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Profits rise in materials manufacturing - but they're still not enough August 16, 2004
The cost-reduction processes implemented over the past few years by international polymer producers seem now to be holding off the inexorable rise in feedstock costs and, with a steady round of higher polymer prices, are returning companies to the profit levels needed for continuing investment. Although, inevitably, there is yet little or no satisfaction with the margins being achieved.
Second quarter results reported so far indicate broadly that the second quarter has been perhaps not as good as the first quarter, but the two quarters together have achieved a first half substantially better than that of 2003.
BASF turned a second quarter sales increase of almost 13 per cent at Eur 9·3 billion to a 44 per cent increase in pre-tax earnings at Eur 1·2 billion. Over the first half sales rose nearly 8 per cent (Eur 18·4 billion) to bring a 32 per cent profits increase at Eur 2·3 billion. Chairman Dr Jürgen Hambrecht credited 'our ongoing restructuring efforts and our steps to optimize our portfolio, production and business processes'. Sales of plastics increased 16 per cent in the second quarter due to higher volumes, and despite high raw materials prices pre-tax profits (before special items) increased by 126 per cent (Eur 76 m to Eur 172 m) due mainly to a reduction in fixed costs. Comparable first half year figures show sales up 8·3 per cent at Eur 4·83 billion, with profits up 73 per cent at Eur 322 m. Some weeks ago BASF announced plans for further rationalisation of its plastics businesses with an emphasis on styrenics, performance polymers and polyurethanes. Its involvement in the olefins business through its shareholding in Basell is somewhat at odds with that emphasis and, with its partner, Shell, it is now taking a hard look at the future of Basell. Both companies hold a 50 per cent interest in Basell, and are currently reviewing whether they should sell the business or float it publicly.
Borealis brought in an operating profit of Eur 49 million in the second quarter (2003 equivalent - Eur 19 million) which, while feedstock costs forced this down to Eur 7 million lower than the first quarter this year, brought a first half operating profit of Eur 105 m compared with Eur 7 m in 2003. Despite the improvement, profits are 'still at barely acceptable levels' according to chief executive John Taylor, and 'with the current outlook for feedstock prices remaining high, it is encouraging to see signs of price recovery early in the third quarter leading to improved margins'.
Sales of Solvay's specialty polymers increased in the first half following recovery in a number of markets, especially semi-conductors and electronics, while in its vinyls business globally sustained demand and increase in PVC prices brought significant improvement. Second quarter pre-tax profits in plastics doubled compared with last year's second quarter, and the first half showed a 45 per cent improvement. A measure of the improvement in profitability comes from the sales figures, 22 per cent up year on year for the second quarter and 15 per cent up for the first half.
Dow Chemical sales in the second quarter set a new quarterly record. In Performance Plastics (primarily thermoset systems and epoxies), sales increased 20 per cent, 17 per cent from volume and 3 per cent from price increases. Pre-tax earnings were $268 million, an increase of 64 per cent over the 2003 second quarter. Other plastics sales increased 24 per cent (14 per cent volume and 10 per cent from higher prices). Polyethylene demand increased significantly and higher prices kept pace with rising feedstock costs. Polystyrene sales achieved double-digit increases in both volume and price, although margins were compressed due mainly to the sharp rise in benzene costs during the quarter. Earnings were $399 million which included $124 million from asset divestitures associated with the formation of Equipolymers. Excluding these divestitures, earnings were 73 per cent higher than in the second quarter of 2003.
PolyOne was also setting records, with its best quarterly result since it was set up in 2000. Sales from continuing operations were $557·8 million, an increase of 10 per cent over the second quarter of 2003. This brought an operating profit of $46·7 million - $35·8 million more than in the same period in 2003. Net profit for the second quarter was $21·5 million. Last year the company lost $6·0 million during the period.
The story continued at DSM, whose Performance Materials Division (which incorporates DSM Elastomers, DSM Engineering Plastics and DSM Dyneema) recorded both higher sales and profits for the second quarter and half year. Quarterly sales were up 16 per cent at Eur 506 m and half year sales rose nearly 10 per cent to Eur 983 million. On this the Q2 operating profit rose 27 per cent to Eur 40 m while the half yearly profit rose 26 per cent to Eur 77 m.
The results at European Vinyls Corporation were not so dramatic as elsewhere, but still encouraging. Turnover in Q2 rose 18·1 per cent through both increased volume and higher prices, and the company made nearly 30 per cent more operating profit at Eur 10·0 m. First half turnover increase was not quite so high, at 11·8 per cent to Eur 615·2 m, but operating profit soared from Eur 1·8 m to Eur 13·9 , reducing the company's last year first half loss of Eur 7·9 m to Eur 1·4 m.
Tough stance on PE, styrenics and nylons August 16, 2004
A polyethylene price increase planned by SABIC for September 1 will 'break the old psychological barrier of Eur 1,000/tonne for all polyethylenes' says the company, adding 'Currently, C2-monomer is short worldwide and in Europe. Prices are such that today it is more attractive to stop polyethylene production and sell the monomer instead'.
