG,in order to fulfill conditions imposed by theantitrust regulators that approved the Aventismerger.
◆ Dow Chemical Co. In June 2001, DowChemical purchased Rohm & Haas’s agricul-tural chemicals business (with sales of $531million in 2000) for approximately $1.0 bil-lion. The business consists of fungicides, in-secticides, and herbicides. Rohm & Haasstated that the agricultural chemicals busi-ness would flourish as part of a global firmwith a stronger presence serving the agricul-tural markets.
Dow said that these products complementand enhance its portfolio by adding high-per-formance, brand name products for specialtycrops, as well as turf and ornamental busi-nesses around the world. With this acquisi-tion, Dow’s agrosciences sales totaled $2.7billion in 2002.
◆ BASF AG. In June 2000, AmericanHome Products Corp. (now called Wyeth)
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sold its Cyanamid crop protection business($1.7 billion in 1999 sales) to BASF for $3.8billion. BASF said that the acquisition dou-bled its annual crop protection sales, whichhad been about $1.9 billion in 1999. (Its to-tal sales were then $29.5 billion.) AmericanHome Products said that the Cyanamid salereflected its strategy of focusing on its phar-maceutical, consumer healthcare, and animalhealth products businesses.
The deal made BASF the world’s thirdlargest supplier of agricultural chemicalsand expanded its presence in North andSouth America. The combination was pro-jected to yield synergies of about $250 mil-lion per year.
◆ Syngenta AG. This company wasformed in November 2000 with the mergerof the agricultural chemicals businesses ofNovartis AG and AstraZeneca plc, bothbased in Europe. With sales of approximate-ly US$6.2 billion in 2002, Syngenta is theworld’s largest crop protection company andthe third-largest supplier of crop seeds. Thepesticide business of Novartis was theworld’s largest, while AstraZeneca’s agri-chemicals business was the third largest.Novartis noted that the benefits of concen-trating on its healthcare businesses out-weighed the modest synergies betweenhealthcare and agribusiness activities.
Specialty chemicals stock performanceThe specialty chemicals industry generally
lagged the overall stock market from 1994through 2002, despite a better relative perfor-mance in 2001 and 2002. Specialty chemicalsunderperformed the broader market each yearfrom 1995 to 1999. From 1998 to 2002, theSpecialty Chemicals subindex of the S&P1500 SuperComposite Stock Index posted anannual compound decline of 2.8%, versus a1.4% drop for the S&P 1500. In 2000, thesubindex declined 7.6%, similar to the 8.0%drop in the S&P 1500 index.
In the broadest sense, the specialty chemi-cals group’s underperformance from the mid-1990s through 2000 can be blamed on theindustry’s maturity. Because a number ofproduct lines grew more slowly than theyhad historically, investors lowered their valu-ations on specialty chemical stocks. Anotherfactor was reduced investor interest in basicmaterials in general. As a result of these neg-
ative factors over the past decade, theSpecialty Chemicals subindex accounted forabout 0.36% of the S&P 1500 as of earlySeptember 2003, compared with 1.21% atthe end of 1994.
For specialty chemicals companies, in par-ticular, concerns have fallen primarily underthe heading of disappointing earnings. Since1998, a large number of companies at vari-ous times have reported earnings below ex-pectations as a result of unfavorable currencyexchange rates, the economic crisis in Asia inthe late 1990s and the more recent U.S.slowdown, higher raw materials costs, andreduced selling price flexibility.
The subindex’s dismal five-year perfor-mance (1998 to 2002) did include one strongyear: 2001, when it climbed 9.6% while theS&P 1500 declined 11.8%. In 2002, the spe-cialty chemicals subindex was off 0.8%, butit still outperformed the S&P 1500, whichfell 22.5% that year due to sharp drops inthe information technology and telecommu-nications services sectors. Year to datethrough September 5, 2003, the SpecialtyChemicals Index had again underperformedthe broader market: up 5.4%, versus a16.9% advance for the S&P 1500.
The market performance for the special-ty chemicals group in 2001 and 2002 re-flected improvement in the industry’sfinancial results, combined with a flight byinvestors to industries that appeared to bewithout the accounting questions or out-right scandals seen in such industries as en-ergy trading and telecommunications.
Boosting shareholder valueA number of companies have implement-
ed business and financial restructurings in ef-forts to improve their stock performance.Business restructuring actions have includedplant closings, job cuts, and acquisitions de-signed to boost revenues and/or reduce costs.
Among companies with major cost-cut-ting programs between 2001 and 2002 areRohm & Haas, Great Lakes Chemical,Crompton Corp., and International Flavors& Fragrances Inc. In late 2002, bothPolyOne Corp. and OM Group Inc. an-nounced restructuring plans. One reasongiven for some mergers between chemicalcompanies was to boost market capitaliza-tion and liquidity in order to be more at-tractive to institutional investors.
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Financial restructuring moves have included buying back common stock to increase debt leverage and boost share-holders’ returns. For example, since mid-November 1999, Sigma-Aldrich Corp. hasrepurchased about one-third of its out-standing stock, and its board of directorshas approved buying another 5%. Thecompany has leveraged what was a nearlydebt-free balance sheet to borrow a portionof the funds used for the stock buyback. Italso sold its metals fabrication business(annual sales of $250 million) in May2000 to focus on its core research and finechemicals business (80% of then totalsales) and used the funds from the sale toreduce debt and to pay for a portion of thestock repurchases.
Spin-offsSome companies have been slimming
down to focus on specialty chemicals by sell-ing or spinning off nonspecialty chemicalsbusinesses. One reason for doing so is thatWall Street generally favors focused, single-industry companies and penalizes diversifiedcompanies with lower valuations.
◆ Great Lakes Chemical Corp. In May2002, Great Lakes sold the remaining 53%interest in its OSCA Inc. oil services businessfor about $220 million to BJ Services Co.Great Lakes, which will focus on its specialtychemicals businesses, said the sale strength-ened its balance sheet. OSCA accounted forabout 11% of Great Lakes’s total 2001 salesof almost $1.6 billion. In mid-2000, GreatLakes sold a 40% stake in OSCA through aninitial public offering.
◆ FMC Corp. This diversified companycompeted the spin-off of its remaining in-terest in its machinery units (energy, food,and transportation) to its shareholders atthe end of 2001. The initial public offeringof FMC Technologies Inc. was completedin June 2001, reducing FMC Corp.’s staketo 83%.
FMC Corp. now consists of specialtychemicals, agricultural crop protectionproducts, and industrial chemicals. Its salesin 2002 were $1.9 billion. The specialtyand agricultural chemicals together ac-counted for 60% of total chemicals sales in 2002.
HOW THE INDUSTRY OPERATES
The products of the specialty chemicalsindustry are usually intended to serve specificpurposes — for example, to eradicate insectsfrom a food crop (agricultural pesticides) orto purify municipal water (water treatmentchemicals). The industry also makes higher-value products in categories otherwise con-sidered to be commodity chemicals, such asengineered resins. These products are typical-ly manufactured by specialty chemicals com-panies, although commodity chemicals firmsalso make them.
The major product categories covered bythis survey are paints and coatings, pesti-cides, adhesives and sealants, lubricants andadditives, catalysts, water treatment chemi-cals, and plastics additives.
As differentiated products designed forspecific applications and/or customers, spe-cialty chemicals may be made in small vol-umes. Some solve specific problems, such aseliminating scale build-up in water boilers;others, such as lubricants, improve the per-formance of finished products. Specialtychemical products (or “specialties”) are soldlargely based on their performance attribut-es. They’re often critical components of theend products in which they’re used.
In contrast, basic commodity chemicals(or “commodities”) are produced in largevolumes with little differentiation of prod-ucts made by different manufacturers or forsimilar applications. (Commodity chemicalsare covered in the Chemicals: Basic issue ofIndustry Surveys.)
Industry overview
Specialty chemicals companies have severalcommon characteristics, as described below.
Less vulnerable to cyclesThe overall health of the specialty chemi-
cals industry is closely tied to the U.S. andglobal economies; its major end markets arethe manufacturing, automobile, housing, andagricultural sectors. Because these businessesare cyclical, the specialty chemicals industryis also somewhat cyclical.
However, because specialties are largelyused in final customer products or applica-tions, and to improve manufacturingprocesses or the quality of end products,
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these specialized niche products are generallyless subject to cyclical demand than are basiccommodity chemicals. Pricing volatility isalso less dramatic, because products are dif-ferentiated and major changes in industrysupply/demand balances do not occur.Capacity additions for specialties are com-monly small in size or designed for uniqueproducts, and can be done relatively quicklyto closely match demand growth.
Manufacturing and capital requirementsThe manufacture of specialties generally
involves the upgrading of basic commoditychemicals (and sometimes other materials)into more exclusive products. These commod-ity inputs range from petrochemicals, includ-ing ethylene derivatives, to inorganics such ascaustic soda and sulfuric acid. Raw materialsare usually purchased from other companies,such as large commodity producers.
Manufacturing plants for specialty chemi-cals are usually small to medium in size.They typically employ batch manufacturingmethods, as opposed to continuous process-ing, because production volumes may be lowfor individual products. Facilities includemixing vessels, packaging facilities, qualitycontrol analytical laboratories, and produc-tion application laboratories. To satisfy cus-tomer needs, plant scheduling may be shortterm and subject to frequent change.
The specialty chemicals industry is lesscapital intensive than the commodity chemi-cals industry. The cost of a new specialty fa-cility commonly ranges from a few milliondollars to several tens of millions, comparedwith hundreds of millions of dollars for acommodity chemical plant. Specialty chemi-cals companies, however, may need manymanufacturing or distribution sites for thelarge number of unique, low-volume prod-ucts that their customers require.
Specialty companies must also investlarge sums in facilities for research and de-velopment (R&D) and/or testing, and inthe continual upgrading and replacementof existing plants.
Close customer relationships,skilled work force
Specialty chemicals companies maintainclose working relationships with their cus-tomers. They offer input into their customers’new product development in the early stages,
working to develop chemicals with specific at-tributes that help customers meet quality, envi-ronmental, or other requirements.
Specialty chemicals companies must havea work force of highly skilled technical em-ployees, including chemists and engineers.Their salespeople often have technical back-grounds similar to those of their R&D em-ployees in order to work closely withcustomers. As a result, specialty chemicals in-cur high levels of marketing and R&D costs.
High barriers to entryThe industry’s capital, R&D, and market-
ing requirements constitute high barriers toentry. Potentially large safety and environ-mental liabilities also discourage companiesfrom entering the industry.
By maintaining close relations with theircustomers, specialties firms make it difficultfor new competitors to enter the field. Oncea customer has incorporated one company’sspecialty chemicals into its products, it isgenerally reluctant to change suppliers ormaterials, as it may have to test and approveany new products or application. Not only issuch testing costly in terms of time and re-sources, the customer — often a manufactur-er — may have to seek approval from itsown customers to make any changes.
Another factor that may determine the de-gree of competition is distribution require-ments for different chemicals. On the onehand, because specialty products may beshipped in small volumes, transportationcosts can represent a higher percentage of thetotal price compared with commodities; thissometimes discourages distant competitors.On the other hand, the high value-added na-ture of specialty chemicals allows for longershipping distances than do bulk, low-value-added commodity chemicals.
Distribution: by truck, water, rail, airAlmost two-thirds of total U.S. chemical
production takes place in 10 U.S. states.Meanwhile, customers are widely dis-persed. Thus, distribution methods play akey role in the industry. It is estimated thattransportation costs account for about 5%to 6% of the chemical industry’s value ofshipments. However, given the different(and sometimes potentially hazardous)physical properties of chemicals, trans-portation costs can vary dramatically.
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According to the American ChemistryCouncil, about 761 million tons of chemicalsand products were shipped within the UnitedStates in 2001 (latest available). Nearly two-thirds of that tonnage was transported lessthan 250 miles, due to the low value ofmany commodity chemicals, which makes itimperative to hold down distribution costs,or to the special handling problems posed byproducts such as industrial gases. However,high-value-added products (a category thatincludes some specialty chemicals) are oftenshipped much longer distances.
About 54% of all chemical tonnage (basic,intermediate, and specialty combined) wasshipped by truck in 2001. Trucking is the mostcommon means of shipping small-volumepackaged products, including specialty chemi-cals. Other methods are waterborne transport(accounting for 22% of total chemical tonnagetransported in 2001) and railroads (20%).Both of these methods are used primarily forcommodity chemicals. Other modes (mostlypipelines for commodities) transported the re-maining 4% of chemicals. Some small volumesof consumer chemical products are shipped byair and courier service.
Heavy regulation
The specialty chemicals industry is subjectto numerous state and federal laws and regu-lations regarding health, worker safety, andenvironmental protection. In the process oftransforming raw materials (many of whichcan be dangerous) into other productsthrough complex methods, specialty chemi-cals manufacturers may generate solid andliquid wastes as unwanted byproducts. To re-
duce the amount of hazardous and nonhaz-ardous wastes generated, they have imple-mented programs and process changes.
Laws that affect the chemicals industry in-clude the Clean Air Act, the Clean WaterAct, the Resource Conservation andRecovery Act, the ComprehensiveEnvironmental Response, Compensation,and Liability Act (CERCLA, commonlycalled the Superfund program), and the ToxicSubstances Control Act. These laws are ad-ministered by a number of governmentalbodies, with the Environmental ProtectionAgency (EPA), the Department of Labor, andthe Food and Drug Administration (FDA)among the key federal agencies.
Paints and coatings
Used to create a protective and/or decora-tive layer, paints and coatings are among theindustry’s major product categories. The sub-stances from which they’re made includeresins, solvents, additives, pigments, and insome products, a diluent. They fall into threebroad categories: architectural coatings,product coatings for original equipmentmanufacturers, and special-purpose coatings.
PaintThe U.S. paint industry produced 1.46 bil-
lion gallons in 2002 (latest available), valuedat $17.2 billion (including miscellaneous prod-ucts), according to the U.S. Department ofCommerce. The industry is generally consid-ered mature. Longer-term unit growth is ex-pected to average about 1% to 2% annually.
The paint industry is under pressure to re-duce emissions of volatile organic compounds
MAJOR SPECIALTY CHEMICALS PRODUCERS, BY CATEGORY
LUBRICANT WATER PLASTICS PAINT PESTICIDES ADHESIVES ADDITIVES CATALYSTS TREATMENT ADDITIVES
Source: Company reports.
Akzo Nobel N.V.
Benjamin Moore (Berkshire
Hathaway)
DuPont
Ferro Corp.
Glidden (Imperial Chemical)
PPG Industries
Rohm & Haas Co.
RPM Inc.
Sherwin Williams Corp.
Valspar Corp.
Aventis
BASF
Bayer
Dow Chemical Co.
DuPont
FMC Corp.
Monsanto
Syngenta
Avery Dennison Corp.
