Specialty Chemicals

Executive Committee member responsible for Specialty Chemicals (photo)

From left to right: Knut Schwalenberg, Niek Stapel, Werner Fuhrmann, Jan Svärd, Graeme Armstrong.

“We are swiftly responding to changing trends in the chemicals industry”

Werner Fuhrmann
Member of the Executive Committee responsible for Specialty Chemicals

It was a weak year for the chemical industry as a whole, notably in Europe – where demand was down across the board – with volatility in supply and demand also evident in China. This inevitably had a negative effect on our financial performance. Despite the strain on operating income caused by the difficult market conditions, we maintained our focus on several key growth initiatives and continued to optimize our global capabilities.

From a financial perspective, in addition to volume declines, unfavorable exchange rates in particular worked against us, with the euro turning out to be stronger than expected and currencies in South East Asia and Brazil being somewhat weaker. A higher number of one-off items, including an impairment of €139 million, also adversely affected to our final results, along with the revenue effect of the divestment of Chemicals Pakistan.

Trading conditions were therefore very challenging and we had to take swifter action than originally planned in order to ensure that we achieve our 2015 ambitions. A major restructuring program is being implemented which is designed to cut costs, drive efficiency and adjust our manufacturing footprint. By taking this action, we are not only making ourselves functionally excellent, but are also preparing ourselves for the future. Because once opportunities for growth do arise, we will be well positioned to take full advantage of the initiatives we already have in place, many of which were launched in 2013.

For example, as well as starting up our Jupiá Chemical Island in Brazil and a new facility for Bermocoll cellulose derivatives in Ningbo, China, we also announced expansion plans for our Surface Chemistry business in both Ningbo and Boxing. In addition, a newly expanded Expancel site was inaugurated in Sweden. Our Middle East organization also grew stronger as the company continued to invest in regions where future growth is expected.

As we continue to strive for operational excellence, a number of improvement programs were introduced, with several of them being centered on our Pulp and Performance Chemicals and Functional Chemicals businesses. Functional Chemicals in particular has endured difficult conditions in recent years, mainly due to the temporary over-supply in the market of ethylene amines. Various other products also encountered difficult conditions in 2013, which forced us to introduce a number of initiatives designed to significantly increase the business’ profitability. In Pulp and Performance Chemicals, a number of closures and divestments have been concluded in order to adjust our manufacturing footprint. Results were reasonable though, impacted mainly by softer demand and margin pressure.

Industrial Chemicals also encountered a challenging business environment and had the additional burden of an extended planned maintenance stop in the Rotterdam value chain. Expensive gas prices, especially in the Netherlands, had a further adverse impact. Surface Chemistry also saw weaker demand, but delivered results very close to the excellent 2012 performance. The business continued to build on the acquisition of Boxing Oleochemicals, which was accompanied by a reduction in FTEs, and benefited somewhat from the upbeat mood in the US chemical industry.

We continue to consolidate progress in safety performance, particularly in the area of people safety, where we are close to achieving the company’s 2015 TRR target of less than 2.0. Several positive developments in terms of further improving the sustainable nature of our operations should also be mentioned. These include securing additional steam supply from Twence for salt production in Hengelo, the Netherlands, helping to lower our CO2 emissions. In addition, we have entered into partnerships with Zeachem and Solvay for the increased purchasing of renewable raw materials, while our StimWell and EcoFill products are now being marketed commercially, helping to increase our share of eco-premium solutions that offer customer benefits.