paper chemicals weblog

AkzoNobel's Divestment of National Starch Completed

2010-10-01T10:58:00.004+01:00

AkzoNobel has finalised the $1.3bn sale of its National Starch business to Corn Products International. The transaction was announced on June 21, 2010.

"National Starch was taken over by AkzoNobel as part of its acquisition of ICI in 2008, but did not offer sufficient opportunity to create value within the company's transformed portfolio."

Corn Products International is one of the world's largest suppliers of food ingredients and industrial products derived from the wet milling and processing of starch-based materials and has its HQ in Westchester, Illinois, USA.

There will be further consolidation of the starch industry as European subsidies disappear.

Kemira closes Blankophor GmbH & Co. KG (German Catec GmbH)

2010-09-30T10:46:00.005+01:00

Kemira Oyj has on September 30, 2010, closed Blankophor GmbH & Co. KG (German Catec GmbH) following the deal announced on June 23, 2010.

Kemira sold its global Fluorescent Whitening Agents (FWAs) business to Blankophor. The parties have agreed not to disclose the transaction price.

The traditional European, high-cost manufacturers of optical brightening agents (OBA) or FWAs continue to struggle as these commodities are easy to source form Indian and Chinese producers at similar quality but much lower price.

Kemira sells its global FWA business

2010-06-23T07:38:00.003+01:00

Reported in the press this morning:

Kemira Oyj and German Catec GmbH financially supported by Fengler Beteiligungs GmbH have signed a contract, according to which Kemira sells its global Fluorescent Whitening Agents (FWAs) business to Catec. FWAs improve the whiteness and brightness of paper. The deal covers a production plant in Leverkusen, Germany, the global FWA sales network and the associated support functions. The FWA business and its staff of about 100 persons will be transferred to the new owner once the companies have closed the transaction in August 2010.

The transaction does not have any significant impact on Kemira's financial figures, and the parties have agreed not to disclose the transaction price.

"Kemira is focusing according to its strategy on products and services that enhance the water quality and quantity management in the water intensive industries such as pulp and paper industry. Exiting FWA business is in line with our strategy to enhance the product lines which are common for all our segments and on which we are building our competitiveness", states Petri Helsky, head of Paper segment.

FWAs or OBAs are widely used in the paper industry for producing white paper. A low-margin, commodity business where the major companies, BASF (Ciba), Clariant and Kemira have struggled to compete against quality market entrants from China and India.

Seasons Greetings

2009-12-25T09:58:00.001Z

Seasons greetings form the paper chemicals weblog. Thank you for your support and interest throughout the year.

The paper chemicals weblog on twitter

2009-12-02T12:51:00.003Z

The paper chemicals weblog has also been sharing news, information and views on the paper chemical industry with fellow tweeters ........ follow us on twitter at @paperinsight ..........

Clariant beats expectations and shows 3Q09 profit. Paper chemical business remains weak.

2009-11-04T14:13:00.005Z

Clariant reported its third quarter 2009 results and overall the company showed better than expected performance, showing a profit driven by restructuring and a higher capacity utilisation. 3Q09 Sales were down 14% in local currencies and 19% in Swiss Francs. The high Euro high Swiss Franc situation had a negative impact on the results.

Details of Clariant's performance are given on their web site.

In the webcast, Patrick Jany stated, 'The paper business remains weak and shows no sign of improvement'.

Use paper towels for dying your hands - Cascades report

2009-10-24T09:53:00.005+01:00

Cascades reinforces the advantages of using paper towels for drying hands - 'hand paper towels are the most hygienic choice for drying your hands'. They show a study comparing the drying efficiency and bacterial contamination of conventional warm air dryers, new high-performance air jet dryers and hand paper towels.

Cascades opens new green building in Lachute

2009-10-19T10:00:00.002+01:00

Cascades of Canada, a leader in green packaging and fibre recovery, announced it had opened its first LEED ('Leadership in Energy and Environmental Design') certified building as part of the expansion of its tissue paper facility in Lachute, Quebec.