Bostik/Findley
H.B. Fuller Co.
Henkel of Germany
3M
National Starch &
Chemicals (Imperial
Chemical)
Rohm & Haas
Swift (Forbo A.G.)
Crompton Corp.
Ethyl Corp.
Infineum (ExxonMobil
and Shell)
Lubrizol Corp.
Oronite (ChevronTexaco)
RohMax (Degussa AG)
Akzo Nobel N.V.
Criterion (Shell)
Engelhard Corp.
Johnson Matthey
W.R. Grace & Co.
Drew Industrial (Ashland)
GE Betz (General Electric)
ONDEO Nalco (Suez)
Akzo Nobel
Albemarle Corp.
Atofina
Ciba Specialty Chemicals
Clariant Group
Crompton Corp.
Cytec Industries Inc.
Great Lakes Chemical
Rhodia Group
Rohm & Haas
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(VOCs) from paints and to limit the consump-tion of solvents. Solvents are the dispersionmedia for the solids — primarily pigments andbinders — that are used in paint. Particular at-tention has been focused on the emissions ofVOCs and solvents in original equipment andindustrial applications.
Manufacturers have introduced a numberof alternatives to conventional high-solventpaints. These include high-solids/low-solventpaints and waterborne and solventless paintsand coatings. Manufacturers have also devel-oped new paint and process techniques to in-crease application efficiency. Ironically, thesetechniques have led to a decline in paint andsolvent consumption, lowering the industry’sunit growth rate (traditionally reported ingallons), especially in the original equipmentand special-purpose paints categories.
Coating segments at a glanceThe industry’s coatings segment consists
of four main product categories, as describedbelow. (Latest available sales and volumedata are given in the “Coatings and alliedproducts” table.)
◆ Architectural coatings. These general-purpose paints, varnishes, and lacquers areused on residential, commercial, institutional,and industrial structures. Sold throughwholesalers and retailers, they are classifiedas stock or shelf goods. Interior paints ac-counted for 61% of volume shipments in2002, followed by exterior paints (38%), ac-
cording to the Department of Commerce.Lacquers and all other applications made upthe balance. Water-based paints accountedfor 79% of architectural coatings shipments.
The architectural coatings market is ma-ture, with long-term growth projected atabout 1% to 2% per year. Sales generally re-flect the level of home redecorating, mainte-nance, and repair, as well as sales of existinghomes, construction of new homes, and to alesser extent, commercial and industrial con-struction. The architectural coating segmentfaces competition from alternative materialssuch as aluminum and vinyl siding, interiorwall coverings, wood paneling, and glass.
◆ OEM coatings. Formulated to cus-tomer specifications, original equipmentmanufacturer (OEM) coatings are appliedto original equipment during manufactur-ing. The category also includes powdercoatings, which are dry, solventless coatings.OEM coatings are used on such durablegoods as automobiles, trucks, appliances,furniture and fixtures, metal containers, andbuilding products, as well as industrial ma-chinery and equipment.
◆ Special-purpose coatings. Special-pur-pose coatings, which can be classified asstock or shelf goods, are formulated for spe-cial applications or environmental condi-tions, such as extreme temperatures,exposure to chemicals, or corrosive condi-tions. Major markets include industrial con-
COATINGS AND ALLIED PRODUCTS(Quantity in millions of gallons; value in millions of dollars)
ARCHITECTURAL PRODUCT COATINGS SPECIAL-PURPOSE MISC. ALLIEDCOATINGS OEM COATINGS PAINT PRODUCTS TOTAL
YEAR QUANTITY VALUE QUANTITY VALUE QUANTITY VALUE QUANTITY VALUE QUANTITY VALUE
2002 719 7,123 412 5,548 183 3,352 149 1,188 1,463 17,210 R2001 667 7,038 407 5,567 161 3,408 158 1,262 1,393 17,275 2000 651 6,461 453 6,149 182 3,607 181 1,507 1,467 17,725 1999 660 6,618 440 6,146 174 3,532 192 1,517 1,466 17,813 1998 632 6,115 428 6,098 173 3,472 211 1,613 1,444 17,298 1997 656 6,265 425 5,751 182 2,896 210 1,648 1,473 16,560 1996 640 6,246 399 5,474 209 3,264 220 1,571 1,468 16,555 1995 621 6,041 376 5,264 195 3,103 216 1,544 1,408 15,952 1994 645 5,888 373 5,070 194 3,197 220 1,490 1,431 15,645 1993* 608 5,615 357 4,788 179 2,938 193 1,289 1,337 14,630 1992* 576 5,294 312 4,214 173 2,934 176 1,154 1,236 13,595
R-Revised. *Estimated by Department of Commerce. OEM-Original equipment manufacturer. Source: U.S. Department of Commerce.
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struction and maintenance, automotive andmachinery refinishing, marine, highway andtraffic markings, aerosol paints, metallicpaints, and roof coatings.
◆ Other. The industry also makes mis-cellaneous products that include paint re-movers, thinners, cleaners, wood fillers andsealants, and putty and glazing compounds.
Pesticides
Pesticides are substances capable of de-stroying or repelling plant or animal pests.The major categories are herbicides, insecti-cides, and fungicides. The worldwide marketfor pesticides is estimated at $26.6 billion in2002, down from almost $28.0 billion in2001, according to Cropnosis Ltd., a re-search firm that covers the crop protectionindustry. The firm estimates that after peak-ing in 1996 at $32.4 billion, global pesticidesales have declined at a 3% annual rate dueto falling commodity prices and weak agri-cultural economies, combined with the ex-pansion of genetically modified crops. With astrong performance in the first half of 2003,Cropnosis forecasts that sales in 2003 willgrow at least 4.4% to $27.7 billion.
According to CropLife America, a tradeorganization representing producers of agri-cultural pesticides, combined sales of U.S.-made and imported pesticide chemicals forcrop protection totaled $7.62 billion in2001 (latest available), down 2.7% fromthe prior year. Exports of U.S.-made chemi-cals were $2.46 billion in 2001, down10.2% from 2000.
Sales of pesticides to the U.S. agriculturalcrop market in 2001 were $6.13 billion, ac-counting for 80% of total domestic U.S. pes-ticide sales, according to CropLife America.The crop market decreased 3.6% in 2001from 2000. Corn was the largest single cropfor the application of pesticides in 2001(23% of domestic pesticide sales), followedby soybeans (16%), cotton (10%), smallgrains (4%), and vegetables (4%). Othercrops, including fruits, rice, sorghum,peanuts, and potatoes, accounted for muchof the remaining agricultural use.
Sales to the noncrop market (includingturf, nursery, home and garden, industrial,and forestry) amounted to $1.49 billion in2001, or 20% of total U.S. sales. Sales in this
market rose 1.1% in 2001 from 2000, reflect-ing growth in herbicide and fungicide prod-ucts and nursery and public health markets.
Pesticides by product categoryThe three main categories of pesticides are
herbicides, insecticides, and fungicides.
◆ Herbicides. Used to control weeds,brush, and other unwanted vegetation, her-bicides constitute the largest pesticide sub-group. According to CropLife America, thissegment accounted for 66% of sales to theU.S. pesticide market 2001. Total U.S. herbi-cide sales that year were $5.02 billion, up0.7% from 2000.
About 85% of total U.S. herbicide sales in2001 were for crop use, of which corn andsoybeans accounted for nearly two-thirds ofintended use. The U.S. Department ofAgriculture (USDA) estimates that more than95% of corn, soybean, and cotton acreage inthe major producing states is treated withherbicides. As a result, little long-termgrowth is expected for herbicides in theUnited States. The main demand variableswill be alterations in chemical formulations,advances in biotechnology that affect appli-cation rates, and changes in the number ofacres planted.
The trends in this sector continue to bethe development of more efficient, lower-dosage products and the development ofgenetically altered crops that are more tol-erant of herbicides. Noncrop uses account-ed for 15% of total demand, according toCropLife America.
◆ Insecticides. Insecticides are chemicalsthat guard growing or stored crops from in-festation by insect pests, or protect peopleand animals from disease-carrying insects.CropLife America reports that insecticidesales in 2001 were $1.66 billion, down 9.7%from 2000. These sales accounted for about22% of total U.S. pesticide sales in 2001.Cotton was the largest application for insec-ticides (with 21% of U.S. insecticide sales),followed by corn (14%).
Among other crops, fruit accounted for11% and vegetables for 8%. Potatoes,peanuts, and tobacco accounted for smalleramounts. Noncrop uses, led by home andgarden applications, accounted for 31% ofinsecticide demand.
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◆ Fungicides. This category represented$612 million of sales (8% of total pesticidesales) in 2001, down 7.5% from 2000, ac-cording to CropLife America. Because almostany material can be subject to fungal attack,fungicides have a diverse pattern of end usesand markets. The agricultural industry is be-lieved to be the largest user of fungicides, butthe lumber, paint, plastics, and pharmaceuti-cal industries, among others, also consumelarge quantities.
According to CropLife America, thelargest agricultural use of fungicides by far isfor the treatment of fruits, followed by veg-etables, potatoes, and peanuts. Noncrop use(27% of total sales) of fungicides was largelyfor the turf and nursery markets.
◆ Other pesticides. This category, whichincludes plant growth regulators and nemati-cides (which combat nematodes) as well asmiscellaneous other products totaled $335million, or 4% of pesticide sales, in 2001, ac-cording to CropLife America.
BiotechnologyBiotechnology has begun to play a major
role in agricultural pest control, spurred on bygovernment pesticide restrictions, insect resis-tance to traditional pesticides, and farmers’need to reduce costs. There is also the desireon the part of farmers and food processors touse biotechnology to increase the value ofcrops by enhancing their quality — the so-called output traits.
Genetically engineered (or transgenic)plants are resistant to specific insects and tol-erant of specific herbicides, thus increasingfarmers’ yields or reducing the need for otherfarm inputs such as pesticides. Since the mid-1990s, a number of companies — mostprominently Monsanto — have introducedtransgenic seeds, including corn and cottonseeds. Commercial use of these seeds is ex-pected to continue to increase in the futurewith the introduction of multiple (or stacked)traits in a single plant.
Adhesives and sealants
Adhesives are substances that attach orbond together other materials, such as pa-per, wood, or metal. Sealants are substancesused to fill the gap between two materialsand prevent the passage of liquids or gases
between them. Thus, sealants must havethe flexibility to adjust to changing condi-tions, such as the expansion and contractionthat occurs with heat and cold, without be-ing damaged.
DPNA International Inc., a research firmspecializing in the adhesives industry, esti-mated the global adhesive and sealant mar-ket at about $26.0 billion in 2002. NorthAmerica represented 34% of the global adhe-sive and sealant market, followed by WesternEurope, with a 29% share. Asia accountedfor 26% of the world market, with the restof the world claiming 11%. DPNA estimatesaverage annual growth at 3.0% globally for2002 through 2004. By region, annualgrowth projections are 2% in both theUnited States and Western Europe, whileAsia (excluding Japan) is expected to grow at5% a year (4.1% including Japan).
According to industry experts, adhesiveshave the potential to gain market share fromtraditional methods of fastening, such as riv-ets, welding, bolting, or screw joining of ma-terials. Adhesive bonding currently accountsfor only about 4.5% of the fastening marketin North America and Western Europe andabout 3.0% in the rest of the world. Few ob-servers expect adhesives to become the domi-nant means of fastening materials, however,becaue of concerns about the long-term relia-bility of adhesive bonds.
Serving numerous markets With over 3,500 producers, the global ad-
hesive industry is quite fragmented. In con-trast, the sealants industry is dominated by arelatively small number of firms. The leadingsealants producers include Dow CorningCorp. (a joint venture between Dow ChemicalCo. and Corning Inc.), Henkel KGaA,General Electric Co., Tremco Inc. (a divisionof RPM Inc.), and Dow Chemical. Producerscommonly participate in both segments.
The volume of the U.S. adhesive industrytotals about 5.7 billion pounds a year, worthabout $7.1 billion, according to DPNAInternational estimates. In terms of volume,the largest market segment for adhesives in2001 (latest available) was paper, board, andrelated products, with a 58% share, followedby construction (16%), assembly operations(9%), woodworking (9%), and transporta-tion (5%). Consumer and footwear/leathermarkets accounted for the remaining 3% of
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demand. Major applications for adhesives in-clude paperboard, labels and tapes, contain-ers, plywood, laminates, furniture, graphicarts, carpeting, and motor vehicles.
DPNA notes that technology trends favorthe use of adhesives with high solids content,such as water-based or hot melt (100% sol-id), as well as adhesives that dry after expo-sure to ultraviolet light or electron beams.The use of solvent adhesives is declining byabout 2% a year.
The U.S. sealant market totaled 510 mil-lion pounds in 2002, valued at just over $1.2billion, according to DPNA International es-timates. The construction market accountsfor over 60% of demand, followed by trans-portation (20%), consumer (12%), and man-ufacturing assembly (7%). Silicone is thelargest product type (at almost 50%), fol-lowed by urethanes (22%); other productsinclude acrylics and polysulfides.
Lubricants and additivesLubricants, which are derived from oils,
are used between moving surfaces to reducethe friction, heat, and wear that would oth-erwise damage them. Lubricants range inconsistency from liquids to greaselike sub-stances, and they include such products asengine oils, industrial fluids (hydraulic fluids,compressor oils, refrigeration oils), metal-working fluids, automotive hydraulic andtransmission fluids, gear oils, and greases.
Additives can help lubricant oils with-stand a broader range of temperatures; limitsludge build-up; inhibit the formation offoam, rust, and corrosion; or retard oxida-tion. Thus, a lubricant oil with additives canbetter perform various functions, meet per-formance and emission standards, or satisfyother regulations.
Lubricant additives include detergents,dispersants, corrosion inhibitors, oxidationinhibitors, wear inhibitors, pour point de-pressants, and viscosity index improvers.Individual additives are usually combinedinto a “package” — a premade mixture —that is designed to help a lubricant meet aparticular performance standard. The volumeof additives in a lubricant may range from afew percentage points to as much as 50%.Motor oils contain a higher percentage ofadditives than do other lubricants.
Kline & Co., an industry research firm inLittle Falls, New Jersey, estimates the vol-
ume of lubricant additives consumed in theUnited States at about 2.5 million pounds,valued at $1.8 billion a year, up modestlyversus the late 1990s. About 80% is sup-plied by just four companies: LubrizolCorp., Infineum (a joint venture betweenExxon Mobil Corp. and Shell), OroniteAdditives (a division of ChevronTexacoCorp.), and Ethyl Corp.
Kline & Co. divides the U.S. finishedlubricant market into the following seg-ments: industrial equipment (about 48% ofthe market by volume), retail automotive(32%), and commercial automotive equip-ment (20%). The research firm also esti-mates that engine oils for passenger, truck,and off-road vehicles account for about50% of lubricant consumption (by volume)in the United States.
