Optimism Springs Eternal - 2011 was a year fraught with uncertainties, and many industries are wearily eyeing the year to come. The state of the worldwide economy as well as the health of the 10-year-old euro has many concerned about what the next months will bring. However, reports from mainstream media seem to differ from the mood within the chemical industry. Here, the outlook is overwhelmingly positive; the sector went through a lot of changes after the crisis that began at the end of 2008, and most in the industry are ready to face any challenges ahead.

Brandi Schuster spoke to Saltigo CEO Wolfgang Schmitz; Andreas Stolle, Pharma business head; and Dirk Sandri, head of Marketing & Sales in the Agro & Fine Chemicals business line, about the year ahead in pharma, agro and custom manufacturing in general.

CHEManager Europe: What is Saltigo's outlook for the coming year?

Wolfgang Schmitz: We are expecting positive perspectives for our agro business this year, and this is where we plan on sharpening our focus. In fact, we have already booked orders for the first half of the year. The majority of our agro customers - and among them the major players - have positive expectations for the coming year. The positivity is also underscored by prices on the commodity bourses in Chicago and Kansas - we're looking at prices that are similar to those in 2008, which clearly shows that the long-term dynamic is intact.

Mr. Sandri, what trends have you been seeing in the agricultural sector?

Dirk Sandri: The agrochemical sector has been very bullish in comparison to many other industries lately. Forecasts show that the end market will have grown by 16-18 % in dollar terms in 2011, which is a very positive signal. And the first signals for 2012, at least for the first half, also look very promising. Our customers are optimistic about developments in various markets, particularly in Eastern Europe, Asia and Brazil.

Mr.

Stolle, what about pharma?

Andreas Stolle: Within pharma, we expect to continue to face hard competition. Compared to agro, it's a more difficult business environment, so we are more cautious. We've been observing ongoing consolidation on the demand side, which is leading to an impressive amount of price pressure in the industry. For our part, Saltigo has been successful in improving its pipeline with drugs in late stage of development where we are now preparing for production of launch quantities.

Has the euro crisis affected your parent company Lanxess?

Wolfgang Schmitz: The construction and electronics sectors have been affected in the second half of 2011, but Lanxess is overall on track to achieve record results for 2011 of €1.1 billion EBITDA pre exceptionals.

Many companies have come up with a contingency plan should the euro fail.

Wolfgang Schmitz: On our financial side, Lanxess has done its homework. We have a balanced financing portfolio and a good maturity profile. This is also reflected by solid long-term investment-grade credit ratings. All this means, we have the ability to pursue our growth strategy of achieving €1.4 billion EBITDA in 2015 through organic and external growth measures.

Many chemical companies have a positive outlook for 2012, despite gloomy economic reports. Is the euro collapse really as possible as it seems, or is a lot of the debate around the currency the result of media hype?

Wolfgang Schmitz: In fine chemicals, people are quite optimistic and predict strong performance for the coming year. As far as the stability of the euro is concerned, it's also something of a psychological issue. If people talk and talk about the dangers and what to do when it collapses, this inevitably leads to more and more people thinking that it will indeed collapse. This is not something any of us want. We see quite positive chances for us to grow further, and this is what we're primarily concentrating on. And we shouldn't forget how many advantages the euro has brought to German, export-oriented companies like Lanxess.

Given the economic state of the world right now, do you see any parallels to the end of 2008 beginning of 2009 at the end of 2011 beginning of 2012?

Wolfgang Schmitz: In 2008, the entire industry was taken by surprise. Orders practically ceased overnight, and this was after the entire supply chain was underway full blast, expecting a good year. It was as if a reset button had been set, and this forced everyone to reconsider the way they do business. In 2009-10, industries thoroughly investigated their supply chains and dramatically reduced the money they had bound as working capital, particularly on the raw material side. This means customers are now much more cautious about the amount of product they order. In the past, customers wanted the security of knowing that they had enough material on hand. Now, many have redefined the level of inventory they need to keep.

What does this mean for the current economic situation? If demand were to go down now, the effect will not be as abrasive as it was in 2008 because everyone has now prepared, step-by-step, for such a situation. Companies are now better prepared to take on any uncertainties, although obviously no one knows what is to be expected in the coming months.