Quo Vadis Europe?

A Survey among European and Non-European Chemical/Petrochemical Companies Paints a Diverse Picture

20.11.2012 -

Economic Outlook - Chemical and petrochemical companies are fairly pessimistic about the current state and future prospects of the European market, says a new survey conducted on behalf of the German management consultancy Camelot. The Euro crisis has already hit most chemical companies' European sales and many foresee the difficult conditions in Europe continuing for at least five years. On the other hand almost half of the 68 global chemical companies interviewed believe that the European debt crisis will be resolved within the next 3 to 5 years.

„Most global chemical companies are expecting their European sales to stagnate or decline in the near future", warns Sven Mandewirth, head of industry segment chemicals & petrochemicals at Camelot. „Global chemical managers are most afraid of market stagnation or decline caused by a slowdown of demand, followed by increasing raw material prices due to the weak Euro." Interestingly, however, non-European companies tend to be more pessimistic than European companies.

A Global Look at Europe
Conducted in September and October 2012, the survey questioned 68 chemical and petrochemical companies from around the world about the European market. The vast majority (46) of the companies were European, while 12 were from the Middle East, 7 from North and South America, and 3 from Asia. This global survey follows on from a similar CHEMonitor survey among German chemical managers about the European crisis, which was recently published in the German edition of CHEManager (20/2012).

The German View
German managers are relatively optimistic: 58% of surveyed companies feel better prepared for a possible economic downturn compared to 2008. Key to the robustness of the German chemical industry are the measures taken as a consequence of the last economic crisis: Optimization of organizational structures, flexibilization of employment and short-term work, a stronger focus on global markets, a stronger process orientation and decentralized decisions. Less than half of the managers interviewed consider the European debt crisis as the biggest threat for their business - rising energy costs are still by far their biggest worry.

European Market Situation
Although all the companies in the global survey generate sales in Europe, it is generally a much more important market for the European companies than for the non-European firms. Around 59% of the European companies generate over half of their sales in Europe, with 22% focused exclusively on Europe. In contrast, 80% of the non-European companies generate less than 30% of their sales in Europe, with only 2 non-European companies (both from the Middle East) generating more than 50% of their sales in Europe. Nevertheless, not all of the European chemicals manufacturers are so Europe-centric: slightly over 20% generate less than 30% of their sales in Europe.
At the moment, the majority of these companies are seeing no growth in their European sales, with 44% predicting falling sales for 2013, 35% predicting stagnating sales and only 21% predicting any sales growth. Companies from North and South America and the Middle East seem to be particularly suffering, with 57% and 80% predicting falling sales, respectively, compared with 37% of European companies. The vast majority of those companies predicting decreasing sales thought their sales would fall by less than 10%, with 24% predicting a fall of up to 3%, another 24% predicting a fall of up to 5%, and 45% predicting a fall of up to 10%, with only 7% predicting a fall of more than 10%.

Risks for European Businesses
Still, almost all the companies (82%) identified the market stagnation and slowdown in demand that is the prime cause of these falling sales as a major risk for their European businesses. Other major risks identified by over 30% of the companies include increasing raw material prices (41%), currency fluctuations (40%), decreasing sales prices (37%), and new trade barriers such as duties, tariffs and export/import regulations (34%). Inflation was less of a concern, with only 13% of the companies saying it was a major risk, although Middle East companies were more concerned than those from other regions, with 33% highlighting inflation as a risk.

The Euro Crisis
The majority of the companies don't foresee the difficult market conditions in Europe ending any time soon, with quite a few predicting that things are likely to get worse before they get better. Only 15% of the companies thought that the crisis in the Eurozone would be resolved within the next 12 months, the majority (50%) thought it would take 3 to 5 years to resolve, while 35% thought the crisis would last longer than 5 years.
Quite a few companies also predicted that the financial turmoil currently sweeping countries in southern Europe such as Greece, Spain, Portugal and Italy would spread north to other European countries. In fact, there was a roughly equal split between those who thought the contagion would spread (42%) and those who thought it wouldn't (38%).
On the whole, European companies tended to be more optimistic than non-European firms. Just under 20% of the European companies thought that the Euro crisis would be resolved within the next 12 months, compared with just one of the non-European companies. Likewise, 46% of the European companies thought that the financial turmoil wouldn't spread to other European countries, whereas only four of the non-European companies agreed, although 2 of each of the American, Asian and Middle East companies didn't give an opinion.
Companies from the Benelux and from German-speaking countries were the most positive, accounting for all the European companies that thought the crisis would be resolved within 12 months. In contrast, 6 of the 7 companies from the rest of Europe thought that the crisis would last more than 5 years.

Measures to Deal with Market Conditions
For most of the companies, simply waiting for the whole thing to blow over is not an option; almost all of them are actively instigating various measures to deal with the difficult market conditions. Understandably, the most popular measure is to expand sales activities, which just under half the companies are doing. Other popular measures include a closer focus on the customer, adopted by 38%, and a closer focus on specific countries and business segments, adopted by 26%.
„Preferred marketing strategies for increasing sales include focusing on stronger economies such as France and Germany, as well as concentrating on quality of services and building up a more diverse customer portfolio", says Mandewirth. On the other hand, 4 of the companies have yet to adopt any special measures.
Whether their predictions are accurate or their measures effective, these chemical and petrochemical companies have no choice but to follow Europe wherever it is going over the next few years. At the very least, it won't be dull.  


Camelot Management Consultants AG

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