The cover story of the latest issue of C&EN is concerned with the “Global Top 50” chemical companies.  To nobody’s surprise, Dow, BASF, and Royal Dutch Shell occupy the top three positions again this year.  The dollar numbers are impressive enough, but have a look at the column on the far right of the table on page 14- “Return on Chemical Assets”.  This is an important column.  It signals which operators can squeeze the greatest value out of their plants.  The winner in this column is 11th ranked SABIC with a 30 % return on assets and reported 43 % operating profit margin.  Compare that with 2nd ranked Shell (11 and 9 %) and 3rd ranked ExxonMobil (6 and 2 %).  There has to be a story there.

On page 16 of the cover story, the figure titled “Narrowing In” shows the market coverage over several decades.  It is clear that the big chemical players exited the pharmaceutical business in favor of chemicals.  One of the euphamisms is that this is a return to core competencies.  A more cynical comment might be that the players fled from core incompetencies. There is truth in both views.

Another table shows R&D spending as % of chemical sales.  These numbers have been flat across the industry since Y2000.  An investor might look at this and conclude that the players are conservative, and that would be right. Chemical industry does tend to be conservative.  But a chemical catalog president would look at the numbers and proclaim that this is indicative of a cash cow for sales of specialty R&D chemicals.  OK, the growth is flat. But it is safe.