Van Houtum Papier target battle against influenza with C2C paper

2009-10-07T12:27:00.002+01:00

van Houtum Papier (VHP) was the first paper company to produce Cradle to Cradle paper towel and toilet paper. In the current period of uncertainty regarding influenza in its many forms, especially swine flu, the paper towel offers one of the best options for drying hands. The VHP C2C paper towel is disposable and why not use a sustainable paper grade to wipe your hands, especially when it has been certified as C2C. C2C certification ensures that the best measures are taken to make the paper either recyclable or biodegradable

Why not join the Cellulose Community?

2009-10-07T10:44:00.004+01:00

The Cellulose Community:

'The Cellulose Community is a worldwide group, believing general pulp and paper information should be fast, free, or at a very low cost'.

The community provides a network of like-minded people and there are now 345 members. The Cellulose Community is also featured on LinkedIn (661 members).

Why not join our Cellulose Community?

Clariant a target for Solvay's cash?

2009-10-01T08:39:00.004+01:00

After Solvay sold its drug unit, Abbott, on Monday for EUR4.5 billion, speculation has started as to what Solvay will spend the money on. In a Reuters article, it was pointed out that the ailing Clariant could be a target.

Clariant's share price rose by as much as 4% on the back of the speculation, but many analysts remain sceptical.

DyStar files for Bankruptcy

2009-09-29T21:22:00.002+01:00

Following earlier rumours, it has now been confirmed that DyStar Textilfarben GmbH, DyStar Textilfarben GmbH & Co Germany and DyStar Holdings have all filed an insolvency petition with the local court in Frankfurt for the company's operations in Germany.

The insolvency petition includes the company's sites in Frankfurt, Leverkusen, Brunsbuttel, Geretsried and Ludwigshafen which in total employ around 1,300 people.

It has been stated that the insolvency filing was necessary after DyStar exhausted alternative solutions to their liquidity problems.

DyStar hold a wealth of dyes technology and it will be interesting to see where it all ends up.

DyStar to file for bankruptcy

2009-09-29T15:08:00.011+01:00

The rumour mill has picked up that DyStar will file for bankruptcy. The company's market focus is on textiles and leather and not the paper industry.

DyStar is a conglomeration of textile dyes businesses - founded in 1995 as an amalgamation of the Bayer, Hoechst and Mitsubishi textile dye businesses, they later acquired the BASF, Mitsui, Zeneca, Colour Solutions and Yorkshire Americas businesses. In 2004 DyStar was acquired by the private equity company, Platinum Equity and is recognised as a leader in the textile and leather markets

More news is expected, but the complex collection of companies in a rapidly changing market may have proved too difficult for the private equity company in the 'credit crunch' era. There will surely be some interest from the surviving market players in purchasing some or all of DyStar; however, it is a good opportunity to take capacity out of the ailing European market.

50 million chemical substances! CAS reaches milestone.

2009-09-07T12:46:00.001+01:00

On the 7th september, 2009, the Chemical Abstracts Service (CAS) announced that it had registered its 50 millionth substance --> CAS 1181081-51-5, a novel heterocycle with analgesic properties.

The 40 millionth substance was registered just 9 months ago, indicating an acceleration of the sysnthesis and innovation in science. We are not voulnteering to do the research, but it would be interesting to know how many paper chemicals there are among the 50 million.

Clariant sells USA silicone business

2009-09-04T23:44:00.000+01:00

Clariant has sold its silicone business based in Gainesville, Florida to SiVance LLC, an affiliate of GenNx360 Capital Partners, a private equity comany. This has little impact on Clariant's paper chemical business.

Kemira's paper chemicals business struggles on

2009-07-30T16:02:00.004+01:00

Kemira announced their first half 2009 results - as is the norm for this sector at the present time, sales decreased - Kemira's overall sales decreased by 5% for the period April-June, 2009 - as customer demand decreased.

