Rising staff costs as a percentage of revenue is a cause for concern for chemical firms at a time when lead economic indicators are starting to stumble, according to analysts at investment bank UBS.
Source: Monkey Business Images/REX/ShutterstockAccording to UBS, employee costs as a percentage of revenue have increased 120bps between 2014 and 2017, a period benefiting from a strong macroeconomic backdrop.
However, with lead macro indicators falling – eurozone private sector growth continued to slow in March from the highs of late 2017, while February inflation fell to 1.1% – UBS expressed concern that wage costs as a percentage of sales are at the highest level for at least four years.
“We could be facing a period of deteriorating economics that risks catching the sector off-guard with an inflated cost base,” UBS said in its note.
The bank said that it is concerned about the lack of cost-efficiency programmes announced by companies in their guides for 2018.
“On our estimates, based on company guidance, specific efficiency programmes (as % of EBITDA) for 2018 are likely to be running at half the level of the last ten years,” it said.
UBS added that, according to estimates for 2018, cost cutting as a percentage of EBITDA is at its lowest level since 2011.
“The highest cost cutting we can see comes from the fertilizer names in the face of a weak grain market backdrop, while specialty names and many consumer chemical names are not engaging in any announced cost cutting measures.”
By Niall Swan
Source: ICIS News
The investment enables the steam cracker to increase the share of renewable and recycled raw materials used in its (ethylene and propylene) production. The move supports the Borealis Strategy 2030 for a circular economy. The Porvoo investment program is expected to be completed in 2025.
Murray Auchincloss, bp’s CEO, said in a statement: “As I set out in February, BP’s destination from IOC [international oil company] to IEC [integrated energy company] is unchanged – and we need to deliver as a simpler, more focused, and higher-value company.
Founded in 1972, Tecnofilm has expanded its product portfolio over the years to offer a wider range of compounds and functional polymers for various industrial applications and technical articles. The company has patented several of its products.
