Bayer sets midterm margin, sales growth targets

MOSCOW (MRC) -- Bayer has announced midterm targets covering margin- and sales growth for 2022-24. The company announced the targets at its virtual capital markets day on 10 March, said Chemweek.

Bayer is aiming for group net sales of EUR43.0-45.0 billion by 2024, up from EUR41.4 billion in 2020. The Crop Science division is projected to grow at a currency- and portfolio-adjusted rate of 3-5% annually from 2022 through 2024, faster than the market. Crop Science is targeting an EBITDA margin before special items of 27-29% by 2024, up from 24% in 2020 on further efficiency improvements.

Bayer expects its sales growth to regain momentum in 2021 and accelerate in subsequent years. The company says it is taking steps to strengthen revenue growth, profitability, and cash flow, and says that all three of its divisions “are projected to contribute to the company’s success in the coming years.” Werner Baumann, CEO of Bayer, said during the capital markets day that the company is aiming for above-market growth from 2022 for the Crop Science and consumer health divisions.

Sales of the consumer health division are also projected to increase annually by 3-5% at a currency- and portfolio-adjusted rate, with the division set to gain further market share, Bayer says. “The primary goal now for consumer health is to consolidate the substantial growth and margin improvements seen over the past 18 months,” Baumann said. Leading innovation and strong brands, a further digitalization of the business, and potentially also bolt-on acquisitions are expected to drive the growth of the business, Bayer says. The division's EBITDA margin before special items is expected to increase toward a mid-20s percentage from 22% in 2020, the company says.
Meanwhile, Bayer plans “to continue to grow at pharmaceuticals despite patent expirations and only expects to register a modest decline in sales in 2024,” Baumann says. The pharma division is expected to post annual sales growth of 3-5% at a currency- and portfolio-adjusted rate, through 2023. In 2024, Bayer anticipates a low- to mid-single digit percentage decline due to the patent expirations, with pharma set to return to sustainable growth in 2025. The division is expected to generate an EBITDA margin before special items of 32.0-34.0% through 2023, down from 34.9% in 2020, and remain above 30% even in 2024 despite the effect of the patent expirations, Bayer says.

The restructuring program Bayer announced in September 2020 will also help strengthen the company’s earnings power. “We aim to become an even simpler, leaner, and more flexible company,” said Wolfgang Nickl, CFO at Bayer. “In doing so, we are freeing up additional resources to invest in innovation and growth, enabling us to further strengthen profitability.” The program is expected to deliver annualized savings of more than EUR1.5 billion from 2024.

Nickl says that the company’s capital-allocation priorities include deleveraging its balance sheet after anticipated US litigation payouts; using a significant portion of its capital for dividends, maintaining its dividend policy and planning to pay out 30-40% of core earnings per share; and investing further resources in bolt-on acquisitions, especially at the pharma and consumer-health businesses. Net financial debt is projected to drop to EUR28-30 billion by the end of 2024, from EUR30 billion at the end of 2020 disregarding potential divestment proceeds, Bayer says.

As MRC reported earlier, Covestro closed the sale of its European polycarbonates (PC) sheets business to the Munich-based Serafin Group effective January 2, 2020. This includes key management and sales functions throughout Europe as well as production sites in Belgium and Italy.

Covestro (formerly Bayer MaterialScience) is an independent subgroup within Bayer. It was created as part of the restructuring of Bayer AG from the former business group Bayer Polymers, with certain of its activities being spun off to Lanxess AG. Covestro manufactures and develops materials such as coatings, adhesives and sealants, polycarbonates (CDs, DVDs), polyurethanes (automotive seating, insulation for refrigerating appliances) etc.

According to MRC's ScanPlast report, Russia's estimated consumption of PC granules (excluding imports and exports to\\from Belarus) rose in January-November 2020 by 18% year on year to 83,600 tonnes (70,600 tonnes a year earlier).
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MOSCOW (MRC) -- Global refineries will increase crude processing sharply over the next six months to stabilize stocks of fuels such as gasoline and diesel – even if substantial coronavirus controls remain on travel and service sector businesses, reported Reuters.

The prospective rise in processing and consequent draw down in crude inventories in the second and especially third quarters is what has been boosting futures prices and causing calendar spreads to tighten.

The oil market’s rapid evolution from a massive production surplus last year to deficit has been most evident in the United States, where reliable data on stocks is published weekly by the Energy Information Administration (EIA).

US inventories of crude and products outside the strategic petroleum reserve amounted to 1,283 million barrels on March 5, which was just 12 million barrels or 1% above the previous five-year average.

Crude stocks were 29 million barrels or 6% above the five-year average, mostly as result of the disruption to refineries caused by cold weather and power failures in Texas last month.

But inventories of finished fuels and intermediate refinery products had already fallen to 15 million barrels or 2% below the average for 2016-2020.

The gasoline shortfall has become particularly severe, with inventories 15 million barrels or 6% below the five-year average.

