Speciality firms ride out storm: some producers performed as if there was no crisis in Q1 2009.(Financial analysis)

Three of our set of speciality producers (Lubrizol, Nalco and Olin) continues to perform as though there was no global economic downturn at all! Other companies, however, were not so successful.

In Q1 2009 Clariant experienced a significant decrease in commodity prices, and private consumption and business investment spending at a multi-year low. The company's gross margin, at 23.6% compared with 30.5% in Q1 2008, was affected by costs related to lower capacity utilisation and devaluation of inventories.

With the acquisition of Ciba by BASF, the US speciality chemical producer Hexion has been added to the list in place of Ciba. Hexion's sales were only 56% of the first quarter of 2008, reflecting lower volumes and the contractual pass through of lower raw material prices, which more than offset price rises in certain speciality lines. These were added to weak demand across many of the company's markets, and the impact of customers carefully managing inventory levels. Overall, however, Hexion's performance was well up on the previous two quarters.

W R Grace, even after the effects of litigation, expenses and other matters unrelated to core operations, still made a loss at the operating and net levels in Q1 2009. The company has been suffering from high raw materials and energy costs.

As already mentioned, Lubrizol, Nalco and Olin continued to perform well despite the downturn. Lubrizol mentioned aggressive cost cutting partially offsetting the impact of lower volumes and unfavourable currency, and a strong cash flow from operations. Nalco also mentioned strong cost controls as contributing to its performance, which did however slip somewhat compared with the previous quarter. Olin reported net income and sales both up compared with Q1 2008.

The comparisons are reproduced courtesy of Chemical Company Profiles, based in London, UK (www.chemicalcompanyprofiles.com). The company provides professionally researched profiles of top international chemical companies with detailed snapshots of each company, both current and historical. These include the development of the product portfolio, performance and growth statistics, world coverage and manufacturing sites and a timeline including the most important recent activities of the company as well as its key future plans.

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Ann McRae & Lambros Antoniou, Chemical Company Profiles

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