Catalysts
Catalysts are substances that affect therate at which other chemicals react, whileundergoing no chemical change themselves.Catalysts are designed specifically for suchapplications as chemical processing, emis-sions control, petroleum refining, and foodprocessing. The useful life of catalysts for in-dustrial processes varies, after which theymust be replaced or regenerated.
The Catalyst Group, an industry consult-ing firm, estimated the North American cata-lyst market at about $3.8 billion in 2001(latest available). In mid-2001, it projectedgrowth for the industry at almost 3% annu-ally through 2005.
There are three main categories of catalysts:petroleum, chemical, and environmental.
Petroleum catalystsPetroleum catalysts are used in the
production of fuels and other productsthrough the refining of petroleum. TheCatalyst Group estimates the value of theNorth American market was close to $1.0billion in 2001, and projects growth of only1% to 2.0% per year through 2005, includ-ing some improvement in selling prices.
There are three main types of petroleumcatalysts. Fluid cracking catalysts (FCCs),used to convert petroleum into gasoline andother fuels. Hydroprocessing catalysts areused to remove impurities from crude oil.Reforming catalysts are used to upgrade pe-
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troleum components to gasoline and petro-chemical feedstocks.
Chemical catalystsChemical processing catalysts are used in
the chemicals, petrochemicals, plastics, phar-maceuticals, and food industries. The NorthAmerican market was estimated at about$1.6 billion in 2001, according to theCatalyst Group, which believes that the mar-ket contracted in 2002 for a second consecu-tive year and does not expect it to reboundto 2000 levels until 2004.
The sector’s largest market is for catalystsused in polymerization, followed by gas syn-thesis (used for producing ammonia,methanol, and hydrogen), oxidation (used inthe production of ethylene oxide), organic syn-thesis, hydrogenation, and dehydrogenation.
A recent technological advance in polymercatalysts involves the use of single-site metal-locene catalysts. These catalysts increase theoutput of a polymer of a certain molecularweight and allow the production of polymerswith distinct properties and process advan-tages. The plastics industry, led by DowChemical and Exxon Mobil, has begun pro-ducing a number of resins using these catalysts.
Environmental catalystsEnvironmental catalysts consist of emissions
control products for use in automobiles’ cat-alytic converters and in stationary sources suchas power generation and industrial plants.Their function is to reduce such pollutants ascarbon monoxide, volatile organic compounds,nitrogen oxide, and sulfur dioxide. The leadingauto catalyst producers are Engelhard Corp.,the U.K.-based Johnson Matthey plc, andDelphi Automotive Systems Corp.
The Catalyst Group estimates the 2001North American market for environmentalcatalysts at $1.2 billion. Growth is projectedat 3% annually through 2005. Changes in reg-ulatory standards to reduce emissions are thedriving factors for growth in this segment.
Water treatment chemicalsWater treatment chemicals are added to
water to improve its purity before, during,and/or after it is used in industrial, commer-cial, and municipal applications. The industrialmarket includes the pulp and paper, chemicalprocessing, petroleum refining, food and bev-erage, metal finishing, electronics, and paint
industries. The residential and commercialmarkets consist of water softening and purifi-cation, as well as recreational water treatmentfor swimming pools, hot tubs, and spas.Municipal applications consist of potablewater and waste water treatments.
Water treatment chemicals include large-volume commodity chemicals, specialtychemicals, and proprietary formulations thatare sold on a performance basis.
Market breakdownDemand for water treatment chemicals is
driven by broad economic factors such asgrowth in population and changes in indus-trial production, as well as by environmentalregulations regarding waste emissions.Concerns about health and product quality,water and energy conservation, and wasteminimization are also major factors.
The Freedonia Group, a research and con-sulting firm, estimated in early 2002 that theU.S. market for water management chemicalswas worth $3.4 billion in 2000 and wouldgrow about 5% a year through 2005. Thefirm estimates that the manufacturing sectoraccounts for about 55% of dollar sales, withthe remaining 45% of demand coming fromthe municipal, residential, power utility, andcommercial markets. In volume terms, mu-nicipal water accounts for a majority of de-mand, due to its use of commodity products.Freedonia forecasts that cooling water willremain the largest application through 2005,but that wastewater treatment will be thefastest growing use.
The Freedonia Group reports that in 2000(the latest year for which it has issued fig-ures), market share for domestic water treat-ment chemicals was distributed as follows:
◆ Corrosion inhibitors. Corrosion in-hibitors comprise the largest category of wa-ter treatment chemicals, at 29% of sales in2000. These products prevent scale forma-tion and the corrosive weakening of metalparts and piping caused by dissolved salts.They are used largely in industrial applica-tions, with less demand in municipal andrecreational applications.
◆ Oxidizers and biocides. Used as disin-fectants in industrial, municipal, and recre-ational applications, these chemicalscomprised 24% of the water treatment
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chemicals market in 2000. They includelarge-volume commodity chemicals, such aschlorine and its derivatives (hypochloriteand isocyanurate) and hydrogen peroxide.(It should be noted that water treatment ap-plications account for only a small percent-age of total demand for these majorchemicals.) Smaller volume specialty prod-ucts in this category include biocides andbromine compounds.
◆ Coagulants and flocculants. Thesechemicals (20% of 2000 sales) help to sepa-rate suspended matter and contaminants, in-cluding solid waste, from water. They includewater-soluble polymers, such as polyacry-lamides and acrylic acid polymers, and alu-minum compounds. Water treatment is thelargest market for coagulants and floccu-lants, which are also used in the paper pro-cessing and mining industries.
◆ pH adjusters and water softeners. Thisgroup of water chemicals (13%) is used tomaintain pH levels (acidity/alkalinity) andeliminate the effects of calcium and magne-sium in potable and industrial water. Thiscategory is dominated by lime, sodiumchemicals, and sulfuric and hydrochloricacids, which are commodity rather thanspecialty chemicals.
◆ Other. The remaining 14% of the mar-ket consists of filter media and adsorbents,defoamers, and chelating agents. Filter me-dia and adsorbents consist of ion-exchangeresins and activated carbon, and provide an-other means of separating suspended matterand contaminants from water. Chelatingagents combine with metals, which can thenbe removed from the water.
A few suppliers dominateA large number of companies supply wa-
ter treatment chemicals — more than 300 inUnited States, as estimated by the FreedoniaGroup. However, after a number of majormergers in the 1990s, only a handful of firmsnow control the specialty chemical side ofthe water-treatment business. These “full-ser-vice” companies provide a broad range ofwater treatment and process chemicals aswell as technical support and services. Someof these companies also derive sizable por-tions of their business from outside the
United States. (See the “Major specialtychemicals producers, by category” table.)
Other suppliers of various types of wa-ter chemicals include Dow Chemical Co.,Occidental Petroleum Corp., PPG Indus-tries Inc., Great Lakes Chemical Corp.,Arch Chemicals Inc., Ecolab Inc., BuckmanLaboratories, Cytec Industries Inc., SolutiaInc., Calgon Carbon Corp., Rohm & HaasCo., and Cargill Inc.
Plastics additives
Plastics additives are chemicals used toimprove the processability or quality of plas-tic resins. The group includes a wide varietyof products, including plasticizers, impactmodifiers, organic peroxides, foaming agents,flame retardants, antioxidants, heat stabiliz-ers, light stabilizers, lubricants, mold releases(which aid the release of a plastic productfrom a mold), and colorants.
Additives are sold to plastic fabricatorsand compounders (together, about 75% ofconsumption) and to resin manufacturers(the remaining 25%). Thus, the condition ofplastic manufacturers affects the companiesthat make plastics additives. From 1991 to2001, U.S. plastic industry production vol-ume (measured in pounds) grew at a com-pound annual rate of just under 5.0%, withincreases each year during this period.Another year of industry growth wasachieved in 2002. (For a description of plas-tic resins, see the Chemicals: Basic issue ofIndustry Surveys.)
BRG Townsend Inc., a materials industryconsulting firm, estimates the worldwide poly-mer additives business (excluding colorants) atabout 17.6 billion pounds in 2001 (latestavailable), valued at approximately $14.6 bil-lion. The firm notes that dollar sales in 2001were slightly less than those of 1998, whilevolumes grew only modestly over the sameperiod, reflecting a downturn in demand inNorth America during 2001 and erosion inselling prices globally. In mid-2002, BRGTownsend expected that the size of the market(in weight) would grow by about 3% a yearbetween 2001 and 2006, even factoring in the2001 downturn caused by the slowing econo-my and reduced plastic production. As ofmid-2003, the firm estimated that the indus-try’s sales rose modestly in 2002, largely as aresult of volume growth.
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The Asia/Pacific region consumed 36% ofpolymer additives by volume in 2001, whileNorth America consumed 27%. Europe ac-counted for 25% of demand, and the rest ofthe world represented the remaining 12%.
The plastics additives industry is highlyfragmented along product lines, with the topdozen largest suppliers accounting for onlyabout one-third of total sales. However, asBRG Townsend notes, consolidation is ongo-ing: the larger suppliers are putting globalorganizations in place to support their in-creasingly widespread customers.
Classes of plastics additivesBRG Townsend estimates that of the four
classes of plastics additives, modifiers ac-counted for 70% of worldwide polymer ad-ditive volume in 2001, and were valued at$7.6 billion, or 52% of global sales. Propertyextenders represented about 23% of volume,and $5.9 billion (41%) of sales. Processingaids, with 7% of volume, were valued atabout $1.2 billion (7%). (Colorants are notincluded in BRG Townsend’s definition ofplastics additives.)
The resin that consumes the most of thesepolymer additives is polyvinyl chloride(PVC). It accounts for about 75% of world-wide volume, but a smaller percentage of thedollar value. Makers of modifiers and pro-cessing aids rely heavily on this resin market,while property extenders are used primarilyin non-PVC resins.
◆ Modifiers. Modifiers are products thatchange the physical properties of resins. Themodifier additives produced in the largestquantity are plasticizers, which increase amaterial’s flexibility. They are used largely inmaking flexible PVC resins. The most com-mon plasticizer by volume is phthalate, acommodity product that is a derivative ofphthalic anhydride.
Impact modifiers, which increase plastics’resistance to stress, are mainly rubber-basedadditives that absorb the force of energy.Other modifiers include blowing agents andorganic peroxides.
◆ Property extenders. Property extendersensure the stability of resins during processingor use. This category includes flame retardants,antioxidants, heat stabilizers, and light stabiliz-ers, as well as biocides and antistatic agents.
Flame retardants are added to materials tohelp them resist combustion. Nearly 90% offlame retardants by volume are used in plas-tics for construction, electronic, and trans-portation uses, with textile and furnitureapplications the second-largest market.Brominated hydrocarbon is the largest vol-ume flame retardant, followed by phosphateesters, chlorinated hydrocarbons, and alumi-na trihydrate. Demand is growing for non-halogen products, in place of bromine andchlorinated products, due to concerns abouthuman health and the environment.
Antioxidants retard the oxidation of plas-tics. Polyolefins (polyethylene, polypropy-lene, and polystyrene) are the biggest users ofantioxidants. Major types include alkylatedphenols, amines, phosphites, and esters.
Heat stabilizers help maintain resinsthrough their processing and service life.PVC manufacturing is the major market forheat stabilizers, due to the high temperaturesat which the resins are processed.
Light (or ultraviolet) stabilizers absorbor screen out radiation that causes plasticsto degrade. They are often combined withother additives such as heat stabilizers andantioxidants.
◆ Processing aids. Processing aids im-prove the compounding or molding of resins.This segment consists of lubricants/mold re-lease agents and antiblocking agents, as wellas slip agents. Lubricants enhance mold re-lease and resin flow, and compensate for im-perfections in machinery and materials.Lubricants include metallic stearates, hydro-carbons, and fatty acids and alcohols.Antiblocking agents help prevent two ormore contacting layers of plastic film (suchas a bag or a roll of film) from sticking to-gether. Minerals used as antiblocking agentsinclude diatomaceous earth, talc, calciumcarbonate, and silica.
◆ Colorants. Pigments and dyes that givecolor to plastics are called colorants. Titaniumdioxide and carbon black are the largest-vol-ume pigments, though only a small percentageof each is used in plastics. Color pigments areiron oxides (used in making red, yellow,brown, and black), chromates (yellow and or-ange), cadmiums (red, yellow, orange, andmaroon), and chromium oxides (green). Salesfigures for colorants are not available.
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KEY INDUSTRY RATIOS AND STATISTICS
� Industrial production indexes. Reportedby the Federal Reserve Board in the middleof each month, these indexes measure theprevious month’s output for the manufac-turing, mining, and utilities industries, cat-egorized (since December 2002) by theNorth American Industrial ClassificationSystem (NAICS). These indexes are subjectto revision.
Production indexes are reported for thechemicals and products industry, as well asfor the industry’s major subgroups. Althoughfew relate to specific categories of specialtychemicals, the indexes indicate productiontrends for the overall chemical industry andfor other major industrial markets that usespecialty chemicals.
In 2002, the industrial production indexeased 0.7%, following a decline of 3.5% in2001. As of August 2003, the index was at110.2 (1997=100), down 1.0% from theyear-earlier level. Standard & Poor’s current-ly forecasts that the index will edge up lessthan 1.0% in 2003.
According to estimates made by theAmerican Chemistry Council (ACC), produc-tion volume for the specialty chemicals sectoreased 0.3% in 2002, after a 1.3% rise in 2001.The ACC estimates that its production index forspecialty chemicals in July 2003 (latest available)was slightly higher than the year-earlier level.
� Producer price indexes (PPIs).Reported by the U.S. Department of Laboreach month, these indexes track selling pricesfor various products at the manufacturinglevel. They indicate trends in selling pricesfor the overall chemical industry and for var-ious product lines, particularly basic chemi-cals. The indexes help identify changes inraw material costs for specialty chemicalcompanies that consume basic chemicals andother materials to make their products.
The PPI for chemicals and productsreached a new high of 155.4 (1982=100) inMarch 2001, as producers implemented priceincreases for petrochemicals and plastic resinsin the face of surging energy costs. With eas-ing feedstock costs and weakening demand,the index declined for the rest of 2001 andbottomed in January 2002, before rising andhitting new highs again over the course of
2002 and into 2003 on a renewed surge infeedstock costs. After a 0.5% climb in 2001,the PPI for chemicals and products was virtu-ally unchanged for full-year 2002. Due toprice increases for petrochemicals and plastics,the PPI for chemicals and products was at161.7 (1982=100) as of August 2003, up5.3% from a year earlier.
The specialty chemicals sector showed a0.7% increase in selling prices in 2002, ac-cording to estimates made by the AmericanChemistry Council. The ACC estimates thatits price index for specialty chemicals in July2003 (latest available) was 2.0% higher thanthe year-earlier level.
