For Immediate Release
Chicago, IL – September 23, 2010 – Today, Zacks Equity Research discusses the Retail Industry, including Dow Chemicals (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/40506/Chemical+Stock+Review+and+Outlook+-+Sept.+2010.
The chemical industry is a large consumer of oil, natural gas and energy, which are widely used as an energy and feedstock input. During 2009, oil prices rose 87% from about $40 per barrel to more than $75 per barrel, re-attaining October 2007 levels. Prices for the chemical raw material naphtha soared in almost exactly the same way as the oil price; naphtha rose throughout 2009 from an average level of $340 per metric ton in January to well over $600 per metric ton in October.
In both the US and Europe, natural gas prices fell during 2009 before increasing in the last quarter of the year. The average annual gas price in the US was around $4 per mbtu, less than half the cost in the previous year. In Europe, the average gas price was well over $8 per mbtu. Natural gas prices are expected to remain weak in the near-to-medium term, boosting profits for North American chemical manufacturers.
OPPORTUNITIES
The overall chemical industry is in a consolidation mode, driven by the need for creating scale economies in operations, supply-chain management and capital market needs. Major players are expanding activity through mergers, acquisitions, alliances and joint ventures. While we can cite multiple examples from recent history, the more noteworthy ones are those of Dow Chemicals (DOW), Agrium (AGU), CF Industries (CF).
Dow Chemical continues to progress in delivering cost synergies from its latest acquisition of Rohm and Haas. 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 makers would be careful in planning capital expenditures. Focus on aggressive cost reduction and improving yield from better technology have been a key technique for 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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ASSURED GUARNTY (AGO): 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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