For the paper business its seems to be a trend to using hyperbole (eg Clariant's use of the word MASSIVE) - For Kemira, 'The paper segment's revenue in April-June shrank by 8% to EUR221.6 million as demand in customer industries PLUMMETED.'

If interested in the detail, see the Kemira web site. What is refreshing about Kemira is that their business is transparent and unlike some companies (eg Clariant, BASF/Ciba, Ashland) it is possible to see exactly how their paper chemicals business is performing.

Clariant experience 'massive' decline in sales for 1H09

2009-07-30T09:39:00.004+01:00

Clariant announced their first half 2009 sales with a degree of honesty which was unusual for the conservative Swiss company:

'Despite persistent poor business conditions resulting in a massive decline in sales, the Textile, Leather and Paper Chemicals Division returned to profitability at the operating level. Sales dropped 22% in local currencies and 25% in Swiss francs.'

The outlook? As we have stated before, this is a watershed year for the paper chemicals business which requires new vision and leadership.

Some recent reports (see bloomberg.com):

22-Jun-09: Clariant, the world’s largest maker of chemicals used in printing ink based in Muttenz, Switzerland, said on June 22 it plans to cut additional jobs on top of 1,350 reductions announced earlier this year.

02-Jul-09: Clariant AG dropped 8.6 percent to 6.36 Swiss francs for the biggest decline on the Stoxx 600. The world’s largest maker of chemicals plans to sell 225 million francs ($209 million) of convertible bonds.

13-Jul-09: Clariant, The world’s biggest maker of chemicals used in printing ink expects monthly profit of as much as 18 million Swiss francs ($16.6 million) in the “coming period,” Finanz & Wirtschaft said, citing an interview with Chief Executive Officer Hariolf Kottmann. Clariant will probably cut more jobs this year and in 2010 before restructuring is complete, he said.

30-Jul-09: Clariant, the world’s biggest maker of chemicals used in printing ink reports first-half earnings. The shares rose 2.1 percent to 6.96 francs.

After 65 years Buckman adjusts its brand

2009-07-15T21:17:00.004+01:00

Buckman Laboratories has announced that it will 'rebrand' itself, shed the 'laboratories' and become Buckman. In an announcement which resembles a rite of passage, Buckman has decided to shorten its name and recognise, 'Its growth from a small laboratory selling a few chemicals to a global supplier .......... ' C'est la vie. For the skeptic, this is just one of those meaningless and costly exercises. For the branding enthusiast it is a chance to refresh the message given to customers.

Buckman is undergoing changes and was a fully grown company many years ago. In the last few years it has faced challenges so perhaps now is the time to go for it and drop the Laboratories! Most of us knew the company as Buckman anyway so loosing the long name is a help!

BASF Blitz Ciba - 3,700 jobs to go in an EU approved acquisition.

2009-07-06T21:06:00.002+01:00

In a not too surprising move, BASF announced that it will further its own agenda and slash the newly-acquired Ciba Specialty Chemicals organisation. In the rather disjointed announcement (lost in the translation, if you want to be kind), BASF announced:

23 of the sites acquired with Ciba are under review (management or poor PR speak for, 'Will be shut')
Synergies of at least EUR400 million per year, in other words, site closures and the planned loss of 3,700 jobs - synergies is a rater out dated word!
Fair and transparent decisions - a PR strip line which has no credibility whatsoever. BASF decide and you will obey! It bewilders us why large companies continue with their old fashioned PR statements - no one believes that the decisions are fair or transparent! We planned it, you do it and those we want will be employed as long as you support our decisions! Too cruel? Not according to our feedback.

Perhaps, for the paper chemicals business there are some glimmers of commitment. The centre for the business will be in Basel (a tax dodge), but feedback from the people based in Ludwigshafen is far from positive - many will not move to Switzerland and why should the heart of the business be relocated to save taxes - the EU needs to take a stand against the Swiss and support its EU members. Clariant, Hercules, BASF .......... how many more will dodge paying EU taxes?

