Monday, December 23, 2013

Gross Profit Margin Percentages in the Chemistry Industry

Gross profit margin percentages (GPM%) were determined for 27 publicly-listed chemical companies.  The companies' most recent 10-K filings, submitted to the Securities and Exchange Commission (SEC), were used for the data to compute the GPM%.  Using WordsAnalytics (click here)  the revenues, cost of sales, and gross profits were found for 8 chemical companies with revenues above $5B (billion), for 11 chemical companies with revenues between $2B and $5B, and for 8 chemical companies with revenues less than $2B.  For each company, the GPM% were computed using the current year reported on in the 10-K and the previous year’s results also provided in the 10-K.

The average GPM% for all 27 companies was 27.9%.  Averages were also determined for companies included in each revenue size (< $2B; $2B - $5B; > $5B).  Interesting, the average for the companies with less than $2B in revenues was 31.6%; for the $2B to $5B revenue-size companies, 28.1%, and for the greater than $5B revenue-size companies, 24.1%.

If indeed, smaller revenue-size companies tend to have larger GPM%, as the data I computed shows, one explanation is that smaller companies are able (willing) to take on projects with higher risks.

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