� International trade. The U.S. Depart-ment of Commerce reports monthly statisticsfor chemicals exports and imports. In recentyears, exports have accounted for about 15%of the U.S. chemical industry’s annual sales.Another source of import/export data is theAmerican Chemistry Council.
According to ACC estimates, exports ofspecialty chemicals in 2002 were $14.2 bil-lion, down 0.9% from 2001, while importsrose 1.8% to $21.4 billion. The trade deficitfor specialty chemicals thus amounted to$7.2 billion, up from $6.7 billion in 2001.The overall chemicals industry had a tradedeficit in 2002 of about $5.0 billion, versus asurplus of $1.3 billion in 2001. The chemicalindustry set its record surplus of $20.4 bil-lion in 1995.
� Statistics for specific end markets.While aggregate industry statistics are notavailable for most individual specialtychemicals, their customers or end marketsmay have ratios or statistics that are readilyavailable. These figures would includebook-to-bill ratios, as in the semiconductorindustry; operating rates for manufacturingindustries, such as paper or petroleum refin-ing; crop acreage for agricultural chemicals;housing starts or resales for housing- or fur-nishing-related markets; and monthly retailsales of automobiles.
HOW TO ANALYZE A SPECIALTY CHEMICAL COMPANY
When evaluating a specialty chemicalcompany, the analyst should take into ac-
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count the nature of specialty chemicals, theeconomic environment, end-market condi-tions for the firm’s products, and factorsunique to the company.
The nature of specialty chemicals
Specialty chemicals (or “specialties”) maybe distinguished from basic commoditychemicals (or “commodities”) in numerousways, from product composition to marketcharacteristics. For instance, specialties areproducts designed for specific applicationsand/or customers, and thus may be made insmall volumes. In contrast, commodities aregenerally produced in large volumes with lit-tle differentiation of the product amongmanufacturers or applications. Specialtychemicals are sold for what they do for acustomer — for example, to improve productperformance. Selling prices for specialtiestend to be set by their value in use, not bycosts, giving their manufacturers greater con-trol over prices than is exercised by makersof commodity chemicals.
With specialty chemical products sellinglargely on performance attributes, they maybe part of a total systems approach to solvinga problem. Manufacturers commonly providea high degree of technical service to cus-tomers, and once they gain a customer’s ac-count, are likely to succeed in keeping theaccount for a long time. Any savings that acustomer might realize by switching to anoth-er company’s products may not be significant,because specialties normally constitute a smallpercentage of the customer’s total costs.
Less cyclical than basic chemicals... Over each business cycle, demand for spe-
cialties is normally more stable than that forcommodities. One reason is that specialty man-ufacturers are close to the end-user in the dis-tribution chain, and changes in customerconsumption are generally small. Any changeat the consumer level is magnified exponential-ly as one goes down the chain. Manufacturersseparated from the ultimate consumer by inter-mediaries and distributors can thus experiencewide swings in inventory levels.
The wide range of end users is another sta-bilizing factor. A broad customer base reducesmarket exposure and volatility, inasmuch asproducers are less reliant on the fortunes of asingle industry to sell their goods. This situa-
tion helps to maintain selling prices and profitmargins at relatively stable levels.
Specialty chemicals require higher re-search and development (R&D) spendingthan commodity chemicals, and they incurgreater marketing and customer service costs.However, the manufacturing process is typi-cally less capital intensive, and raw materialsaccount for a lower percentage of total costs.
Industry capacity changes generally play asmall role in the analysis of specialty chemicalcompanies, again in contrast to commodities.Again, because specialty chemicals are soldlargely on the basis of their performance attrib-utes, and because their demand is relatively sta-ble, industry supply/demand balances exert lessinfluence over selling prices and profit marginsthan is the case with commodities. Capacityadditions for specialties are commonly small insize, or they are designed for unique products;either way, they can be completed relativelyquickly. Thus, specialty chemicals companiescan readily make short-term changes in capitalspending and capacity in response to significantchanges in demand.
...but still subject to economicand end-market conditions
Despite specialty chemicals’ relatively stabledemand, economic conditions should be con-sidered as part of a company analysis. Demandfor most specialty products is influenced byconditions in the overall economy, as these af-fect demand in specific key end markets.
Economic changes affect some specialtiesmore than others because of the nature oftheir customers or applications. For example,demand is fairly stable for flavors used infood and beverages, as the total consumptionof these consumer products doesn’t fluctuatemuch through an economic cycle. Changes inconsumer preferences for specific foods andbeverages, however, play a greater role in de-mand for various flavor products.
Meanwhile, demand for additives used inplastics can vary to a greater extent over abusiness cycle. Plastic is a more cyclical in-dustry than foods and beverages, reflectingthe influence of some key users such as theconstruction industry.
Unique company characteristics
A number of factors unique to a givenspecialty chemical company must be taken
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into account, including new products, geo-graphic location, and acquisition strategy.
New productsAll companies introduce new products,
but specialty chemical producers must doso continually. Questions to ask include thefollowing. At what rate is the company re-leasing new products? Are customers ac-cepting those products? Is the companyimproving its product mix by introducinghigher-margin goods?
Is the company’s response to customer de-mand being driven by changes in final con-sumer preferences, government regulations,or technology? Is it maintaining or increasingits market share? This latter question is oftenhard to answer in the specialty chemicals in-dustry, since information on individual prod-ucts is often lacking and most segments havefew public competitors.
Location of customersA company’s geographic exposure is an-
other major factor to study. A broad mix ofcustomer locations reduces a firm’s exposureto an economic downturn in any one regionor country, helping to smooth its sales andearnings trends.
Because expansion may provide growthopportunities, many specialty chemical com-panies are widening their geographic reach.Chemical markets in the Asia/Pacific, LatinAmerican, and Eastern European regionshave the potential to see more rapid growththan do those in the United States andEurope. On the down side, the costs of suchexpansions — in terms of capital spending,acquisitions, product development, or mar-keting — may hurt near-term financial re-sults. Changes in currency exchange ratesalso affect results.
Acquisition strategySome companies may see acquisitions as a
means to expand in the face of limitedgrowth opportunities in existing markets orproducts. For others, they are a way to im-prove technological expertise. Questions toask include: How does management allocatecapital? What portion goes toward internalgrowth, and what portion toward externalgrowth through acquisitions? What are itsacquisition criteria? How does managementdecide between investments that sharpen the
company’s focus on current markets and cus-tomers, and those that serve to reduce cycli-cal exposure? Is the diversification strategyconsistent with the firm’s core competencies?Finally, in the wake of an acquisition, are ex-ecution and integration effective?
The income statement
As with any business, a specialty chemi-cals company’s income statement providesdata that can be used to assess a company’soperating performance. Following are themost important items to consider.
Sales trendsA natural place to begin a financial
analysis of a specialty chemicals companyis with the sales figures. Changes in thesenumbers largely reflect changes in sales vol-ume, selling prices, product mix, and cur-rency exchange rates, as well as acquisitionsand divestitures. Any period of less thanone year should be compared with anotherperiod of the same duration to eliminate theimpact of variations such as holidays, nor-mal timing of plant shutdowns, or the sea-sonality of end markets such as agriculture.If possible, the analyst should focus on thesales trends for ongoing businesses or prod-uct lines, and separately assess the effect ofacquisitions and divestitures.
Changes in sales should be compared withthe company’s historical rates, with its com-petition, and with industry rates. Are thecompany’s sales growing or declining, andwhy? Are its core markets or product linesgrowing faster or slower than in the past? Isit becoming more efficient in its use of re-sources to generate sales? Is it gaining or los-ing market share? Are its customers gainingor losing market share?
What is a company’s exposure to currencyexchange rates? Analyze factors that havecaused any deviation from historical trends —such as selling prices, currency exchange rates,or temporary benefits or problems related toproduction plants, key customers, or the com-petition. Are these causes likely to last, orcould they quickly reverse?
Operating marginA firm’s operating margin is calculated by
subtracting its costs of operation from thesales figure, and expressing that answer as a
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percentage of sales. Operating costs includelabor, raw materials, energy and utilities,plant operations, and depreciation of plantsand equipment, as well as selling, administra-tion, and R&D expenses. According to theAmerican Chemistry Council (ACC), the op-erating margin in 2002 for the specialtychemicals industry was 8.8%, up from 5.8%in 2001.
In general, raw material, plant, and depre-ciation costs account for a smaller percentageof total costs for a specialty chemicals com-pany than for a commodity company. Sellingand R&D costs, however, account for a larg-er percentage. According to the ACC, R&Dexpense for the specialty chemicals industryequaled 4.1% of sales in 2002.
Operating margins for specialty chemicalsare usually relatively stable over a businesscycle, due to the low volatility in productionlevels and selling prices. Therefore, marginsnormally don’t vary significantly from oneyear to the next.
Changes in the costs of commodity chemi-cals and other raw materials can materiallyaffect margins for specialty chemicals, whoseselling prices may not change or may lag be-hind changes in costs. Therefore, during peri-ods of robust demand for commoditychemicals, higher raw material costs can re-sult in a margin squeeze for specialty prod-ucts. In times of weak demand, specialtymargins can widen. In either case, the impactwill vary by specialty product and company.
An analysis may compare a firm’s expensesand margins in one period with those of a pri-or year, or with those of other companies in itsindustry for the same period. Is the firm con-trolling its expenses? Does it use assets, per-sonnel, or other resources more efficientlythan its competitors? Are there unusual ex-penses that may not occur in the future? Is thecompany underspending in areas such asR&D, which could hurt future results?
Other factors that may change marginsfor a specialty chemicals company are thecosts associated with businesses recently ac-quired or divested, unusual levels of newproduct introductions, major new plant con-struction or maintenance programs, and en-vironmental clean-up.
Special itemsSpecialty chemicals companies may report
special or nonrecurring charges or gains for
various reasons. Nonrecurring items can in-clude gains or losses on the sale of assets, costsassociated with the integration of a major ac-quisition, and the expected costs of restructur-ing a business line or the overall company.
Restructuring costs may include employeeseverance, plant closing expenses, or thewritedown of assets such as plants andequipment, inventories, and goodwill for aproduct or business acquired in previousyears. These actions normally result in lowercosts in categories like personnel and in re-duced depreciation in the future.
When specialty companies undertake re-structuring actions, it is generally in responseto company-specific factors rather than tobroad chemical industry or economic trends.
Interest expenseInterest expense is not normally a major
factor in the financial analysis of a specialtychemical company. The industry is generallyprofitable and has the positive cash flow tocover debt payments.
Acquisitions and divestitures, as well aschanges in capital spending and the pace ofstock issuance or repurchases, can result inhigher or lower debt and interest expensecompared with prior years. Such changes indebt expense may be temporary, as a companymay plan to return to prior debt levels. On theother hand, they may become permanent if thecompany decides to have a more or less lever-aged balance sheet than in the past.
The use of debt to make acquisitions or toadd production capacity may result in newsources of sales and earnings. Stock repur-chases that reduce the number of outstandingshares will boost future earnings per share.
Net incomeNet income is the bottom line on the in-
come statement. After all expenses and in-come taxes have been paid, net income iswhat remains.
To understand the true earnings of a com-pany’s ongoing businesses, one should look atnet income before special items. Changes inaccounting methods, such as for inventory val-uations, depreciation schedules, and assump-tion of pension costs, can affect net income.
A company’s net margin — net income di-vided by sales — can be compared with thecompany’s historical levels and with its com-petitors’ net margins. Changes in net margins
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might indicate that a company is using its re-sources more or less efficiently than in otheryears or than do other companies.
Again, for reasons discussed earlier, earn-ings and margins for specialty companiestend to be relatively steady over a businesscycle and from one year to the next.According to the ACC, the return on rev-enues for the specialty chemicals industrywas 5.6% in 2002, versus 3.5% in 2001.
Earnings per shareIdeally, a company’s earnings per share
(EPS) should increase from year to year.However, if a company issues new shares orbuys back existing shares, the growth ratewill be affected by the change in the numberof shares used to calculate EPS. In recentyears, many specialty chemicals companieshave been repurchasing stock, raising theirEPS levels. In addition, EPS should be adjust-ed for nonrecurring items to obtain accuratecomparisons with prior years.
It’s also important to study any potentialimpact on EPS from the conversion of out-standing stock options that management orother investors hold. If converted into newstock, these options could have a significanteffect on EPS. However, unlike other indus-tries, such as high technology, the specialtychemicals business isn’t generally known forissuing large numbers of stock options.
Balance sheet data
Analysts should look at a company’s bal-ance sheet to evaluate its financial strengthand identify potential problems. Changes inthe working capital ratio (current assets di-vided by current liabilities) indicate whetherthe company is using more or less cash thanin the past for normal operations, andwhether it has a potential liquidity problem.
AssetsIn reviewing the asset side of the balance
sheet, it’s important to look at accounts re-ceivable and inventory levels. A build-up inaccounts receivable as a percentage of salesmay indicate problems related to customersnot paying their bills or the company easingcredit standards in order to boost sales.
A build-up in inventories as a percentageof sales or a reduction in the inventoryturnover ratio (sales divided by average in-
ventory level) indicate the possibility of afuture slowdown in production levels,which would hurt profit margins. Problemsin either asset category may result in assetwrite-offs.
LiabilitiesThe liabilities side of the balance sheet
should be closely reviewed as well. Items toexamine include the debt-to-capital ratio andthe coverage ratio. Specialty chemicals com-panies tend to have lower debt-to-capital ra-tios than do commodity companies, reflectinglower capital requirements. The long-termdebt-to-capital ratio for the specialty chemi-cals industry was 57.5% at year-end 2002,according to the ACC, versus 68.0% for thecommodity chemicals industry.
A potentially major liability for a specialtychemicals company, which may not be fullyrecorded on its balance sheet, is the futurecost of environmental remediation for exist-ing plants or former hazardous waste sites.The financial exposure for specialty compa-nies, however, is generally less than that forthe basic chemicals firms, which producecommodities in large volumes at sites overlong periods of time.
Discussion of a company’s cash spendingand financial reserves for environmental-re-lated matters, including remediation costs,can be found in the company’s notes to its fi-nancial statements, although the extent ofdisclosure varies by company. If changing en-vironmental regulations result in additionalpotential costs, or if liability is determinedfor additional sites, the company may haveto book new reserves.
The notes to financial statements may re-port on the company’s annual expenses foroperating and maintaining environmental fa-cilities as well as capital outlays for environ-mental equipment.
Return on equityReturn on equity (ROE) — net income
divided by average equity — indicates acompany’s earnings power. An increase in acompany’s ROE indicates either improvedutilization of financial resources or a re-duction in equity. According to theAmerican Chemistry Council, ROE for thespecialty chemicals industry was 12.6% in2002, versus 7.5% in 2001. ROE for ma-jor specialty chemical companies ranged
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from well below those averages to as highas 35%.
