Bleak prospects in the pipeline for chemical CEOs

    TORONTO, Feb. 25 /CNW/ - CEOs in the chemicals industry are less
confident about growth prospects than ever, according to
PricewaterhouseCoopers' (PwC) latest Global CEO survey. Only 17% of chemical
company leaders are very confident that they can increase revenues over the
next 12 months, compared with 39% in PwC's CEO survey last year.
    This fall in confidence levels, expressed by our sample of 48 chemicals
industry CEOs, is not surprising given that the chemicals industry is
currently contending with the fallout from hurricanes Gustav and Ike, rapidly
deteriorating global credit markets and the threat of a deep global recession.
Moreover, two of its key groups of customers, the automotive and construction
sectors, are among those most severely affected by the downturn.
    In addition to weakened demand, financing is a key concern, with 65% of
respondents concerned that the disruption of the capital markets will affect
their own expansion plans. More than two-thirds of chemicals CEOs anticipate
that financing costs will increase and that they will have to delay some of
their investments.
    In terms of cost-cutting, 35% of chemical CEOs anticipate that they will
have to reduce the number of people they employ over the next 12 months. This
is higher than leaders in other industries - 26% of the overall CEO survey
population. But the chemicals industry is heavily reliant on the development
of new products and ideas - and it is people, not systems or processes, who
generate innovation - so these CEOs will have to be very careful about how
they implement such reductions.
    "Every chemicals industry CEO will need to make tough decisions about
what actions are required to ensure their company's short-term survival," says
Michael Clifford, Leader of the PwC Canada Chemicals Practice. "Retaining the
right skills to deliver long-term business growth is essential, and companies
that cut back too far now may struggle to take advantage of the economic
recovery, when it occurs."
    Further, comments Clifford, "Business models in the industry will need to
continue to evolve. Commodity chemicals companies will follow speciality
manufacturers by getting even closer to their customers; Chinese and Middle
Eastern companies will buy into new markets or technologies; and almost all
companies will need to adopt sustainable business solutions."
    On a positive note chemical CEOs are actually less pessimistic than their
peers in the overall survey sample of 1,124 CEOs from a range of industries.
Chemical CEOs are less likely than other industries to be planning a reduction
in the development of new products and services as a result of the current
financial crisis. Chemical leaders see new products as absolutely critical to
the long-term viability of their companies. Some 33% of chemicals CEOs are
also planning to complete a cross-border merger or acquisition over the next
12 months, compared with just 25% of the total survey population.
    "While the economic downturn has significantly affected the large deal
market, the small to mid-sized deal market remains relatively strong, as
companies look for bolt-on acquisitions to strengthen their existing positions
and dispose of assets that do not meet their internal performance levels,"
says Clifford. "We expect to see additional deal activity driven by distressed
companies requiring capital in order to restructure or continue operating
during the bankruptcy process. The reduced valuation level in the markets
could be seen as a chance for Chinese and Middle Eastern chemicals
conglomerates to expand into speciality chemicals and pick up entire companies
or minority stakes."
    For more details or a copy of the report please visit For more information on PwC's Chemicals practice please

    PwC Economic and Credit Crisis Task Force

    PwC recognizes that a global crisis requires a global and coordinated
    The PwC Economic and Credit Crisis Task Force (the "PwC Task Force")
brings together a Canadian team of senior cross-functional experienced
practitioners who understand market volatility and the diverse challenges
facing companies today. By leveraging knowledge, experience and networks, the
PwC Task Force can advise and guide Canadian companies through a multitude of
capital market and economic crisis issues.
    For more information please visit:

    PricewaterhouseCoopers ( provides industry-focused assurance,
tax and advisory services to build public trust and enhance value for its
clients and their stakeholders. More than 155,000 people in 153 countries
across our network share their thinking, experience and solutions to develop
fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP
( and its related entities have more than 5,200 partners and
staff in offices across the country.
    "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario
limited liability partnership, or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network,
each of which is a separate and independent legal entity.

For further information:

For further information: Carolyn Forest, PricewaterhouseCoopers LLP,
(416) 814-5730,; Nina Godard, PricewaterhouseCoopers
LLP, (416) 941-8383 x 13520,

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