Fitch: Low Oil Prices Do Not Threaten Advantage of North American High Yield Specialty Chemical Cos.
Fitch Ratings has published a special report comparing and contrasting
key metrics, trends and outliers for a sample of nine North American
high-yield specialty chemicals companies. The report highlights topics
such as the effects of the drop in crude prices, differences in
operating profiles, M&A trends, and covenant differences. Companies
reviewed in the sample include A. Schulman Inc., Axalta Coating Systems
Ltd., Hexion Inc., Koppers Holdings Inc., Kraton Performance Polymers,
LSB Industries, Inc., Momentive Performance Materials Inc., OMNOVA
Solutions, Inc. and Platform Specialty Products Corp.
'Lower crude prices have put downward pressure on margins throughout the
production chain,' says Greg Fodell, Associate Director, Corporates.
'However, the impact on margins for North American specialty chemicals
has been moderated, both because of an offsetting decline in natural gas
liquids prices, and because of pricing power in specialty end markets.'
In the long-run, Fitch expects North American chemical producers to
remain cost-advantaged due to robust natural gas and NGL feedstock
supplies, though some margin compression is likely. Specialty chemicals
should be protected given their high value-add and lower percentage of
total end-product cost. Producers should benefit from solid domestic
growth in manufacturing and their exposure to continued recovery in U.S.
construction and consumption.
Despite historically high valuation multiples, M&A activity has
increased in the past few years as low interest rates and robust
economic conditions fuel growth strategies. Fitch believes that higher
barriers to entry and high importance of customer relationships in the
specialty chemicals space drives M&A activity as companies seek to scale
The strategic focus of many specialty companies continues around
population trends for new product development and specialization,
focusing on rapidly growing North American agriculture, electronics,
health care and nutrition markets.
The full report, 'High-Yield Specialty Chemical Review' is available at www.fitchratings.com
Additional information is available at 'www.fitchratings.com'.
High-Yield Specialty Chemicals Review (Analyzing Key Metrics, Trends and
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Copyright Business Wire 2015
Source: Business Wire
(October 6, 2015 - 10:11 AM EDT)
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