In a straw poll of the paper industry there is a decided unease regarding the merger and a general belief now that the trend to consolidation ('one stop shop') has had its day and the opportunities for India, China and smaller companies is gaining momentum. The growth in the importation of paper chemicals into the EU bears testament to this view.

Keep posted as we gather more information regarding exactly what BASF intends to do with Ciba ............. so far the message is that they are taking a supplier out of the market. The strategy will not be easy to implement!

BASF remain pessimistic about economy

2009-07-06T07:32:00.001+01:00

BASF remain pessimistic and say that slump will continue for the chemicals industry. Sales volumes in some segments had fallen by as much as 30-40% and small to medium sized companies were still having difficulties securing loans.

These comments support the view of those active in the industry that the 'green shoots of recovery' are not being seen yet.

RISI now 100% owned by UBM

2009-07-03T22:58:00.001+01:00

United Business Media completed its acquisition of RISI, the news and information provider for the forest industries. Times are tough in the forest products industry and RISI have struggled to grow their service offering. For UBM this may be an opportunity to invest in the future although some rationalisation and streamlining of the RISI operation is expected.

UBM paid $14.3 million.

Pöyry Complete Negotiations Regarding Restructuring of Forest Industry Business in Finland

2009-06-11T09:43:00.005+01:00

The consulting and engineering group, Pöyry has announced that statutory employee negotiations, started in April in the Forest Industry business group's units based in Finland have been concluded. Due to the reorganisation the business group will permanently lay off about 100 people in Finland at this stage. The remaining staff in Pöyry Industry Oy, Finland, may be laid off temporarily until further notice. In addition, temporary lay-offs may lead to permanent lay-offs, affecting a maximum of 150 people. Part of the capacity reduction will be implemented through pension arrangements.

In 2009 restructuring took place in Sweden, North America and Russia with a reduction of about 200 people. The non-recurring cost of the retructuring is estimated to be EUR 2.5 million, which will be booked in the second-quarter results.

Demand for print & graphic paper to decline sharply by 2010 - New market report

2009-06-08T17:16:00.008+01:00

In printweek.com article, it has been reported that a Stationers' and Newsprint Makers' Company Report, entitled, 'Future of Paper and Print in Europe 2008-2020', that there will be a dramatic drop in demand for print and graphic grades of paper in Europe. Some highlights are:

Total demand to drop by 32.5% by 2020
Newsprint demand to decline by 56% between 2008 and 2020
Business papers and print to decline by 45.5%
Magazine paper demand to decline by 32%
Advertising and commercial print sector to decline by 14.5%

It doesn't take a rocket scientist to conclude that digital media and online publishing is the prime reason for the predicted decline in use of these papers.

For paper chemical producers this is a significant market for process chemicals and functional chemicals aimed at this market (eg OBAs, internal sizing, surface treatment). To compound the agony, it is well know that imports of OBA (and other paper chemicals) from China and India into Europe have increased significantly in the last year or so. The market report will also not make good reading for the suppliers of fillers and pigments (eg calcium carbonate, kaolin).

The market report was prepared by NLK Associates.

Van Houtum Papier set new standard - first in the world with 'Cradle to Cradle' paper

2009-06-08T11:58:00.012+01:00

Van Houtum Papier, an independent paper company based in The Netherlands has announced that it is the first to produce paper according to the 'Cradle to Cradle' or C2C standards operated by MBDC - in Europe, the certification is overseen by EPEA.

The 'Cradle to Cradle' product and process design philosophy was the brain child of William McDonough and Michael Braungart who founded MBDC in 1995 to promote their eco-effective design concept. There are some overviews on YouTube: The man himself and a review of a conference in Maastricht (in Dutch).

MBDC/EPEA are commercial organisations (charge a significant fee for C2C certification) and not regulated (accountable, independent), so some critics argue that certification of this kind lacks credibility when it is self-regulating. However, there is no question that their approach to design is holistic and goes beyond the 'cradle to grave' concept which has been promoted for decades. In the words of MBDC, C2C describes an approach in which, "products and services are designed based on patterns found in nature, eliminating the concept of waste entirely ........ optimising materials to be food either for natures ecosystems or for humans industrial systems - perpetually circulating in closed systems that create value and are inherently healthy and safe".