Cash flow
Any analysis of a specialty chemicals com-pany should examine cash flow. The cashflow statement reveals how a company’s cashis generated and how much is available fromnormal operations to fund capital expendi-tures, make acquisitions, distribute divi-dends, or repay debt.
In its simplest definition, cash flow is netincome plus depreciation and amortizationexpenses. Depreciation and amortization arecalled noncash charges; although they mustbe listed as expenses, they require no cashoutlays. A broader definition of cash flow in-cludes changes in working capital (currentassets minus current liabilities), because thesechanges can consume or free up cash.
Cash flow analysis helps to show if acompany can do such things as pay interestexpense on its debt or fund capital projectsfrom internally generated sources, or if it willneed to borrow or issue equity to pay forthem. Analysis will also indicate if the com-pany’s dividend can be raised or if it’s underpressure to be cut or even eliminated to helpconserve cash. The availability of cash flowabove normal needs would let the companyboost share value through the repurchase ofits common stock.
The industry’s low cyclicality means thatcash flow for a specialty company may notchange dramatically during a business cycle.During the down portion of the cycle, a com-pany may reduce expenses and capital out-lays to conserve cash. It may even be forcedto cut or eliminate its dividend, but that’s anunusual occurrence in the specialty chemicalindustry. In an upturn, a company will beable to increase capital spending and/or in-crease dividends to shareholders as cash flowimproves. Capacity expansions may requireexternal funds, but completion of such pro-jects may result in the company generatingexcess cash. ■
INDUSTRY REFERENCES
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PERIODICALS
CChheemmiiccaall && EEnnggiinneeeerriinngg NNeewwssAmerican Chemical Society1155 16th St. NW, Washington, DC 20036(202) 872-4600Web site: http://pubs.acs.org/cenWeekly magazine; covers the chemical professionand the chemical processing industries. It presentsindustrial, commercial, educational, and governmentviewpoints.
CChheemmiiccaall MMaarrkkeettiinngg RReeppoorrtteerrSchnell Publishing Co. Inc. Two Rector St., New York, NY 10006(212) 791-4200Web site: http://chemicalmarketreporter.comWeekly; prices of industrial and specialty chemicals, al-lied products, drugs, flavors, perfumes, and plastics.
CChheemmiiccaall WWeeeekkChemical Week Associates110 William St., New York, NY 10038(212) 621-4900Web site: http://www.chemweek.comWeekly; newsmagazine for business and technicalmanagers in the chemical processing industries.
IInndduussttrryy PPrrooffiilleeCropLife America 1156 15th St. NW, Ste. 400, Washington, DC 20005(202) 296-1585Web site: http://www.croplifeamerica.orgAn annual study of the pesticide chemicals industry.
PPaaiinntt,, VVaarrnniisshh,, aanndd LLaaccqquueerrU.S. Census Bureau4700 Silver Hill Rd., Suitland, MD 20746 (301) 763-4748Web site: http://www.census.gov/cir/www/alpha.htmlQuarterly; reports paint and coatings production.
GOVERNMENT AND REGULATORY AGENCIES
UU..SS.. CCeennssuuss BBuurreeaauu4700 Silver Hill Rd., Suitland, MD 20746(301) 763-4748Web site: http://www.census.govAgency within the U.S. Department of Commerce;collects and provides data about the U.S. people and economy.
UU..SS.. EEnnvviirroonnmmeennttaall PPrrootteeccttiioonn AAggeennccyy ((EEPPAA))1200 Pennsylvania Ave. NW, Washington, DC 20460(202) 272-0167Web site: http://www.epa.govFederal agency charged with protecting public healthand the natural environment; enforces governmentalregulations regarding air, water, and land resources.
SSeeccuurriittiieess aanndd EExxcchhaannggee CCoommmmiissssiioonn ((SSEECC))450 Fifth St. NW, Washington, DC 20549(202) 942-7040Web site: http://www.sec.gov/index.htm The SEC’s Edgar site provides access to corporate doc-uments such as 10Ks and 10Qs.
TRADE ASSOCIATIONS
TThhee AAddhheessiivvee aanndd SSeeaallaanntt CCoouunncciill IInncc..7979 Old Georgetown Rd., Bethesda, MD 20814(301) 986-9700Web site: http://ascouncil.orgRepresents adhesive and sealant manufacturers andmarketers and their suppliers.
AAmmeerriiccaann CChheemmiissttrryy CCoouunncciill ((AACCCC))1300 Wilson Blvd., Arlington, VA 22209(703) 741-5000Web site: http://www.americanchemistry.comTrade association formerly known as the ChemicalManufacturers Association; member companies account for more than 90% of U.S. industrial chemi-cal capacity.
CCrrooppLLiiffee AAmmeerriiccaa1156 15th St. NW, Ste. 400, Washington, DC 20005(202) 296-1585Web site: http://www.croplifeamerica.orgPromotes the environmentally sound use of crop pro-tection products; members include producers of agri-cultural pesticides. (Formerly the American Crop Pro-tection Association.)
FFrraaggrraannccee FFoouunnddaattiioonn145 E. 32nd St., New York, NY 10016(212) 725-2755Web site: http://fragrance.org/main.htmlMembers include perfume manufacturers, suppliers tothe trade, and designers.
NNaattiioonnaall PPaaiinntt && CCooaattiinnggss AAssssoocciiaattiioonn1500 Rhode Island Ave. NW, Washington, DC 20005(202) 462-6272Web site: http://www.paint.orgRepresents paint and chemical coatings manufacturersand their raw materials and equipment suppliers.
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INDUSTRY CONSULTANTS
BBRRGG TToowwnnsseenndd IInncc..500 International Dr. N., Mount Olive, NJ 07828(973) 347-5300Web site: http://www.brgtownsend.comResearch company serving the plastics, chemicals, andpulp and paper industries, plus related materials.
TThhee CCaattaallyysstt GGrroouupp714 N. Bethlehem Pike, Spring House, PA 19477(215) 628-4447Web site: http://www.catalystgrp.comCatalyst industry consulting firm.
CCrrooppnnoossiiss LLttdd..Kintore House, 74-77 Queen St. Edinburgh, UK EH2 4NS (44) (0) 131 243-4474Web site: http://www.cropnosis.com Research firm covering the crop protection industry.
DDPPNNAA IInntteerrnnaattiioonnaall126 Allendale Circle, Troutman, NC 28166(704) 528-3985Web site: http://www.dpna-international.com/dpna2002_001.htmAdhesives industry market research firm.
TThhee FFrreeeeddoonniiaa GGrroouupp IInncc..767 Beta Dr., Cleveland, OH 44143(440) 684-9600Web site: http://www.freedoniagroup.comInternational multiclient business research/databasecompany.
KKlliinnee && CCoo..150 Clove Rd., Ste. 410, Little Falls, NJ 07424(973) 435-6262Web site: http://www.klinegroup.comChemical industry market research firm.
YYoouunngg && PPaarrttnneerrss LLLLCC230 Park Ave., Ste. 1145, New York, NY 10169
(212) 682-5555Web site: http://www.youngandpartners.com An international investment banking firm focused on thechemical and life science industries.
DEFINITIONS FOR COMPARATIVE COMPANY ANALYSIS TABLES
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Operating revenuesNet sales and other operating revenues. Excludesinterest income if such income is “nonoperating.”Includes franchised/leased department income forretailers and royalties for publishers and oil and miningcompanies. Excludes excise taxes for tobacco, liquor,and oil companies.
Net incomeProfits derived from all sources, after deductions ofexpenses, taxes, and fixed charges, but before anydiscontinued operations, extraordinary items, anddividend payments (preferred and common).
Return on revenues Net income divided by operating revenues.
Return on assets Net income divided by average total assets. Used inindustry analysis and as a measure of asset-use efficiency.
Return on equity Net income, less preferred dividend requirements,divided by average common shareholder‘s equity.Generally used to measure performance and to makeindustry comparisons.
Current ratioCurrent assets divided by current liabilities. It is ameasure of liquidity. Current assets are those assetsexpected to be realized in cash or used up in theproduction of revenue within one year. Current liabilitiesgenerally include all debts/obligations falling due withinone year.
Debt/capital ratioLong-term debt (excluding current portion) divided bytotal invested capital. It indicates how highly “leveraged”a company might be. Long-term debt are thosedebts/obligations due after one year, including bonds,notes payable, mortgages, lease obligations, andindustrial revenue bonds. Other long-term debt, whenreported as a separate account, is excluded; this accountgenerally includes pension and retirement benefits. Totalinvested capital is the sum of stockholders’ equity, long-term debt, capital lease obligations, deferred incometaxes, investment credits, and minority interest.
Debt as a percent of net working capitalLong-term debt (excluding current portion) divided by thedifference between current assets and current liabilities.It is an indicator of a company’s liquidity.
Price/earnings ratio The ratio of market price to earnings, obtained bydividing the stock’s high and low market price for theyear by earnings per share (before extraordinary items).It essentially indicates the value investors place on acompany’s earnings.
Dividend payout ratioThis is the percentage of earnings paid out in dividends.It is calculated by dividing the annual dividend by theearnings. Dividends are generally total cash paymentsper share over a 12-month period. Although payments areusually calculated from the ex-dividend dates, they mayalso be reported on a declared basis where this has beenestablished to be a company’s payout policy.
Dividend yield The total cash dividend payments divided by the year’shigh and low market prices for the stock.
Earnings per shareThe amount a company reports as having been earnedfor the year (based on generally accepted accountingstandards), divided by the number of shares outstanding.Amounts reported in Industry Surveys excludeextraordinary items.
Tangible book value per shareThis measure indicates the theoretical dollar amount per common share one might expect to receive shouldliquidation take place. Generally, book value isdetermined by adding the stated (or par) value of thecommon stock, paid-in capital, and retained earnings,then subtracting intangible assets, preferred stock atliquidating value, and unamortized debt discount. Thisamount is divided by the number of outstanding shares to get book value per common share.
Share price This shows the calendar-year high and low of a stock’smarket price.
In addition to the footnotes that appear at the bottom ofeach page, you will notice some or all of the following:NA—Not available.NM—Not meaningful.NR—Not reported.AF—Annual figure. Data are presented on an annualbasis.CF—Combined figure. In this case, data are not availablebecause one or more components are combined withother items.
OCTOBER 2 , 2003 / CHEMICALS: SPECIALTY INDUSTRY SURVEY
32
COMPARATIVE COMPANY ANALYSIS — CHEMICALS: SPECIALTY
SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS‡‡ALB † ALBEMARLE CORP DEC 1,011.4C 916.9A 917.5 845.9 820.9 829.8 818.2 2.1 4.0 10.3 124 112 112 103 100ARJ § ARCH CHEMICALS INC DEC 939.4D 920.8D 941.2A 879.8 862.8 929.9 NA NA 0.2 2.0 ** ** ** ** NACBM § CAMBREX CORP DEC 526.9F 498.9A,F 484.2A,F 481.4A,F 457.2F 374.2A,F 179.5A 11.4 7.1 5.6 294 278 270 268 255CK † CROMPTON CORP DEC 2,546.9 2,718.8 3,038.4 2,092.4B 1,796.1A 1,851.2 517.7A 17.3 6.6 -6.3 492 525 587 404 347CYT † CYTEC INDUSTRIES INC DEC 1,346.2 1,387.1 1,492.5 1,412.5 1,444.5 1,290.6A NA NA 0.8 -2.9 ** ** ** ** NA
ECL * ECOLAB INC DEC 3,403.6D 2,354.7 2,264.3C 2,080.0 1,888.2 1,640.4A 1,004.8 13.0 15.7 44.5 339 234 225 207 188FOE † FERRO CORP DEC 1,528.5D 1,501.1A 1,447.3A 1,355.3 1,361.8 1,381.3 1,097.8 3.4 2.0 1.8 139 137 132 123 124FUL § FULLER (H. B.) CO NOV 1,256.2 1,274.1 1,352.6 1,364.5 1,347.2 1,306.8 933.7 3.0 -0.8 -1.4 135 136 145 146 144GLK * GREAT LAKES CHEMICAL CORP DEC 1,401.5D 1,594.7A 1,670.5A 1,453.3A 1,394.3 1,311.2A,C 1,496.5A -0.7 1.3 -12.1 94 107 112 97 93IFF * INTL FLAVORS & FRAGRANCES DEC 1,809.2 1,843.8 1,462.8A 1,439.5 1,407.3 1,426.8 1,126.4A 4.9 4.9 -1.9 161 164 130 128 125
LZ † LUBRIZOL CORP DEC 1,983.9C 1,844.6A 1,775.8 1,748.0 1,617.9 1,673.8 1,552.2 2.5 3.5 7.5 128 119 114 113 104MRD § MACDERMID INC DEC 687.6 533.9H 794.8A 756.0A 382.6A 314.1 156.3 16.0 17.0 28.8 440 342 508 484 245MSC § MATERIAL SCIENCES CORP # FEB 266.8 250.5D 482.0C 502.9 469.1 320.2A 156.2 5.5 -3.6 6.5 171 160 309 322 300MTX † MINERALS TECHNOLOGIES INC DEC 752.7A 684.4A 670.9A 637.5 609.2A 602.3 394.0 6.7 4.6 10.0 191 174 170 162 155OMG § OM GROUP INC DEC 4,909.4D 2,367.4A 887.7A 507.0 521.2A 487.3A 201.2 37.6 58.7 107.4 2,441 1,177 441 252 259
OMN § OMNOVA SOLUTIONS INC NOV 681.2 737.0 773.3A 767.4A 624.0A NA NA NA NA -7.6 ** ** ** ** NAPOL § POLYONE CORP DEC 2,498.2A,C 2,654.6 1,887.8 1,261.2A 1,284.4A 1,250.0A 969.9 9.9 14.9 -5.9 258 274 195 130 132KWR § QUAKER CHEMICAL CORP DEC 274.5C 251.1 267.6 258.5 257.1 241.5 212.5C 2.6 2.6 9.3 129 118 126 122 121ROH * ROHM & HAAS CO DEC 5,727.0A 5,666.0D 6,879.0C 5,339.0A 3,720.0C,F 3,999.0F 3,072.0C 6.4 7.4 1.1 186 184 224 174 121RPM † RPM INTERNATIONAL INC # MAY NA 1,986.1 2,007.8 1,954.1 1,712.2 1,615.3A 625.7A NA NA NA NA 317 321 312 274
SHLM § SCHULMAN (A.) INC AUG 966.6 975.2 1,032.5 985.6 993.4 996.4 732.2 2.8 -0.6 -0.9 132 133 141 135 136SIAL * SIGMA-ALDRICH DEC 1,207.0D 1,179.4 1,096.3C 1,037.9D 1,194.3 1,127.1 654.4 6.3 1.4 2.3 184 180 168 159 182VAL † VALSPAR CORP OCT 2,126.9 1,921.0A 1,483.3 1,387.7A 1,155.1 1,017.3 683.5 12.0 15.9 10.7 311 281 217 203 169
IINNDDUUSSTTRRIIAALL GGAASSEESS‡‡APD * AIR PRODUCTS & CHEMICALS INC SEP 5,401.2 5,717.2 5,467.1 5,020.1A 4,919.0 4,637.8C 3,217.3 5.3 3.1 -5.5 168 178 170 156 153ARG † AIRGAS INC # MAR 1,787.0A 1,636.0A 1,628.9A 1,542.3A,C 1,561.2A 1,448.0A 410.8A 15.8 4.3 9.2 435 398 397 375 380PX * PRAXAIR INC DEC 5,128.0C 5,158.0C 5,043.0 4,639.0C 4,833.0 4,735.0 2,604.0 7.0 1.6 -0.6 197 198 194 178 186
OOTTHHEERR CCOOMMPPAANNIIEESS WWIITTHH SSIIGGNNIIFFIICCAANNTT SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS OOPPEERRAATTIIOONNSSCBT † CABOT CORP SEP 1,557.0A 1,670.0A 1,517.0D 1,695.0 1,647.8C 1,630.0 1,557.0C 0.0 -0.9 -6.8 100 107 97 109 106CCC CALGON CARBON CORP DEC 258.1C 270.6 269.0 296.2 301.0 327.5C 298.4 -1.4 -4.7 -4.6 87 91 90 99 101EC * ENGELHARD CORP DEC 3,753.6 5,096.9 5,542.6 4,402.0 4,172.3A 3,629.6 2,397.2C 4.6 0.7 -26.4 157 213 231 184 174EY ETHYL CORP DEC 656.3D 724.5 820.9 843.7 974.2 1,063.6 2,975.0 -14.0 -9.2 -9.4 22 24 28 28 33FMC † FMC CORP DEC 1,852.9 1,943.0A,C 3,925.5D 4,110.6 4,378.4A 4,259.0D 3,973.7 -7.3 -15.3 -4.6 47 49 99 103 110
GRA GRACE (W R) & CO DEC 1,817.2 1,723.2 1,597.4 1,471.9 1,463.4 1,479.7A,C 5,518.2D -10.5 4.2 5.5 33 31 29 27 27HPC * HERCULES INC DEC 1,705.0D 2,620.0 3,152.0 3,248.0 2,145.0A 1,866.0 2,864.9 -5.1 -1.8 -34.9 60 91 110 113 75ISP INTL SPECIALTY PRODS INC DEC NA 787.2C 783.9 787.4D 823.9A,C 749.2 570.8 NA NA NA NA 138 137 138 144OLN † OLIN CORP DEC 1,301.3A 1,270.6 1,549.0C 1,315.0 1,426.0D 2,410.0 2,376.0 -5.8 -11.6 2.4 55 53 65 55 60PENX § PENFORD CORP AUG 231.4 225.7A,C 158.1 155.1 163.0D 196.6 126.0 6.3 3.3 2.6 184 179 126 123 129
PPG * PPG INDUSTRIES INC DEC 8,067.0 8,169.0 8,629.0 7,757.0A 7,510.0A 7,379.0A 5,813.9A 3.3 1.8 -1.2 139 141 148 133 129
Operating Revenues
Million $ Compound Growth Rate (%) Index Basis (1992 = 100)
Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. ** Not calculated; data for base year or end year not available.A - This year's data reflect an acquisition or merger. B - This year's data reflect a major merger resulting in the formation of a new company. C - This year's data reflect an accounting change. D - Data exclude discontinued operations. E - Includes excise taxes. F - Includesother (nonoperating) income. G - Includes sale of leased depts. H - Some or all data are not available, due to a fiscal year change.
