Chief executive officers of chemical companies are surprisingly confident about revenue growth this year, reports PricewaterhouseCoopers, New York City, in "Dealing with Disruption, 16th Annual Global CEO Survey." The report, which was issued in February, draws upon inputs from 1,330 CEOs in 68 countries, including 77 chemical industry CEOs in 27 nations.
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A substantial majority of the chemicals CEOs (81%) responded that they were somewhat or very confident of generating higher revenues in the next 12 months. Even more, 94%, felt optimistic about achieving revenue growth over the next three years, with 51% of the CEOs saying they were "very confident."
The chemicals CEOs cited the prospects for growth in China and foreign markets more generally, as well as the importance of innovation and research and development. "In both these areas, the results for chemicals CEOs far outdistanced the overall survey and were the strongest for any industry sector," notes the report.
"The chemicals sector is already global, and CEOs see organic growth in existing foreign markets as holding the most promise for growth this year. Deals and innovation follow close behind," states the report. Again, chemical industry responses differed from those of the overall sample: 25% of chemicals CEOs (versus 17% of all respondents) pointed to organic growth in existing foreign markets but fewer (21% versus 32%) cited organic growth in their existing domestic market. Chemicals CEOs also expect to boost growth more from new mergers and acquisitions, joint ventures and strategic alliances (23% versus 17%) but less from new product or service development (22% versus 25%).
When asked which nations, excluding the company's home country, are most important for the firm's overall growth prospects over the next 12 months, China took the top spot, cited by 51% of chemicals CEOs (versus 31% of all respondents), followed by the U.S. (31% versus 23% overall), Brazil (21% versus 15%) and India (16% versus 10%).
Chemicals CEOs expressed far more interest than the overall sample in building manufacturing capacity in China (64% versus 30%), accessing its talent base (59% versus 43%), taking advantage of raw materials or components there (44% versus 24%), and acquiring a local operation and customer base (41% versus 29%).
Their attitude toward research and development was another notable difference: "60% of chemicals CEOs say R&D is a top investment priority over the next 12 months. That's almost double the overall average, and significantly more than other innovation-driven sectors," notes the report. "And 78% of chemicals CEOs say they'll make changes to increase R&D and innovation capacity. Again, that's more than across the overall sample," it adds.
The responses from the chemicals CEOs also significantly differed from those of all respondents when it came to their take on threats to growth. While they, like other respondents, (84% versus 81% of the overall sample) considered uncertain or volatile economic growth a major worry, the chemicals CEOs showed more concern about energy and raw material costs (75% versus 52%) and less concern about over-regulation (57% versus 69%).
Testifying to their concerns about energy and raw materials costs, 36% of chemicals CEOs (versus 24% of all respondents) said their companies over the next three years would increase investments for crucial natural resources. In addition, 38% (versus 28% overall) thought that securing natural resources should be a government priority.
Almost half (42%) of chemicals CEOs worried about supply chain disruption. "Nearly two-thirds of chemicals CEOs say their companies are diversifying their supply chains and working with more partners across varied geographies," notes the report. "And many are working to strengthen engagement with supply chain partners, too," it adds.
The survey also points to stepped-up environmental efforts. Nearly two-thirds (66%) of chemicals CEOs stated that their companies would increase their focus on reducing their environmental footprint this year, with 18% saying they would significantly boost their focus.
On the downside, 74% of chemicals CEOs indicated they would implement a cost-reduction initiative in the next 12 months.
The chemicals CEOs' generally upbeat assessment squares with our recent cover story about the U.S. outlook, "Prospects Brighten for Chemical Industry."