Total stocks of crude and products have fallen by 168 million barrels since July, largely reversing the 198 million build between March and June associated with the epidemic and volume war between Saudi Arabia and Russia.

In the next few months, US refineries will have to accelerate crude processing and fuel production to prevent stocks from depleting further.

If coronavirus controls on travel, services and international passenger aviation are relaxed, that would provide an even bigger boost to consumption.

But it is important to stress that crude processing will have to accelerate even if controls are maintained to prevent fuel stocks from eroding to undesirably low levels.

The depletion of petroleum inventories is most obvious in the United States because of its high-frequency real-time data, but the phenomenon is worldwide.

Commercial petroleum inventories in the OECD countries have fallen by around 284 million barrels since July, reversing most of the 335 million barrel build between last February and June, according to the EIA.

In March, OECD inventories are likely to fall slightly below the average for the previous five years, for the first time since the epidemic started to spread outside China in February last year.

Globally, petroleum consumption has been above production in eight out of the last nine months, according to EIA estimates (“Short-term energy outlook”, EIA, March 9).

OPEC+ leaders have expressed scepticism about the continued recovery in oil demand in the near term, opting to leave production unchanged at their meeting on March 4, rather than increasing it.

But even if consumption remains at current levels, global inventories will continue to tighten over the next six months, and any relaxation in coronavirus movement controls will intensify the drawdown.

Futures prices are anticipating global inventories will become tight over the second and third quarters and signalling the immediate need for more production, either from OPEC+ or the US shale industry.

As MRC informed before, the largest US refinery, Motiva Enterprises’ 607,000 barrel-per-day Port Arthur, Texas, plant, returned to normal operations. The refinery was shut on Feb. 15 when freezing temperatures, rarely seen on the US Gulf Coast, knocked out steam supply. Motiva began restarting the refinery on Feb. 24.

Motiva Chemicals has also resumed operations at its mixed-feed cracker in Port Arthur, USA. The process of restart of this cracker with the capacity of 635,000 mt/year of ethylene and 340,000 mt/year of propylene began on 27 February, 2021, and finished late last week. The cracker wa shut along with the refinery at the same site on 14 February, 2021, because of the deep freeze.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.
MRC

MOSCOW (MRC) -- Honeywell has recently announced that Hengli Petrochemical Co. Ltd. successfully used Callidus burner technology from Honeywell UOP to minimize nitrogen oxide (NOx) and carbon monoxide (CO) emissions in China, and reduce the impact of these emissions while ensuring safe and stable operations, according to Hydrocarbonprocessing.

Hengli selected Callidus advanced flares and low-NOx burner technology in 2017 to comply with environmental regulations and improve energy efficiency and operational safety at its refinery and petrochemicals complex in Dalian, Liaoning Province. Equipped with innovative low fire mode (LFM) technology, Callidus burners reduced Hengli’s emissions, improving air quality and helping to eliminate causes of acid rain.

When furnace temperatures are below 650 C, the NOx burner produces higher levels of CO. But by using the LFM technology, the Callidus burners kept emissions at ideal levels - with NOx and CO each less than 50mg/Nm3. This helped Hengli solve an industry problem of minimizing both NOx and CO emissions to reduce environmental impact, while ensuring safe and stable operations.

“We selected the Callidus technology because it’s the global leader in combustion technologies and because it was the first in China to solve the CO emission issue in a NOx burner,” said Liang Peng, Static Equipment Director, Hengli Petrochemical. “Callidus burners also can be replaced without requiring a shutdown of the furnace and other operations.”

“Our experience with these technologies around the globe helps customers like Hengli generate economic value by improving their return on investment with environmentally sound products,” said Xiang Lei, vice president and general manager, Honeywell UOP China. “We’re pleased to work with Hengli to improve its energy efficiency and operational safety.”

As MRC reported earlier, in November, 2020, Honeywell announced Zhenhua Petrochemical Co. Ltd will use Honeywell UOP’s C3 Oleflex technology for propane dehydrogenation to process 1 million metric tons per year of polymer-grade propylene for a proposed plant in Dongying City, Shandong Province, China.

Propylene is the main feedstock for production of polypropylene (PP).

According to MRC's ScanPlast report, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.
MRC

MOSCOW (MRC) -- Composite material supplier Composites One has purchased the Process Materials business from the Solvay Composites Materials Global Business, said Canplastics.

In a news release, Composites One officials said that the acquisition gives it the opportunity to add international manufacturing and sales capabilities in specialized materials used in a variety of vacuum-assisted composite manufacturing processes. The acquired business, rebranded as Aerovac, is a manufacturer, developer, and supplier of process materials, tooling, and services used in prepreg processing, vacuum infusion, glass lamination, and other industrial applications.

"Aerovac is a natural, strategic extension of Composites One’s business,” said Steve Dehmlow, CEO of Composites One. “It positions us for future growth, and further establishes Composites One as a major supplier to the aerospace, wind energy and marine markets."