Ticker Company Yr. End 2002 2001 2000 1999 1998 1997 1992 10-Yr. 5-Yr. 1-Yr. 2002 2001 2000 1999 1998
OCTOBER 2 , 2003 / CHEMICALS: SPECIALTY INDUSTRY SURVEY
33
Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. ** Not calculated; data for base year or end year not available.
SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS‡‡ALB † ALBEMARLE CORP DEC 74.7 68.2 101.8 88.8 84.7 80.0 41.7 6.0 -1.3 9.6 179 163 244 213 203ARJ § ARCH CHEMICALS INC DEC 7.8 1.8 0.5 40.7 40.0 56.3 NA NA -32.7 333.3 ** ** ** ** NACBM § CAMBREX CORP DEC 36.2 26.6 49.6 38.1 39.1 17.8 6.2 19.3 15.3 36.4 582 426 796 612 628CK † CROMPTON CORP DEC 15.5 -123.9 89.3 -159.4 183.2 92.1 43.3 -9.8 -30.0 NM 36 -286 206 -368 423CYT † CYTEC INDUSTRIES INC DEC 79.3 66.2 177.6 121.3 124.7 113.6 NA NA -6.9 19.8 ** ** ** ** NA
ECL * ECOLAB INC DEC 211.9 188.2 208.6 175.8 154.5 134.0 64.3 12.7 9.6 12.6 330 293 324 274 240FOE † FERRO CORP DEC 33.7 39.2 73.1 73.0 69.3 -37.3 58.8 -5.4 NM -13.9 57 67 124 124 118FUL § FULLER (H. B.) CO NOV 28.2 44.9 49.2 44.1 16.0 40.3 35.6 -2.3 -6.9 -37.3 79 126 138 124 45GLK * GREAT LAKES CHEMICAL CORP DEC 47.4 -289.5 127.0 139.6 56.4 71.8 232.7 -14.7 -8.0 NM 20 -124 55 60 24IFF * INTL FLAVORS & FRAGRANCES DEC 175.9 116.0 123.0 162.0 203.8 218.2 176.7 0.0 -4.2 51.7 100 66 70 92 115
LZ † LUBRIZOL CORP DEC 126.3 94.1 118.0 123.0 71.2 154.9 124.6 0.1 -4.0 34.2 101 76 95 99 57MRD § MACDERMID INC DEC 9.3 -28.9 34.8 49.1 36.3 30.8 7.7 2.0 -21.2 NM 122 -376 453 639 472MSC § MATERIAL SCIENCES CORP # FEB 2.0 -4.5 -0.7 16.7 10.2 6.5 8.9 -13.7 -20.5 NM 23 -50 -8 188 114MTX † MINERALS TECHNOLOGIES INC DEC 53.8 49.8 54.2 62.1 57.2 50.3 24.2 8.3 1.3 8.0 222 206 224 257 236OMG § OM GROUP INC DEC -198.3 80.2 71.5 55.8 48.4 38.4 12.0 NM NM NM -1,654 669 596 466 403
OMN § OMNOVA SOLUTIONS INC NOV 7.0 -6.7 4.4 34.4 42.0 NA NA NA NA NM ** ** ** ** NAPOL § POLYONE CORP DEC -6.6 -46.1 15.9 106.2 13.8 22.5 -15.0 NM NM NM NM NM NM NM NMKWR § QUAKER CHEMICAL CORP DEC 14.3 7.7 17.2 15.7 10.6 12.6 12.1 1.7 2.5 86.5 118 63 142 129 88ROH * ROHM & HAAS CO DEC 218.0 -70.0 354.0 249.0 453.0 410.0 174.0 2.3 -11.9 NM 125 -40 203 143 260RPM † RPM INTERNATIONAL INC # MAY NA 101.6 63.0 41.0 94.5 87.8 39.4 NA NA NA ** 258 160 104 240
SHLM § SCHULMAN (A.) INC AUG 32.2 12.7 37.7 47.8 52.2 50.7 43.8 -3.0 -8.7 153.3 73 29 86 109 119SIAL * SIGMA-ALDRICH DEC 186.7 140.7 139.1 148.6 166.3 166.1 95.5 6.9 2.4 32.7 196 147 146 156 174VAL † VALSPAR CORP OCT 120.1 51.5 86.5 82.1 72.1 65.9 34.4 13.3 12.8 133.2 349 150 251 239 210
IINNDDUUSSTTRRIIAALL GGAASSEESS‡‡APD * AIR PRODUCTS & CHEMICALS INC SEP 525.4 512.9 124.2 450.5 546.8 429.3 277.0 6.6 4.1 2.4 190 185 45 163 197ARG † AIRGAS INC # MAR 68.1 48.6 28.2 38.9 51.9 40.5 12.5 18.5 10.9 40.2 546 390 226 312 416PX * PRAXAIR INC DEC 548.0 432.0 363.0 441.0 425.0 416.0 84.0 20.6 5.7 26.9 652 514 432 525 506
OOTTHHEERR CCOOMMPPAANNIIEESS WWIITTHH SSIIGGNNIIFFIICCAANNTT SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS OOPPEERRAATTIIOONNSSCBT † CABOT CORP SEP 105.0 121.0 108.0 97.0 121.6 92.7 62.2 5.4 2.5 -13.2 169 194 174 156 195CCC CALGON CARBON CORP DEC 4.2 8.0 9.9 -13.7 8.3 21.6 28.6 -17.4 -27.8 -47.1 15 28 34 -48 29EC * ENGELHARD CORP DEC 171.4 225.6 168.3 197.5 187.1 47.8 100.1 5.5 29.1 -24.0 171 225 168 197 187EY ETHYL CORP DEC 9.5 -105.0 61.0 55.3 70.6 77.5 269.4 -28.4 -34.3 NM 4 -39 23 21 26FMC † FMC CORP DEC 69.1 -306.3 177.3 216.0 185.3 -24.5 192.6 -9.7 NM NM 36 -159 92 112 96
GRA GRACE (W R) & CO DEC 22.1 78.6 -89.7 130.2 -145.7 88.2 79.4 -12.0 -24.2 -71.9 28 99 -113 164 -184HPC * HERCULES INC DEC -49.0 -58.0 98.0 168.0 9.0 324.0 167.9 NM NM NM -29 -35 58 100 5ISP INTL SPECIALTY PRODS INC DEC NA 0.6 94.1 49.6 4.8 92.6 57.2 NA NA NA ** 1 165 87 8OLN † OLIN CORP DEC -31.3 -9.5 81.0 17.0 38.0 153.0 55.0 NM NM NM -57 -17 147 31 69PENX § PENFORD CORP AUG 3.8 0.1 10.4 6.2 8.1 6.6 7.5 -6.5 -10.4 3337.8 51 1 138 83 108
PPG * PPG INDUSTRIES INC DEC -60.0 387.0 620.0 568.0 801.0 714.0 319.4 NM NM NM -19 121 194 178 251
Net Income
Million $ Compound Growth Rate (%) Index Basis (1992 = 100)
Ticker Company Yr. End 2002 2001 2000 1999 1998 1997 1992 10-Yr. 5-Yr. 1-Yr. 2002 2001 2000 1999 1998
OCTOBER 2 , 2003 / CHEMICALS: SPECIALTY INDUSTRY SURVEY
34
Return on Revenues (%) Return on Assets (%) Return on Equity (%)
Ticker Company Yr. End 2002 2001 2000 1999 1998 2002 2001 2000 1999 1998 2002 2001 2000 1999 1998
SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS‡‡ALB † ALBEMARLE CORP DEC 7.4 7.4 11.1 10.5 10.3 6.4 6.5 10.5 9.4 9.3 12.9 11.8 19.4 18.9 17.5ARJ § ARCH CHEMICALS INC DEC 0.8 0.2 0.1 4.6 4.6 0.8 0.2 0.1 5.5 5.7 2.2 0.4 0.1 8.5 8.3CBM § CAMBREX CORP DEC 6.9 5.3 10.2 7.9 8.6 4.3 3.5 7.3 5.9 6.7 9.4 7.6 15.7 13.3 15.6CK † CROMPTON CORP DEC 0.6 NM 2.9 NM 10.2 0.5 NM 2.5 NM 12.4 4.1 NM 11.8 NM 786.1CYT † CYTEC INDUSTRIES INC DEC 5.9 4.8 11.9 8.6 8.6 4.7 3.9 10.2 7.0 7.5 12.6 10.6 31.7 25.9 30.5
ECL * ECOLAB INC DEC 6.2 8.0 9.2 8.5 8.2 7.8 8.9 12.6 11.5 10.7 21.4 23.0 27.5 24.2 24.9FOE † FERRO CORP DEC 2.2 2.6 5.1 5.4 5.1 1.9 2.5 6.6 7.6 8.0 9.9 15.4 30.0 31.2 30.2FUL § FULLER (H. B.) CO NOV 2.2 3.5 3.6 3.2 1.2 2.9 4.5 4.8 4.3 1.6 6.4 10.7 12.6 12.3 4.7GLK * GREAT LAKES CHEMICAL CORP DEC 3.4 NM 7.6 9.6 4.0 2.8 NM 5.8 6.5 2.6 7.0 NM 13.1 13.6 4.8IFF * INTL FLAVORS & FRAGRANCES DEC 9.7 6.3 8.4 11.3 14.5 7.8 4.9 6.3 11.6 14.5 32.0 20.1 16.5 18.0 20.9
LZ † LUBRIZOL CORP DEC 6.4 5.1 6.6 7.0 4.4 7.2 5.7 7.1 7.4 4.6 15.4 12.3 15.3 15.8 9.0MRD § MACDERMID INC DEC 1.4 NM 4.4 6.5 9.5 1.2 NM 4.2 7.6 9.0 4.4 NM 15.7 27.7 29.3MSC § MATERIAL SCIENCES CORP # FEB 0.8 NM NM 3.3 2.2 0.8 NM NM 4.2 2.5 1.6 NM NM 10.9 7.0MTX † MINERALS TECHNOLOGIES INC DEC 7.1 7.3 8.1 9.7 9.4 6.2 6.0 6.9 8.1 7.6 9.8 10.0 11.2 12.8 12.0OMG § OM GROUP INC DEC NM 3.4 8.1 11.0 9.3 NM 4.1 6.0 5.9 6.6 NM 14.9 15.0 13.1 13.7
OMN § OMNOVA SOLUTIONS INC NOV 1.0 NM 0.6 4.5 6.7 1.3 NM 0.6 5.2 NA 3.3 NM 1.5 8.6 NAPOL § POLYONE CORP DEC NM NM 0.8 8.4 1.1 NM NM 0.9 10.8 1.6 NM NM 2.7 38.7 6.3KWR § QUAKER CHEMICAL CORP DEC 5.2 3.1 6.4 6.1 4.1 7.3 4.2 9.3 8.4 5.9 16.9 9.2 20.7 19.0 13.4ROH * ROHM & HAAS CO DEC 3.8 NM 5.1 4.7 12.2 2.2 NM 3.1 3.3 11.8 6.3 NM 9.9 10.0 28.3RPM † RPM INTERNATIONAL INC # MAY NA 5.1 3.1 2.1 5.5 NA 4.9 3.0 2.1 5.5 NA 13.6 9.8 5.9 14.4
SHLM § SCHULMAN (A.) INC AUG 3.3 1.3 3.7 4.8 5.2 5.4 2.2 6.5 8.3 9.3 9.5 3.9 11.1 13.3 13.8SIAL * SIGMA-ALDRICH DEC 15.5 11.9 12.7 14.3 13.9 13.2 10.1 10.0 10.4 12.4 22.1 16.9 13.1 12.0 14.6VAL † VALSPAR CORP OCT 5.6 2.7 5.8 5.9 6.2 5.2 3.1 7.7 8.6 10.2 17.3 9.4 20.8 22.4 22.7
IINNDDUUSSTTRRIIAALL GGAASSEESS‡‡APD * AIR PRODUCTS & CHEMICALS INC SEP 9.7 9.0 2.3 9.0 11.1 6.3 6.3 1.5 5.7 7.4 16.0 17.3 4.3 16.0 20.6ARG † AIRGAS INC # MAR 3.8 3.0 1.7 2.5 3.3 4.0 2.9 1.7 2.3 3.1 12.4 9.7 5.8 8.2 11.6PX * PRAXAIR INC DEC 10.7 8.4 7.2 9.5 8.8 7.3 5.6 4.7 5.6 5.3 22.8 17.9 15.6 19.1 19.1
OOTTHHEERR CCOOMMPPAANNIIEESS WWIITTHH SSIIGGNNIIFFIICCAANNTT SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS OOPPEERRAATTIIOONNSSCBT † CABOT CORP SEP 6.7 7.2 7.1 5.7 7.4 5.1 5.8 5.3 5.2 6.5 10.8 12.1 12.2 13.6 16.8CCC CALGON CARBON CORP DEC 1.6 2.9 3.7 NM 2.7 1.4 2.4 2.8 NM 2.0 2.5 4.3 5.4 NM 3.8EC * ENGELHARD CORP DEC 4.6 4.4 3.0 4.5 4.5 5.7 7.3 5.5 6.8 6.9 16.5 24.0 20.5 23.7 22.2EY ETHYL CORP DEC 1.4 NM 7.4 6.6 7.2 1.4 NM 6.1 5.4 6.6 6.4 NM 25.7 27.5 42.6FMC † FMC CORP DEC 3.7 NM 4.5 5.3 4.2 2.6 NM 4.6 5.3 4.5 22.1 NM 23.0 29.3 24.9
GRA GRACE (W R) & CO DEC 1.2 4.6 NM 8.8 NM 0.8 3.0 NM 5.1 NM NM NM NM 106.6 NMHPC * HERCULES INC DEC NM NM 3.1 5.2 0.4 NM NM 1.7 2.9 0.2 NM NM 11.7 23.6 1.4ISP INTL SPECIALTY PRODS INC DEC NA 0.1 12.0 6.3 0.6 NA 0.0 5.0 2.8 0.3 NA 0.1 14.7 9.1 0.7OLN † OLIN CORP DEC NM NM 5.2 1.3 2.7 NM NM 7.4 1.3 2.2 NM NM 25.4 3.1 4.6PENX § PENFORD CORP AUG 1.6 0.0 6.6 4.0 5.0 1.6 0.1 5.9 3.5 4.1 5.7 0.2 16.2 10.9 11.3
PPG * PPG INDUSTRIES INC DEC NM 4.7 7.2 7.3 10.7 NM 4.4 6.9 7.0 11.2 NM 12.5 20.0 19.0 29.7
Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.