For the paper chemical producers this philosophy offers opportunities to design products which are biodegradable, based on sustainable raw materials and which are inherently safe. The Van Houtum Papier initiative is one to watch, but in the words of Henk van Houtm, "We will first look at the market response"......... will C2C certified paper carve out a valuable niche in the market?

A book has been written by McDonough and Braungart giving details of their admirable philosophy and there are a number of reviews available in the blogosphere (eg blogcritics). There are also some excellent blogs giving some insight into MBDC (eg greencitizenship).

Emotional Intelligence at Ciba - BASF?

2009-06-05T14:53:00.010+01:00

When browsing recently, we came across an article on how Ciba used 'Emotional Intelligence' to accelerate its 'change programme'. Like many chemical companies, Ciba implemented a survival strategy which essentially was geared to slashing costs across the entire organisation. So how do you do this with the least amount of pain? Call in the consultants, I guess, and introduce a 'new term', emotional intelligence (EI).

There are many definitions of EI and the original development of the understanding of what it means and its importance in communication and inter-personal relationships is not questioned. The definition given in Wikipedia is quite detailed, but to steal a few lines:

Emotional Intelligence (EI), often measured as an Emotional Intelligence Quotient (EQ), is a term that describes the ability, capacity, skill or (in the case of the trait EI model) a self-perceived ability, to identify, assess, and manage the emotions of one's self, of others, and of groups^[1].

What does all of this EI stuff mean? It was tempting to write an essay and point out where big companies fail in recognising that the company is made up of people who are intelligent, have different abilities (real and perceived) and are able to perceive, understand and use emotion (positively and in a manipulative way) - we will avoid the essay, but conclude that if you harness the combined assets of the individuals you have a great company! It simply distils into the following:

Understand
Communicate
Listen
Involve
Decide

Sure, in these tough times, decisions have to be made but making them in the board room and then asking middle management to implement them may not be the best soultion, unless you don't give a damn about the individuals that make up the company. The Alan Sugar approach popularised in the TV show, 'Apprentice', seems to lack any Emotional Intelligence and portrays a very old fashioned way to run a company. If large companies (and SMEs) are to survive in the future, particularly in the developed world, a change of approach is needed - more of this 'Emotional Intelligence'. In our experience, one advantage that SMEs have is that they are more emotionally intelligent.

The article which started this blog off concerned an approach used by Ciba, a Swiss company with a relatively multi-national outlook. Ciba has now been acquired by BASF, a giant German company with a reputation for having an autocratic style of managememt (Do it!). Does BASF have emotional intelligence? Let us know.

Bioplastics continue their growth - opportunity for the future

2009-06-05T14:22:00.005+01:00

Bioplastics have been around for a while now, but recently there has been significant developments and more small to medium sized enterprises moving into the market. The opportunity is to use sustainable, biodegradable raw materials to make products which compete effectively with the hydrocarbon based synthetic plastics. There have often been performance and cost issues but the volatility of the oil price, the 'green agenda' and the injection of money into biopolymer research, has driven the development of what can be described as 'eco-effective' alternatives to traditional plastics.

A recent study from Ceresana Research shows that bioplastics are flourishing. During the last eight years, it is reported that consumption of biodegradable plastics based on starch, sugar and cellulose, has grown by 600%, albeit from a small base. Starch-derived plastics dominate in Europe and polylactic acid is considered to offer significant promise.

This is an opportunity for companies back integrated into natural raw materials (eg suppliers of starch to the paper industry), but it is an opportunity for all synthetic chemical companies to look across their entire range and consider where natural raw materials could subsitute those derived from oil.

