Financial Statistics for Large Chemical Companies – Part 3

In an earlier blog on financial statistics for large companies, I presented a table with financial statistics for thirty-seven large global chemical companies. Click here to read that blog. In a second blog (Financial Statistics for Large Chemical Companies – Part 2), I presented correlations between those statistics. Click here to tread the second blog.

In this blog, I am presenting in the following table an additional statistic - the return on invested capital (ROIC):

 

company	return on invested capital (ROIC)
air products	11.7%
arkema	8.2%
basf	1.7%
chemours	14.0%
clariant	7.0%
covestro	7.0%
dsm	10.4%
evonik	6.1%
fmc	15.6%
kemira	12.1%
lanxess	7.5%
linde	13.4%
mitsui	2.0%
ppg	10.6%
sekisui	7.7%
solvay	6.9%
umicore	12.1%
wacker	5.6%
yara	8.0%
average	8.8%

 

Only nineteen of the thirty-seven chemical companies provide their ROIC percentages in their annual reports. Why the remaining seventeen do not is uncertain. The ROIC seems to be an excellent statistic for evaluating how well a capital-intensive company is doing in managing capital. ROIC is the amount of money a company makes that is above the average cost it pays for its debt and equity capital. Capital intensive companies are companies, such as chemical plants, which need and use large capital amounts in their businesses, e.g., in building production plants and in research and development. Capital intensive companies’ financial success likely relates to how well it employs its capital to obtain financial returns to the company. 

The average ROIC for the nineteen companies in the table above is 8.8%, which judging from management comments in some of the annual reports I reviewed, is a fairly good result.   Many of the nineteen companies state in their annual reports that ROIC is a major measurement that they use to judge their success by.

  

Financial Statistics for Large Chemical Companies – Part 2

In my last blog I presented a table with a few financial statistics for many large global chemical companies. Click here to read that blog.

In this follow-up blog, I present some correlations between those statistics in the previous blog. Correlations were computed using Excel’s CORREL function. I focused on those correlations between statistics that management might affect and the results of those effects on targeted financial improvements.

An increase in sales correlates with an increase in long-term debt (81% correlation) but long-term debt as a percentage of sales goes down (-10% correlation) as sales goes up.

An increase in long-term debt is correlated with a greater gross profit margin percentage (11% correlation).

Companies with higher sales show a greater gross profit margin percentage (2% correlation).

Also correlated with higher gross profit margin percentage is increased research & development expense (13%).

Net income as a percentage of sales correlates with an increase in gross profit margin percentage (31% correlation).

However, greater net income increase as percentage of sales does not correlate with greater research & development expense (-33% correlation) or long-term debt (-29%).

The following table shows those correlations between statistics (sales, long term debt, cost of sales, and research & development expense) that management might affect and the results of those effects on potentially targeted financial improvements:

 

sales	gpm%	2%
sales	net inc % sales	-33%
sales	r&d exp % sales	3%
sales	lt debt % sales	-10%
lt debt	gpm%	11%
lt debt	r&d exp % sales	8%
lt debt	lt debt % sales	44%
lt debt	net inc % sales	-29%
cos	gpm%	-12%
cos	r&d exp % sales	-1%
cos	lt debt % sales	-12%
cos	net inc % sales	-35%
r&d exp	gpm%	13%
r&d exp	r&d exp % sales	54%
r&d exp	lt debt % sales	-3%
r&d exp	net inc % sales	-33%

Such correlations, as the above, might be helpful in predicting company decisions on targeted financial measurements. 