OCTOBER 2 , 2003 / CHEMICALS: SPECIALTY INDUSTRY SURVEY
35
Current Ratio Debt / Capital Ratio (%) Debt as a % of Net Working Capital
Ticker Company Yr. End 2002 2001 2000 1999 1998 2002 2001 2000 1999 1998 2002 2001 2000 1999 1998
SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS‡‡ALB † ALBEMARLE CORP DEC 2.5 1.3 2.2 2.5 2.9 20.5 1.8 12.9 21.4 25.5 72.6 15.5 56.5 79.0 94.6ARJ § ARCH CHEMICALS INC DEC 1.4 1.6 1.5 1.9 1.9 40.1 40.6 37.1 14.3 1.4 216.7 187.1 143.7 45.6 4.8CBM § CAMBREX CORP DEC 2.9 3.5 2.6 3.3 3.1 36.5 43.4 29.7 39.2 36.8 148.6 180.0 117.1 138.5 122.4CK † CROMPTON CORP DEC 1.1 1.2 1.5 1.1 1.5 86.3 71.8 66.2 63.3 90.7 NM NM 409.3 923.8 318.0CYT † CYTEC INDUSTRIES INC DEC 1.4 1.8 1.6 1.3 1.2 25.7 33.1 33.6 45.5 49.3 124.1 138.1 149.0 338.0 504.2
ECL * ECOLAB INC DEC 1.2 1.1 1.1 1.2 1.3 32.9 36.8 23.6 18.2 24.7 360.8 504.1 342.0 158.5 218.9FOE † FERRO CORP DEC 1.2 1.5 1.2 1.5 1.6 48.4 73.4 53.2 44.4 36.1 544.8 424.7 449.0 154.9 92.0FUL § FULLER (H. B.) CO NOV 1.9 2.0 1.9 1.7 1.6 25.1 30.9 37.1 40.1 45.6 83.4 101.6 120.2 151.4 173.7GLK * GREAT LAKES CHEMICAL CORP DEC 2.0 1.5 2.6 3.8 2.9 36.5 44.6 40.0 46.1 31.8 100.9 230.8 110.5 103.2 79.4IFF * INTL FLAVORS & FRAGRANCES DEC 2.4 1.6 0.9 2.3 3.1 63.7 62.3 36.2 0.4 0.4 198.5 279.5 NM 0.8 0.8
LZ † LUBRIZOL CORP DEC 3.0 2.9 2.6 2.5 2.5 28.2 31.0 30.9 30.0 32.1 63.9 78.0 85.0 77.9 93.5MRD § MACDERMID INC DEC 1.9 1.8 1.5 1.7 1.5 58.0 65.2 62.6 61.7 61.8 223.5 280.7 312.4 270.3 365.2MSC § MATERIAL SCIENCES CORP # FEB 2.2 2.9 1.8 1.6 1.6 25.6 40.2 43.8 40.2 45.5 64.2 79.0 231.0 248.6 345.2MTX † MINERALS TECHNOLOGIES INC DEC 2.3 1.5 1.6 1.9 2.2 12.2 13.6 14.4 12.3 14.1 53.3 102.1 109.8 73.5 78.1OMG § OM GROUP INC DEC 3.0 3.4 3.0 4.0 3.5 68.6 64.4 48.5 44.5 41.7 140.0 126.3 136.2 103.4 103.1
OMN § OMNOVA SOLUTIONS INC NOV 1.0 1.1 0.9 1.7 2.0 44.3 35.0 32.6 36.5 0.0 NM NM NM 207.9 0.0POL § POLYONE CORP DEC 1.0 1.0 1.1 0.8 0.9 44.0 35.0 31.2 22.7 35.4 NM NM 718.2 NM NMKWR § QUAKER CHEMICAL CORP DEC 1.6 2.1 2.1 2.2 1.9 14.6 17.6 18.7 21.2 20.9 44.2 40.9 42.1 48.7 55.5ROH * ROHM & HAAS CO DEC 1.6 1.5 1.3 1.0 1.5 40.0 34.7 39.4 39.8 19.0 311.5 341.3 549.4 NM 99.3RPM † RPM INTERNATIONAL INC # MAY NA 2.2 2.2 2.1 2.3 NA 43.8 57.9 57.6 42.2 NA 162.1 215.3 234.6 144.5
SHLM § SCHULMAN (A.) INC AUG 3.5 3.9 3.5 3.5 3.7 18.0 24.0 19.9 14.9 9.5 26.9 36.4 30.2 22.4 13.9SIAL * SIGMA-ALDRICH DEC 2.6 1.8 2.1 7.3 5.4 16.7 18.0 10.5 0.0 0.0 41.2 53.9 26.7 0.0 0.1VAL † VALSPAR CORP OCT 1.4 1.4 1.6 1.4 1.6 49.1 58.5 39.5 42.5 32.1 447.6 539.7 150.5 213.2 104.2
IINNDDUUSSTTRRIIAALL GGAASSEESS‡‡APD * AIR PRODUCTS & CHEMICALS INC SEP 1.5 1.2 1.3 1.0 1.3 31.8 33.6 41.3 33.9 40.3 312.5 610.0 608.0 NM 604.7ARG † AIRGAS INC # MAR 1.3 1.4 1.2 1.9 1.8 44.9 52.1 48.5 57.5 58.0 NM 929.5 NM 453.2 512.6PX * PRAXAIR INC DEC 1.2 1.1 0.9 0.8 1.1 45.8 46.9 47.0 40.1 47.1 NM NM NM NM NM
OOTTHHEERR CCOOMMPPAANNIIEESS WWIITTHH SSIIGGNNIIFFIICCAANNTT SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS OOPPEERRAATTIIOONNSSCBT † CABOT CORP SEP 3.4 3.3 2.4 1.5 1.2 30.7 28.1 22.0 34.2 28.0 73.6 61.9 47.3 200.5 382.9CCC CALGON CARBON CORP DEC 3.0 2.2 1.6 1.8 1.8 25.3 20.1 18.2 26.6 21.9 74.4 95.7 118.1 148.9 122.5EC * ENGELHARD CORP DEC 1.1 1.0 1.0 1.0 1.1 18.7 19.2 22.1 39.5 35.6 137.9 NM NM NM 555.6EY ETHYL CORP DEC 2.1 1.8 1.5 1.8 2.2 62.0 67.8 51.0 59.4 67.4 174.2 243.7 379.1 251.7 248.7FMC † FMC CORP DEC 1.3 0.8 0.9 0.9 1.2 69.7 71.2 50.7 54.5 62.3 344.0 NM NM NM 491.6
GRA GRACE (W R) & CO DEC 3.4 3.0 0.7 1.1 0.9 0.0 0.0 0.0 41.0 22.6 0.0 0.0 NM 320.8 NMHPC * HERCULES INC DEC 1.5 0.9 1.1 0.9 0.9 103.3 71.2 74.7 70.7 80.8 468.0 NM NM NM NMISP INTL SPECIALTY PRODS INC DEC NA 2.2 1.6 2.6 2.7 NA 56.3 38.4 54.8 61.5 NA 162.9 154.5 187.2 220.4OLN † OLIN CORP DEC 2.5 1.8 1.9 2.0 1.8 58.6 49.0 35.8 38.9 22.5 86.0 117.2 90.1 90.9 102.2PENX § PENFORD CORP AUG 1.3 1.4 1.5 1.5 1.5 46.5 51.7 35.0 39.5 44.2 515.1 596.5 405.8 490.7 372.3
PPG * PPG INDUSTRIES INC DEC 1.5 1.4 1.2 1.3 1.4 42.0 31.2 32.4 33.0 24.1 165.8 227.1 329.1 270.8 144.5
Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.
