The first post–COVID-19 pandemic financial results are starting to trickle in from chemical makers, and they aren’t good. Indications are that 2020 will be a year of sharp declines.
LyondellBasell Industries expects its net earnings for the first quarter will land between $110 million and $180 million when it puts out final numbers on May 1. Last quarter, before the pandemic hit, its net was $612 million.
The company says its major sites are up and running and that packaging and medical markets have been robust. However, it did idle production of plastic compounds used in auto manufacturing.
LyondellBasell has been taking money-saving measures such as reducing inventories and slowing capital spending, including the construction of a massive propylene oxide/tert-butyl alcohol plant in Texas. The company expects that 2020 capital expenditures will be down 20% from its original estimate of $2.4 billion.
Preliminary first-quarter figures from the German polyurethane chemical supplier Covestro show a 4.1% decline in sales volumes. It expects earnings before taxes to fall to $277 million, compared to $303 million in the previous quarter.
Covestro expects earnings before taxes to be between $1.1 billion and $1.6 billion for the year, , compared to more than $1.7 billion in 2019. Like Lyondell, the company is throttling back capital spending by around 20%.
In a new report, Moody’s Investor Service says it expects chemical industry earnings before taxes to decline by 10% on average during 2020. Some sectors will be affected more than others, Moody’s says. For example, coatings might be bolstered because of lower raw material costs, but US petrochemical makers will bear the brunt of lower oil prices...I don't understand how the chemical industry taking a 10% hit in earnings won't hit 1) overall employment 2) entry-level R&D employment or 3) wages overall. But we'll see how things go. Best wishes to us all.