Comparisons Between European, United States, and Japanese Chemical Companies

This blog attempts to provide some general financial comparisons between representative European, United States, and Japanese chemical companies.   Tables 1, 2, and 3, below, show 2018 financial data for four representative chemical companies from each area.

table 1   Europe              performance measure	basf	clariant	dsm	evonik	average
earnings per share	6.04	1.2	7.19	2.36	4.2
price to earnings ratio	11.78	18.09	11.71	12.1	13.4
% dividend yield	5.3	2.95	3.22	4.75	4.1
price/share divided by operating cash flow/share	7.09	11.7	11.13	6.6	9.1
return on equity %	13.04	12	13.81	11.9	12.7
one-year sales growth %	2.37	3.86	7.36	4.5	4.5
gross profit margin %	29.29	29.2	36.74	30.8	31.5
operating profit margin %	9.63	8.24	13.43	9.1	10.1
net income profit margin %	7.5	5.28	11.64	6.2	7.7
non-current liabilities divided by equity %	75.1	92.02	41.65	116.3	81.3
sales per employee	603,814	436,321	522,199	462,099	506,108
table 2  United States               performance measure	eastman	huntsman	kraton	westlake	average
earnings per share	7.56	2.54	2.1	7.66	5.0
price to earnings ratio	9.55	8.29	12.15	8.29	9.6
% dividend yield	3.19	3.09	0	1.45	1.9
price/share divided by operating cash flow/share	10.25	4.47	4.46	5.83	6.3
return on equity %	18.61	23.64	8.77	16.39	16.9
one-year sales growth %	6.3	12.35	2.65	7.39	7.2
gross profit margin %	24.24	21.7	28.83	23.01	24.4
operating profit margin %	15.29	11.07	12.48	16.31	13.8
net income profit margin %	10.64	6.63	3.33	11.53	8.0
non-current liabilities divided by equity %	142	131	241	71.48	146.4
sales per employee	700,069	940,000	1,050,000	973,500	915,892
table 3  Japan            performance measure	jsr	mitsui	teijin	tosoh	average
earnings per share	1.41	3.37	2.24	2.48	2.4
price to earnings ratio	10.99	9.2	7.28	5.24	8.2
% dividend yield	3.03	1.64	3.33	3.16	2.8
price/share divided by operating cash flow/share	8.56	8.47	4.28	3.88	6.3
return on equity %	8.8	16.29	12.44	19.34	14.2
one-year sales growth %	8.62	9.59	12.64	10.74	10.4
gross profit margin %	30.84	23.29	33.25	29.3	29.2
operating profit margin %	10.33	7.8	8.36	15.87	10.6
net income profit margin %	8.29	5.95	5.64	11.09	7.7
non-current liabilities divided by equity %	19.94	85.4	79.66	14.88	50.0
sales per employee	530,073	723,792	378,733	591,507	556,026

Data are provided for eleven financial performance indicators.  These eleven indicators are commonly used to evaluate a company’s financial performance.  For the monetary data in the tables (earnings per share and sales per employee), the currency is the US dollar.  The data were obtained from each company’s 2018 annual report.  For non-current liabilities, total non-current liabilities (not just financial but also pension and other non-current liabilities) are used.

Table 4, below, shows the averages of the four companies in each area (averages taken for tables 1, 2, and 3).

table 4             comparison	europe	usa	japan	standout
earnings per share	4.2	5	2.4	none
price to earnings ratio	13.4	9.6	8.2	europe
% dividend yield	4.1	1.9	2.8	europe
price/share divided by operating cash flow/share	9.1	6.3	6.3	none
return on equity %	12.7	16.9	14.2	none
one-year sales growth %	4.5	7.2	10.4	japan
gross profit margin %	31.5	24.4	29.2	none
operating profit margin %	10.1	13.8	10.6	none
net income profit margin %	7.7	8	7.7	none
non-current liabilities divided by equity %	81.3	146.4	50	usa
sales per employee	506,108	915,892	556,026	usa

Table 4 shows that for some of the financial performance indicators, one area has an average for its four companies that stands out (for example, a significant percentage difference exists from the averages of the other two areas).

Here are some comments based on the data in Table 4:

·         The European chemical companies, on average, are priced higher per share but also provide a significantly better dividend return;

·         Companies in all three areas have good cash flow (based on reasonably low price per share to operating cash flow per share ratio);

·         Returns on equity are reasonably good for the companies in three areas;

·         Japan’s one-year sales growth from 2017 to 2018 stands out;

·         Gross profit, operating income, and net income margin percentages are comparable for the three areas;

·         The USA chemical companies’ total non-current liabilities exceed their total equity, perhaps a worrisome sign; and

·         On the other hand, the sales per employee is significantly higher for the USA companies, usually a good sign.