In the context of the epidemic, the specialty products industry has outperformed the basic chemicals. In Europe and the US, the performance of most specialized companies improved in the third quarter, with many Posting monthly gains but still falling sales. The gains are due to increased demand following deregulation in some countries, particularly In Europe. For the current fourth quarter, due to the severe rebound of the epidemic in Europe and the United States, corporate performance expectations diverge.
The performance of specialty products tends to be better
In the third quarter, as the COVID-19 outbreak eased, many countries relaxed their controls, especially the recovery of the Chinese market, which provided an opportunity for the performance of specialty products companies to improve. The performance of many corporate specialty products units was significantly higher than the second quarter, or even higher than the same period last year.
Akzonobel reported that the epidemic eased in the third quarter, but demand trends varied by region and business segment. Sales fell 5% in the third quarter from a year earlier, despite a 3% increase driven mainly by strong demand for decorative coatings. Sales of decorative paints rose 4 percent from the same period last year, helped by strong demand in Europe, South America and China.
Ecolab reported a 6 per cent year-on-year drop in net sales, as lower volumes due to the outbreak offset cost cuts and higher selling prices by a less favourable mix of businesses. However, Douglas Baker, the company's chairman and chief executive, noted that sales and earnings improved significantly in the third quarter from the second quarter, partly because consumer trends were beginning to recover.
The company doesn't release third-quarter sales figures, but says its catalyst business outsells the global auto market in volume and revenue. This is thanks to the company's strong position in the Chinese market.
The fastest growth is in the health sector
Of all specialty products sectors, health, nutrition and other chemicals grew the fastest due to the COVID-19 outbreak, making them a bright spot for the entire specialty products industry in the third quarter.
Evonik reported a better-than-expected third quarter, with sales continuing to improve after the second quarter was severely affected by the spread of the epidemic. Sales of specialty additives and smart materials were particularly strong quarter-on-quarter, according to the report, but none was as strong as the nutrition and consumer Chemicals business. Even with the negative impact of currency movements, sales in the nutrition and consumer chemicals business fell only 2 per cent in the third quarter and adjusted EBITDA rose 18 per cent, while total sales were down 10 per cent year on year.
Fragrance maker Dexin was one of the few companies to report year-on-year sales growth of 2.7 per cent in the third quarter. Among them, sales in the company's nutrition division rose 9.1 percent from a year earlier, the highest growth rate of any of its business units. "Demand for product solutions for food, personal care and hygiene products is still high," says Heinz-Jurgen Bertram, CHIEF executive of Symrise. "There is less demand for luxury goods like high-end perfume."
Merck said net sales rose 9.7 percent from a year earlier, driven by 15.6 percent organic growth in its life sciences business and acquisition-related growth in its high-performance materials business. The company's drug growth is mainly driven by tumor lines and hospital emergency care products. In the first three quarters, the pharmaceutical sector accounted for 70% of the company's revenue, a record high.
Future performance is predictable
Despite signs of a recovery in demand in the third quarter, the second wave of the outbreak, which began in the autumn, led many European countries to impose new lockdowns in November. So far, the epidemic is still worsening in Europe and the United States. Still, most specialty companies believe the positive trend in the third quarter will continue into the fourth quarter and that containment measures will have a less negative impact on the market than in the second quarter.
Mr Arkema expects fourth-quarter activity levels to be flat compared with the third quarter, and that conditions such as outbreak restrictions will not have a significant impact on global economic recovery trends.
Michael McGarry, chairman and CHIEF executive of PPG USA, said the fourth quarter was likely to see normal seasonal trends, particularly in Europe and North America's architectural coatings business. He believes that overall economic activity will continue to recover, albeit at a different pace, even if the outbreak creates continued uncertainty. PPG expects fourth-quarter sales to fall 3% to 5% from a year earlier.
Ecolab also expects the third-quarter improvement to continue into the fourth quarter, with the impact less pronounced than at the start of the year, although a second wave of outbreaks in Europe and the US could affect reopening.
