For Immediate Release
Chicago, IL – October 18, 2010 – Today, Zacks Equity Research discusses the Chemical industry, including Dow Chemical (DOW), Agrium (AGU), CF Industries (CF), DuPont (DD) and PPG Industries (PPG ).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/41600/Chemical+Industry+Outlook+-+Oct.+2010
The chemical industry is a large consumer of oil, naphtha and natural gas, which are widely used as energy and feedstock input. Crude oil prices have shown an uptrend since the second half of 2009. Oil prices have now reached near 2008 levels, when prices were historically high. Naphtha prices also soared through 2009 and are expected to rise further.
U.S. natural gas prices declined in the first nine months of 2009, but moved slightly upward thereafter. According to the U.S. Energy Information Administration, average annual gas price in the US was around $4 per mbtu in 2009 and remained at the same level in the first half of 2010, considerably below 2008 prices. Natural gas prices are expected to remain weak in the near-to-medium term, positively impacting profits for North American chemical manufacturers.
OPPORTUNITIES
The overall chemical industry is in consolidation mode, driven by the need for creating scale economies in operations and supply-chain management. Major chemical makers are expanding through mergers, acquisitions and joint ventures. While we can cite multiple examples from recent history, the more noteworthy cases are those of Dow Chemical (DOW), Agrium (AGU) and CF Industries (CF).
Dow Chemical is delivering cost synergies from its recent Rohm and Haas acquisition. Similarly, fertilizer manufacturer Agrium is growing through a combination of acquisitions and organic expansion. Agrium’s acquisition of United Agri-Products is expected to drive growth through an expanded product line. The take-over of rival Terra Industries has made CF a global leader in the nitrogen fertilizer sector.
After a tough 2009, chemical producers remain cautious about capital expenditures. Aggressive cost cuts and superior technology have been key techniques employed by most chemical manufacturers. DuPont (DD), for instance, plans to capture $1 billion each in the years between 2010 and 2012 by way of reducing fixed costs and working capital productivity gains.
PPG Industries (PPG ), a major global supplier of protective and decorative coatings, responded to the economic turmoil with aggressive restructuring and cost reduction measures, while further increasing its focus on cash flows.
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AGRIUM INC (AGU): Free Stock Analysis Report
CF INDUS HLDGS (CF): Free Stock Analysis Report
DU PONT (EI) DE (DD): Free Stock Analysis Report
DOW CHEMICAL (DOW): Free Stock Analysis Report
PPG INDS INC (PPG): Free Stock Analysis Report
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