The acquisition gives Composites One, which is headquartered in Arlington Heights, Ill., multiple manufacturing, kit design/fabrication and materials distribution locations including Santa Fe Springs, California; Sumner, Washington; Keighley, U.K.; Mondovi, Italy; and Toulouse, France. An additional site in Toulouse focuses on the design and manufacture of hard and soft tooling. Another inclusion is a U.K.-based distribution business, Med-Lab, which trades in aircraft engine overhaul consumables and fuel testing instruments.

As MRC informed earlier, in August, 2020, through the acquisition of the Solvay polyamide (PA) business, BASF enhanced its R&D capabilities in Asia Pacific with new technologies, technical expertise, and upgraded material and part testing services. BASF is planning to integrate the R&D centers from Solvay into its R&D existing facilities in Shanghai, China, and Seoul, Korea. The enhanced capabilities will boost BASF’s position as a solution provider to develop advanced material solutions for key industries.

We remind that BASF-YPC, a 50-50 joint venture of BASF and Sinopec, undertook a planned shutdown at its naphtha cracker on 30 April 2020. The company initially planned to start turnaround at the cracker on April 5, 2020. The plant remained under maintenance unitl 18 June, 2020. Located in Jiangsu, China, the cracker has an ethylene capacity of 750,000 mt/year and propylene capacity of 400,000 mt/year.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,220,640 tonnes in 2020, up by 2% year on year. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, polypropylene (PP) shipments to the Russian market reached 1 240,000 tonnes in 2020 (calculated using the formula: production, minus exports, plus imports, excluding producers' inventories as of 1 January, 2020). Supply of exclusively PP random copolymer increased.

Solvay is a science company whose technologies bring benefits to many aspects of daily life. With more than 24,100 employees in 64 countries, Solvay bonds people, ideas and elements to reinvent progress. The Group seeks to create sustainable shared value for all, notably through its Solvay One Planet plan crafted around three pillars: protecting the climate, preserving resources and fostering better life. The Group’s innovative solutions contribute to safer, cleaner, and more sustainable products found in homes, food and consumer goods, planes, cars, batteries, smart devices, health care applications, water and air purification systems. Founded in 1863, Solvay today ranks among the world’s top three companies for the vast majority of its activities and delivered net sales of EUR10.2 billion in 2019. Solvay is listed on Euronext Brussels (SOLB) and Paris and in the United States, where its shares (SOLVY) are traded through a Level I ADR program.
MRC

MOSCOW (MRC) -- BASF's net income surged to EUR1.01bn in the fourth quarter amid stronger prices and higher volumes, the German chemicals major said in its press release.

Sales in the fourth quarter of 2020 increased by 8 percent to EUR15.9 billion. Volumes were up by 7%. Prices also increased by 7%, driven mainly by the Surface Technologies, Agricultural Solutions and Materials segments. Portfolio effects contributed 1 percent and resulted from the acquisition of the polyamide business from Solvay. Currency effects had a negative impact of 7 percent on sales.

EBITDA before special items rose by 15 percent in the fourth quarter to EUR2.1 billion. EBITDA amounted to EUR2.0 billion, compared with EUR1.6 billion in the fourth quarter of 2019. EBIT before special items rose in the fourth quarter by 32 percent to EUR1.1 billion. This increase was primarily due to significantly higher earnings in the Materials, Chemicals and Industrial Solutions segments. This more than offset lower contributions from the other segments as well as from Other. Special items in EBIT amounted to minus EUR181 million, as compared with minus EUR263 million in the fourth quarter of 2019. EBIT in the fourth quarter of 2020 rose by 61 percent to EUR932 million.

Sales of EUR59.1 billion in the full year 2020 were almost stable. Negative currency and volume effects were nearly offset by higher prices and positive portfolio effects.

EBITDA before special items was EUR7.4 billion, down by 11 percent versus the prior-year level. EBITDA came in at EUR6.5 billion, compared with EUR8.2 billion in 2019. EBIT before special items was EUR3.6 billion in the full year 2020, down by 23 percent compared with the previous year. Owing to the effects of the pandemic, all segments posted lower earnings – with one exception: The Industrial Solutions segment achieved EBIT before special items on a level with the year 2019. The earnings decline at the BASF Group level was attributable in particular to significantly lower contributions from the upstream businesses in the Chemicals and Materials segments. The sharp drop in demand from the automotive industry especially weighed on earnings development in the Surface Technologies segment.

We remind that German chemicals maker BASF said in early November it had put a project to build a petrochemicals complex in India worth up to USD4 billion on hold due to the economic uncertainty caused by the COVID-19 pandemic. BASF signed a memorandum of understanding with Abu Dhabi National Oil Company (ADNOC), Adani Group and Borealis AG in October 2019 to evaluate a collaboration to build the chemical site in Mundra, in India’s Gujarat state.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.

BASF is the leading chemical company. It produces a wide range of chemicals, for example solvents, amines, resins, glues, electronic-grade chemicals, industrial gases, basic petrochemicals and inorganic chemicals. The most important customers for this segment are the pharmaceutical, construction, textile and automotive industries.

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