CIM midsummer survey: Global chemicals industry continues to be optimistic

14-Aug-2012 - Germany

Despite current economic slow-down, the majority of companies declare themselves willing to employ more people and increase investment. Even though the Ceresana Industry Monitor (CIM) is exhibiting worsened values for expectations, it continues at positive levels of 8.3 points. On the whole, companies stated to be optimistic but also are clear about future challenges and their demands regarding politics.

Dampened spirit and optimistic forecasts

About 30% of interviewed enterprises in the chemicals and plastics industry are rating their current business situation as good. Thus, less panel members are optimistic about the present situation as in the two previous surveys this year. A slight dampening was already visible in the comparison of spring to early summer.

Outlook in terms of business situation in all regions cooled down as compared to spring: Other regions (Africa, South America, and the Middle East), Asia-Pacific, and North America in particular saw their share of pessimistic assessments rise in comparison with early summer. At that point, more than 40% of companies in other regions rated their situation as 'good'; only 8% classified it as 'poor'. By now, only 25.6% are maintaining this optimism, about the same number of enterprises are now assessing their business situation to be 'poor'.

The persistent Sovereign Debt and banking crisis, above all in the European Union, and the recession in Southern Europe will continue to impede development of global trade. Europe ceased to be the strong sales market for foreign produce that it used to be in the past. Therefore, it has to be awaited what effects the consolidation of national budgets and a common European fiscal policy will have on a desired strengthening of the European market. "Apart from Europe, the USA and important emerging countries saw their economic development decline notably. A world wide solution strategy to combat the Sovereign Debt crisis seems necessary in order to ascertain positive economic development", explains Oliver Kutsch, CEO of Ceresana.

On the whole, however, the chemical and plastics industry remains optimistic. Even though numbers of those expecting improvement fell compared to earlier surveys, still more than one third is expecting their business situation to improve during the next 6 to 12 months. Only about 16% are forecasting a worsening; more than half is not expecting significant changes to their situation.

Hardly any reductions in workforce or investment activities anticipated

The vast majority of panel members are expecting constant or rising investment activities; only 16% are anticipating a decline. Apart from Asian-Pacific interviewees, all panel members expressed intentions to maintain overall levels of employment. A reduction of workforce numbers is mainly expected in Eastern European enterprises and Western European companies, about 26.7% and 15.8% respectively expressed corresponding plans.

About every second company stated to plan to increase the budget for Sales & Marketing. Increases to budgets for production came second (42%), followed by R&D (38%), and staff (29%). Roughly every fourth company expressed intentions to increase its budget for market research; followed by investment in IT systems, logistics, and other areas.

Companies utilize alternative sources of financing

As part of the midsummer survey, Ceresana also asked the companies how they rate the current opportunities for obtaining loans from credit institutes. Just below one quarter of interviewed companies qualifies the opportunities for obtaining loans from credit institutes as 'good'. About one third of interviewees expressed themselves to be satisfied while 29% rated the opportunities given as 'poor'.

Thus, it comes as no surprise that companies are looking for alternative sources for funding. The survey examined the utilization of following alternative sources of funding: leasing, supplier credits, shareholder loans, equity capital, factoring, public law financial assistance, mezzanine capital, and other sources.

In the selection of funding sources, notable regional differences can be observed: While Western Europe mainly relied on leasing (29.5%), shareholder capital (20.5%), and supplier credit (17.2%); Asia-Pacific and North America are primarily utilizing equity capital.

Political action required

When asked about the need for political action in the R&D sector, 31% of companies would like to see access to financial resources and project funding be facilitated. More than every fourth company is hoping for increased transparency regarding public research, followed by stronger protection under patent legislation (18.3%), and the combating of product piracy (17.9%).

Strong regional differences can be observed in regard to demands of political action. The majority of panel members from Western Europe (38%) want to see the lack of researchers and skilled labor addressed, while Eastern European companies are mainly interested in seeing access to project support facilitated (60%). Asia-Pacific would also like to the see lack of researchers and skilled labor being dealt with; additionally, increased transparency of public research would be welcome. Interviewees from North America are mainly concerned with transparency of public research and the combating of product piracy.

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