OCTOBER 2 , 2003 / CHEMICALS: SPECIALTY INDUSTRY SURVEY
36
Price / Earnings Ratio (High-Low) Dividend Payout Ratio (%) Dividend Yield (High-Low, %)
SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS‡‡ALB † ALBEMARLE CORP DEC 19-12 17-11 12-7 13-9 16-10 30 35 21 21 23 2.5-1.6 3.2-2.0 3.2-1.8 2.4-1.6 2.3-1.4ARJ § ARCH CHEMICALS INC DEC 73-45 NM-NM NM-NM 14-7 NA-NA 229 NM NM 34 NA 5.1-3.1 4.6-3.2 5.1-3.6 4.9-2.4 NA-NACBM § CAMBREX CORP DEC 32-17 56-29 26-15 23-13 18-12 9 12 6 8 7 0.5-0.3 0.4-0.2 0.4-0.2 0.6-0.3 0.6-0.4CK † CROMPTON CORP DEC NM-42 NM-NM 18-9 NM-NM 13-5 154 NM 26 NM 2 3.7-1.5 3.2-1.6 2.9-1.4 1.4-0.5 0.4-0.2CYT † CYTEC INDUSTRIES INC DEC 17-10 24-12 10-5 11-7 21-5 0 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0
ECL * ECOLAB INC DEC 31-22 30-19 28-17 33-23 32-22 34 35 30 32 32 1.5-1.1 1.8-1.2 1.8-1.1 1.4-1.0 1.5-1.0FOE † FERRO CORP DEC 37-26 25-18 12-9 16-10 17-10 71 55 29 28 28 2.7-1.9 3.0-2.2 3.4-2.3 2.9-1.8 2.8-1.6FUL § FULLER (H. B.) CO NOV 33-24 19-11 20-8 23-12 56-29 44 27 24 26 68 1.8-1.3 2.5-1.4 3.0-1.2 2.1-1.1 2.3-1.2GLK * GREAT LAKES CHEMICAL CORP DEC 31-23 NM-NM 17-11 21-14 56-38 36 NM 13 13 42 1.6-1.2 1.6-0.9 1.2-0.8 1.0-0.6 1.1-0.7IFF * INTL FLAVORS & FRAGRANCES DEC 20-14 26-16 31-12 32-22 27-17 32 50 106 99 78 2.3-1.6 3.0-1.9 8.8-3.4 4.5-3.1 4.6-2.9
LZ † LUBRIZOL CORP DEC 15-11 20-13 15-8 14-8 32-18 42 57 47 46 82 4.0-2.9 4.3-2.8 5.7-3.1 5.8-3.3 4.6-2.6MRD § MACDERMID INC DEC 84-57 NM-NM 37-15 30-18 29-16 28 NM 7 5 6 0.5-0.3 0.7-0.4 0.5-0.2 0.3-0.2 0.3-0.2MSC § MATERIAL SCIENCES CORP # FEB NM-63 NM-NM NM-NM 14-6 20-10 0 NM NM 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0MTX † MINERALS TECHNOLOGIES INC DEC 21-12 19-13 20-11 20-13 22-14 4 4 4 4 4 0.3-0.2 0.3-0.2 0.3-0.2 0.3-0.2 0.3-0.2OMG § OM GROUP INC DEC NM-NM 20-14 19-11 18-11 22-12 NM 16 15 17 17 10.5-0.6 1.1-0.8 1.3-0.8 1.5-0.9 1.4-0.8
OMN § OMNOVA SOLUTIONS INC NOV 54-20 NM-NM 72-40 14-7 NA-NA 0 NM 182 6 NA 0.0-0.0 2.0-1.3 4.6-2.5 0.9-0.4 NA-NAPOL § POLYONE CORP DEC NM-NM NM-NM 66-18 8-5 43-27 NM NM 72 11 83 8.3-1.9 4.4-2.3 4.1-1.1 2.3-1.4 3.1-1.9KWR § QUAKER CHEMICAL CORP DEC 16-12 26-19 10-7 10-8 17-11 54 96 41 43 60 4.6-3.3 5.1-3.7 5.9-4.1 5.7-4.2 5.6-3.5ROH * ROHM & HAAS CO DEC 43-30 NM-NM 31-15 38-22 15-10 83 NM 48 58 27 2.7-1.9 3.2-2.1 3.2-1.6 2.6-1.5 2.7-1.8RPM † RPM INTERNATIONAL INC # MAY NA-NA 16-8 18-12 43-26 21-15 NA 52 80 128 40 4.4-2.9 6.3-3.3 6.4-4.4 4.9-2.9 2.7-1.9
SHLM § SCHULMAN (A.) INC AUG 23-12 34-21 14-7 15-9 18-9 49 126 42 32 30 4.1-2.2 6.0-3.7 5.9-3.1 3.8-2.2 3.3-1.7SIAL * SIGMA-ALDRICH DEC 21-15 27-19 24-12 24-17 26-16 13 18 19 20 17 0.9-0.7 0.9-0.6 1.6-0.8 1.2-0.8 1.1-0.7VAL † VALSPAR CORP OCT 21-14 37-24 21-10 22-15 25-16 23 48 26 24 25 1.6-1.1 2.0-1.3 2.6-1.2 1.6-1.1 1.6-1.0
IINNDDUUSSTTRRIIAALL GGAASSEESS‡‡APD * AIR PRODUCTS & CHEMICALS INC SEP 22-17 21-13 73-40 23-12 18-11 34 33 128 33 25 2.0-1.5 2.4-1.6 3.2-1.8 2.7-1.4 2.2-1.4ARG † AIRGAS INC # MAR 21-12 22-9 24-11 25-14 25-11 0 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0PX * PRAXAIR INC DEC 18-13 21-14 24-13 21-12 20-11 23 25 27 20 19 1.7-1.2 1.9-1.2 2.0-1.1 1.8-1.0 1.6-0.9
OOTTHHEERR CCOOMMPPAANNIIEESS WWIITTHH SSIIGGNNIIFFIICCAANNTT SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS OOPPEERRAATTIIOONNSSCBT † CABOT CORP SEP 21-11 22-13 23-11 20-12 22-12 30 25 27 30 23 2.7-1.4 2.0-1.1 2.4-1.1 2.5-1.5 1.9-1.1CCC CALGON CARBON CORP DEC 90-36 45-27 38-19 NM-NM 66-28 109 95 60 NM 152 3.0-1.2 3.6-2.1 3.2-1.6 5.7-3.7 5.5-2.3EC * ENGELHARD CORP DEC 25-16 17-11 16-9 16-11 18-12 30 23 30 27 31 1.9-1.2 2.2-1.4 3.2-1.9 2.5-1.7 2.5-1.8EY ETHYL CORP DEC 13-5 NM-NM 5-2 10-5 10-4 0 NM 17 38 29 0.0-0.0 0.0-0.0 9.5-3.1 7.1-3.7 7.3-2.9FMC † FMC CORP DEC 21-11 NM-NM 13-8 11-6 15-9 0 NM 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0
GRA GRACE (W R) & CO DEC 12-3 4-1 NM-NM 11-6 NM-NM 0 0 NM 0 NM 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0HPC * HERCULES INC DEC NM-NM NM-NM 31-12 25-14 NM-NM NM NM 68 66 NM 0.0-0.0 0.0-0.0 5.5-2.2 4.8-2.7 4.4-2.1ISP INTL SPECIALTY PRODS INC DEC NA-NA NM-NM 7-4 19-10 NM-NM NA 0 0 0 0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0 0.0-0.0OLN † OLIN CORP DEC NM-NM NM-NM 13-8 81-26 62-30 NM NM 44 250 152 5.8-3.5 6.6-3.5 5.6-3.5 9.5-3.1 5.0-2.4PENX § PENFORD CORP AUG 39-20 NM-NM 16-6 21-12 33-8 48 NM 16 24 18 2.5-1.2 2.9-1.5 2.4-1.0 2.0-1.1 2.4-0.5
PPG * PPG INDUSTRIES INC DEC NM-NM 26-17 18-10 22-15 17-11 NM 73 44 46 31 4.1-2.7 4.3-2.8 4.4-2.5 3.2-2.1 2.9-1.9
Ticker Company Yr. End 2002 2001 2000 1999 1998 2002 2001 2000 1999 1998 2002 2001 2000 1999 1998
Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year.
OCTOBER 2 , 2003 / CHEMICALS: SPECIALTY INDUSTRY SURVEY
37
Earnings per Share ($) Tangible Book Value per Share ($) Share Price (High-Low, $)
SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS‡‡ALB † ALBEMARLE CORP DEC 1.78 1.49 2.22 1.89 1.64 12.82 12.34 11.71 10.23 9.16 33.00-21.90 25.38-16.50 26.13-14.56 25.31-16.63 26.19-16.00ARJ § ARCH CHEMICALS INC DEC 0.35 0.08 0.02 1.77 NA 5.82 8.63 11.18 18.35 NA 25.68-15.70 24.70-17.40 22.19-15.63 25.31-12.31 NA-NACBM § CAMBREX CORP DEC 1.40 1.04 1.98 1.55 1.62 5.61 3.50 7.47 12.00J 11.48J 44.61-24.00 58.30-30.40 51.75-29.00 35.88-20.50 29.75-19.31CK † CROMPTON CORP DEC 0.13 -1.10 0.78 -1.91 2.48 -4.59 -4.38 6.69J 6.50J 0.96J 13.00-5.44 12.19-6.20 14.19-6.94 21.38-7.25 32.81-12.88CYT † CYTEC INDUSTRIES INC DEC 2.01 1.65 4.34 2.83 2.79 6.43 6.58 5.77 2.66 1.88 34.00-19.20 39.50-19.00 41.31-22.38 31.94-19.50 58.56-14.88
ECL * ECOLAB INC DEC 0.82 0.74 0.81 0.68 0.60 0.83 0.41 1.77 1.98 1.75 25.20-18.26 22.09-14.25 22.84-14.00 22.22-15.84 19.00-13.06FOE † FERRO CORP DEC 0.82 1.05 2.02 1.97 1.80 -0.48 -5.11 1.24 3.78 4.70 30.55-21.37 26.50-19.41 25.13-17.31 30.94-19.19 30.13-18.00FUL § FULLER (H. B.) CO NOV 1.00 1.61 1.76 1.60 0.58 12.59 12.37 11.08 13.39J 12.20J 33.32-24.15 31.18-17.25 35.88-14.06 36.44-19.06 32.50-17.00GLK * GREAT LAKES CHEMICAL CORP DEC 0.94 -5.76 2.42 2.42 0.96 11.34 9.44 13.38 13.72 16.07 29.31-21.24 37.63-20.00 40.50-26.50 50.00-33.19 54.19-36.69IFF * INTL FLAVORS & FRAGRANCES DEC 1.86 1.21 1.22 1.53 1.90 -2.21 -2.87 -1.28 8.19 8.91 37.45-26.05 31.69-19.75 37.94-14.69 48.50-33.63 51.88-32.06
LZ † LUBRIZOL CORP DEC 2.45 1.84 2.22 2.25 1.27 12.78 11.86 11.34 11.75 11.04 36.36-26.20 37.69-24.13 33.88-18.25 31.38-18.00 40.19-22.38MRD § MACDERMID INC DEC 0.29 -0.91 1.12 1.58 1.44 -0.26 -1.76 -2.33 -1.56 -3.21 24.30-16.55 21.56-11.49 41.81-16.25 46.75-28.88 42.38-23.33MSC § MATERIAL SCIENCES CORP # FEB 0.15 -0.32 -0.05 1.11 0.66 8.15 8.28 8.85 8.85 8.00 15.80-9.40 10.96-6.64 14.81-7.31 16.00-6.38 13.19-6.50MTX † MINERALS TECHNOLOGIES INC DEC 2.66 2.54 2.65 2.90 2.57 26.61 23.26 24.14 23.14 22.33 54.90-32.00 48.00-32.00 54.06-28.94 57.00-36.75 55.56-35.88OMG § OM GROUP INC DEC -7.07 3.34 2.99 2.35 2.11 9.59 14.76 13.17 11.15 17.04J 73.70-4.00 67.00-46.25 57.00-33.75 42.50-26.50 46.00-25.00
OMN § OMNOVA SOLUTIONS INC NOV 0.18 -0.17 0.11 0.82 NA 1.78 1.42 1.51 1.86 NA 9.80-3.63 7.55-5.10 7.94-4.38 11.13-5.81 NA-NAPOL § POLYONE CORP DEC -0.07 -0.51 0.26 2.28 0.30 1.12 1.93 3.06 3.13 2.70 13.40-3.03 10.70-5.69 17.25-4.56 18.50-10.78 13.00-8.13KWR § QUAKER CHEMICAL CORP DEC 1.56 0.85 1.94 1.76 1.21 6.47 7.06 7.63 7.30 7.01 25.50-18.22 22.30-16.12 19.25-13.38 18.38-13.50 21.00-13.00ROH * ROHM & HAAS CO DEC 0.99 -0.31 1.61 1.28 2.55 -1.62 -2.73 -4.29 15.87J 8.88J 42.60-30.19 38.70-24.90 49.44-24.38 49.25-28.13 38.88-26.00RPM † RPM INTERNATIONAL INC # MAY NA 0.97 0.62 0.38 0.87 NA 0.01 -2.27 -2.62 0.77 17.87-11.58 15.05-7.91 11.31-7.75 16.50-9.94 18.00-12.75
SHLM § SCHULMAN (A.) INC AUG 1.10 0.43 1.25 1.51 1.48 11.84 10.99J 10.78 11.10 10.75 24.78-13.03 14.70-8.98 16.88-8.94 22.75-13.00 26.50-13.44SIAL * SIGMA-ALDRICH DEC 2.57 1.89 1.67 1.47 1.65 10.78 9.34 9.72 11.89 10.96 52.80-38.16 51.49-36.25 40.88-20.19 35.25-24.50 42.75-25.75VAL † VALSPAR CORP OCT 2.41 1.12 2.02 1.90 1.66 -9.87 -8.13 5.39 9.16J 7.84J 50.15-34.80 42.00-26.48 43.31-19.75 41.88-29.25 42.13-25.75
IINNDDUUSSTTRRIIAALL GGAASSEESS‡‡APD * AIR PRODUCTS & CHEMICALS INC SEP 2.42 2.39 0.58 2.12 2.54 13.54 14.41J 13.17J 12.26 11.08 53.52-40.00 49.00-32.25 42.25-23.00 49.25-25.69 45.34-29.00ARG † AIRGAS INC # MAR 0.97 0.71 0.43 0.56 0.74 1.93 1.01 0.38 -0.31 -0.19 20.74-11.75 15.85-6.38 10.19-4.63 14.00-7.88 18.81-8.00PX * PRAXAIR INC DEC 3.36 2.68 2.28 2.77 2.68 8.04 8.00 7.91 7.40 6.73 61.11-44.55 55.92-36.50 54.94-30.31 58.13-32.00 53.88-30.69
OOTTHHEERR CCOOMMPPAANNIIEESS WWIITTHH SSIIGGNNIIFFIICCAANNTT SSPPEECCIIAALLTTYY CCHHEEMMIICCAALLSS OOPPEERRAATTIIOONNSSCBT † CABOT CORP SEP 1.74 1.89 1.65 1.47 1.80 13.67 14.83J 15.18J 10.28J 10.27J 37.22-19.45 42.24-24.44 38.44-18.19 29.81-17.94 39.94-21.75CCC CALGON CARBON CORP DEC 0.11 0.21 0.25 -0.35 0.21 3.41 2.84 2.85 2.69 3.40 9.89-4.00 9.50-5.63 9.44-4.75 7.75-5.06 13.88-5.81EC * ENGELHARD CORP DEC 1.34 1.73 1.33 1.49 1.30 6.00 5.44 4.51 3.49 4.02 33.00-21.18 29.20-18.20 21.50-12.56 23.69-16.25 22.81-15.75EY ETHYL CORP DEC 0.57 -6.30 3.65 3.30 4.25 5.02 3.98 10.32 6.95 4.30 7.40-2.70 12.19-2.75 20.00-6.56 33.44-17.50 42.50-17.19FMC † FMC CORP DEC 2.06 -9.85 5.83 6.86 5.45 7.53 3.27 9.98 7.83 10.10 42.30-22.90 84.00-45.65 77.19-46.06 75.25-39.25 82.19-48.25
GRA GRACE (W R) & CO DEC 0.34 1.20 -1.34 1.84 -1.95 -5.36 -4.32 -5.27 -2.71 0.22 3.99-0.95 4.63-1.25 15.13-1.25 21.00-11.81 86.94-10.00HPC * HERCULES INC DEC -0.45 -0.54 0.91 1.63 0.10 -7.21 -16.22 -14.65 -16.04 -19.73 13.70-8.45 20.00-6.50 28.00-11.38 40.69-22.38 51.38-24.63ISP INTL SPECIALTY PRODS INC DEC NA 0.01 1.38 0.72 0.08 NA 1.57 2.97 1.11 -0.38 10.80-5.45 11.25-6.63 9.31-5.00 13.81-7.00 20.50-9.56OLN † OLIN CORP DEC -0.63 -0.22 1.80 0.36 0.79 2.59 6.24J 7.48J 6.86J 17.20J 22.60-13.85 22.75-12.05 23.19-14.19 29.25-9.50 49.31-23.88PENX § PENFORD CORP AUG 0.50 0.02 1.40 0.84 1.11 6.91 6.70 9.16 8.04 7.34 19.60-9.78 15.63-8.31 22.13-9.00 17.63-10.19 36.50-8.50
PPG * PPG INDUSTRIES INC DEC -0.36 2.30 3.60 3.27 4.52 3.47 8.64 8.30 8.16 12.84 62.86-41.39 59.75-38.99 65.06-36.00 70.75-47.94 76.63-49.13
Ticker Company Yr. End 2002 2001 2000 1999 1998 2002 2001 2000 1999 1998 2002 2001 2000 1999 1998
Note: Data as originally reported. ‡ S&P 1500 Index group. * Company included in the S&P 500. † Company included in the S&P MidCap. § Company included in the S&P SmallCap. # Of the following calendar year. J-This amount includes intangibles that cannot be identified.
Information has been obtained from sources believed to be reliable, but its accuracy and completeness and that of the opinions based thereon are not guaranteed. Printed in the United States of America. Industry Surveys is a publication of Standard & Poor'sEquity Research Department. This Department operates independently of and has no access to information obtained by S&P's Corporate Bond Rating Department, which may, through its regular operations, obtain information of a confidential nature.
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