'These increases are only a first step to bring margins back to an acceptable level. Significant increases are necessary to restore profitability. With today's oil price level we are still at the bottom of the cycle'. BASF has warned that unless customers are prepared to pay higher prices for styrenic and nylon materials, they will not be supplied. The company says that the continuously increasing price of benzene is forcing it to keep raising prices, and it has reached the point that if it is not possible to achieve these prices 'and thus pass on the enormous increase in the cost of benzene to customers', then its Styrenics and Performance Polymers divisions will turn down business.
Although benzene prices have been increasingly volatile over the last two years, the price has suddenly more than doubled since the beginning of 2004 and is now at a record high, says BASF. To date, the resulting increase in the cost of producing styrenics and nylons has only been partially passed on through price increases.
Pulsed cooling technology for sale August 16, 2004
Temperature control specialist Rowland Evans has decided to retire and has put his company, RE Promotion Services (REPS) up for sale because 'small entrepreneurial companies can no longer service global markets, especially when their home market is shrinking, so it's better for me to retire and let someone with a global presence take the technology forward'.
Rowland Evans has long been a champion (and patent holder) of pulsed cooling techniques. The company name, product designs and patents are all up for sale.
Share technology in car component recycling August 16, 2004
A technology network is being set up to study the dismantling, reuse and recycling of road vehicles. DRIVENet will examine the whole lifecycle of the car - from raw materials, to design, assembly of components, manufacture, disassembly, recycling and reuse of components and materials. Its premise is that the proper application of knowledge in materials science and processing technologies should lead to the production of technically and commercially viable components that can be effectively dismantled at end of their life and to produce materials/components that can be recycled and reused.
The Engineering and Physical Sciences Research Council (EPSRC) has recently funded this three-year network, led by Oxford Brookes University in conjunction with the Warwick Manufacturing Group, the Oxford University-led Faraday Advance Partnership, Oxford University's Begbroke Directorate and MIRA.
HSE revises calender safety advice August 16, 2004
The Health and Safety Executive has revised its procedures for threading up calenders. The new advice applies to calenders installed before 1998 and revises guidance first published by The Rubber Industry Advisory Committee. It requires all safety guards to be in position during threading; a minimum of two people in attendance during the whole threading operation; and the use of slow crawl throughout.
The guidance on threading given in RUBIAC's original publication,
Safeguarding of Calenders in the Rubber Industry, was found to be impractical for most calenders that pre-date the publication and, as a result, the guidance was routinely ignored.
The amendment can be obtained, free of charge by e-mailing Rubiac Area14@hse.gsi.gov.uk. The remaining parts of the publication are unaltered.
Help to comply with environmental legislation August 16, 2004
Help on environmental legislation is now available free on the Environwise website, at www.envirowise.gov.uk/legislation. The site provides guidance on reducing waste which may help with compliance, and links to other websites where the legislation is identified and explained. Compliance can call for eliminating or reducing environmental impact, and practical advice on how to achieve this can be obtained from Envirowise publications that can be downloaded free from the website.
A survey conducted by the Environment Agency revealed that only 18 per cent of small businesses could name any environmental legislation and just 31 per cent of the 8,000 businesses surveyed had heard of the 'Duty of Care' regulations that affect all UK businesses.
Ensinger to expand in Wales August 16, 2004
Stock shapes distributor and machinist Ensinger is to expand with a 500 m² warehouse and factory in Wales. The German family-owned company has been in the UK for the past 15 years, expanding from a single small factory unit with three people to seven locations currently employing more than 200.
The company has been searching for a suitable site for some time since two previous expansions at its headquarters in Llantrisant were insufficient for it to continue its growth in line with strategic plans. Several sites between Llantrisant and Bridgend are currently being evaluated.
The new site will house part of the company's stock shapes distribution business, including the supply of products for its building division, and one of its specialist machining companies. The greater warehousing space and improved logistics for the distribution business will allow new products, including specialist blends for the medical industry and anti-microbial materials to be stocked. There will also be new products from sister companies in Germany, the Americas, Italy and France.
Basell process for Iranian PE plant August 16, 2004
A 300,000 tonnes LDPE plant to be built in Bandar Imam, Iran will use Basell's Lupotech T process. The plant, for Amir Kabir Petrochemical Company (AKPC), an affiliate of Iran's National Petrochemical Company, will be the ninth license for a Basell technology that NPC or its affiliates have signed in the past seven years. Amir Kabir operates olefin, high density polyethylene, polypropylene, linear low density polyethylene, low density polyethylene, butadiene and butadiene-1 units.
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BASF has warned that unless customers are prepared to pay higher prices for styrenic and nylon materials, they will not be supplied. The company says that the continuously increasing price of benzene is forcing it to keep raising prices, and it has reached the point that if it is not possible to achieve these prices 'and thus pass on the enormous increase in the cost of benzene to customers', then its Styrenics and Performance Polymers divisions will turn down business.