Financial Statistics for Large Chemical Companies

The following table presents a few financial statistics for many of the largest global chemical companies:

 

company	sales in billions usd	cost of sales (cos) in billions usd	gpm% (sales-cos/rev)	net income in billions usd	net income as % of sales	r&d expense in billions usd	r&d %  of sales	long term debt in billions usd	long term debt % of sales
air products	8.86	5.86	34%	1.89	21%	0.08	1%	10.31	116%
akzo nobel	9.73	5.42	44%	0.77	8%	0.27	3%	4.71	48%
albemarle	3.13	2.13	32%	0.45	14%	0.059	2%	2.77	88%
arkema	8.99	7.23	20%	0.38	4%	0.27	3%	4.45	49%
asahi kasei	20.16	13.83	31%	0.97	5%	0.853	4%	5.360	27%
basf	67.45	50.22	26%	0.00	0%	2.39	4%	33.75	50%
celanese	5.66	4.36	23%	1.99	35%	0.074	1%	3.23	57%
chemours	4.97	3.90	22%	0.22	4%	0.093	2%	4.01	81%
clariant	4.40	3.07	30%	0.84	19%	0.19	4%	2.85	65%
covestro	12.21	9.36	23%	0.52	4%	0.52	4%	5.61	46%
dow	38.54	33.34	13%	1.30	3%	0.768	2%	10.6	28%
dsm	9.25	6.08	34%	0.58	6%	0.45	5%	5.26	57%
dupont	20.40	13.52	34%	0.00	0%	0.86	4%	21.8	107%
eastman	8.47	6.50	23%	0.49	6%	0.226	3%	5.27	62%
evonik	13.91	10.07	28%	0.55	4%	0.49	4%	18.18	131%
fmc	4.64	2.59	44%	0.55	12%	0.288	6%	2.93	63%
huntsman	6.02	4.92	18%	1.03	17%	0.135	2%	1.53	25%
kemira	2.77	2.30	17%	0.16	6%	0.03	1%	0.83	30%
lanxess	6.96	5.19	25%	1.03	15%	0.12	2%	4.63	67%
linde	31.01	17.54	43%	2.85	9%	0.17	1%	13.85	45%
lyondellbasell	31.64	27.78	12%	1.62	5%	0.13	0.4%	17.43	55%
mitsubishi	33.54	24.30	28%	0.81	2%	1.246	4%	14.580	43%
mitsui	11.36	8.60	24%	0.60	5%	0.319	3%	2.750	24%
mosaic	8.68	7.62	12%	0.67	8%	na	na	4.07	47%
nitto denko	7.13	4.84	32%	0.66	9%	0.331	5%	0.161	2%
olin	5.76	5.37	7%	0.00	0%	0.017	0%	3.84	67%
ppg	13.83	7.77	44%	1.07	8%	0.379	3%	5.17	37%
sekisui	10.58	7.19	32%	0.57	5%	0.049	0.5%	0.585	6%
shin-etsu	14.16	9.06	36%	3.84	27%	0.445	3%	0.138	1%
solvay	10.58	9.35	12%	0.18	2%	0.37	3%	3.4	32%
sumitomo	20.45	13.96	32%	0.50	2%	1.6	8%	7.8	38%
toray	20.36	16.33	20%	0.60	3%	na	na	6.19	30%
trinseo	3.04	2.72	11%	0.01	0%	0.06	2%	1.16	38%
umicore	23.71	21.46	9%	0.16	1%	0.25	1%	1.95	8%
wacker	5.01	4.36	13%	0.23	5%	0.18	4%	1.51	30%
westlake	7.50	6.48	14%	0.37	5%	na	na	3.57	48%
yara	11.73	7.82	33%	0.69	6%	0.091	1%	3.37	29%
average	14.23	10.61	25%	0.79	8%	0.41	3%	6.48	48%

 

The averages for these statistics provide some interesting information.   The average revenues for the thirty-seven companies (based on 2020 annual reports) is $14.23 billion.  Other averages seem good.  The average gross profit margin is twenty-five percentage.  The average net income as a percentage of sales is 8.  And the research and development (r&d) expenditure as a percentage of sales is three.

One statistic that might deserve pause in determining ow problematic it might be is the average long-term debt as a percentage of sales, which is forty-eight.

Those companies that improve on the averages should be commended.

In a future blog I hope to provide some analysis on correlating these various measurements with net income as a percentage of sales.