BASF to place Paper Chemicals HQ in Basel

2009-06-05T10:16:00.001+01:00

BASF has announced that from July 1, 2009, BASFs Paper Chemicals operating division will be based in Basel together with two associated business units: Coatings & Starch Europe and Wet End Chemicals. The cynic would say that this is another tax-dodging ruse followed by other companies such as Hercules and Clariant where repatriation to Switzerland has saved paying higher taxes in Europe; on the other hand, BASF had to make some promises to Ciba and Switzerland that in acquiring Ciba, some major businesses would remain in Switzerland. Basel was the HQ for Ciba's paper business.

The details are available on the BASF web site including the overall plans for the Basel site - Research Centre; European Plastics and Additives Business Unit; and the Business Centre Switzerland.

Clariant North America acquires defoamer business

2009-05-19T12:52:00.004+01:00

Three months ago, Clariant USA fomed an exclusive strategic alliance to service the world-wide foam control market, they have now announced that they will acquire XL Performance Chemicals from Fibro Chem LLC. The terms of the deal have not been disclosed.

The aquisition has been made by Clariant's Functional Chemicals Division and although claims are made for Clariant's ability to now service the global foam control market, the reality is that any impact of the acquisition is likley to be in the Functional Chemicals Division and North America - Clariant does not have a good track record of working across divisional 'silos' or in exploting regional sucesses world-wide.

In the paper business Clariant does not have a presence or reputation in the process chemicals market so would be at a distinct disadvantage were it to try to use its current business model to exploit the defoamer market. Clariant essentially has two functional paper product ranges - speciality dyes and commodity fluorescent whitening agents.

The future manufacture of the acquired foam control agent products will continue in Greenville SC, USA under a toll manufacturing agreement. As the business develops, Clariant has the option to transfer production world-wide and use its own facilities.

Clariant's share price has continued to edge upwards from the rock bottom CHF3.71 on March the 9th to just above CHF7 today - a good increase for the short-term trader but far short of the CHF20 range in mid 2007. As we have stated before, this is a watershed year for Clariant.

BASF Roadshow - 'The Chemical Company' pitch to investors

2009-05-11T14:29:00.001+01:00

BASF has been on the road with a story to keep or entice future investors.

Unde the title, 'Tackling the challeneges ahead", details of BASF's current performance and outlook are made. In the last slide, the integration of the Ciba businesses into the BASF structure, effective 1 April, 2009, is shown.

Clariant continue decline - paper business lacks direction

2009-05-06T19:45:00.003+01:00

A familiar story at Clariant, as the first quarter results are announced - this time with an air of resignation and an acceptance of reality. It is best to spare the details, but they are available on the Clariant web site and there are many analyst reports on the web. Sales declined 19% in local currencies and 24% in Swiss francs.

The only comment regarding the paper business was 'lower demand, significantly affected by inventory devaluation'. The reality is that in Clariant's key markets:

The OBA market has declined and, as predicted in this weblog, Clariant is becoming less competitive in the market where competent, lower cost suppliers based in China and India have made inroads.
A similar story in paper dyes - Clariant is a high-cost supplier with a declining market share.
Other segments? Clariant has had to face reality - efforts to enter the emulsion polymer market were doomed to failure from the start and rumour has it that they have now embarrasingly had to abandon their efforts. There continues to be a lack of strategy in the paper business - someone to lead the business with modicum of market knowledge would be a start.

A watershed year for Clariant ............

Kemira sales and profit down in 1Q09 - paper chemicals struggling

2009-05-06T17:46:00.004+01:00

Kemira posted a first quarter pre-tax profit of EUR8 mio, down from EUR22 mio a year ago. Sales fell from EUR684 million a year ago to EUR609 million.

Sales of pulp and paper chemicals declined from EUR247.7 mio a year ago to EUR225 mio and EBITDA fell 21% to EUR19.8 (8.8% of sales). The reasons given for the poor performance were falling customer demand, especially in the 'traditional' markets of North America and Europe, linked to the global economic slow-down. There was a positive currency effect of EUR2mio.

There was some mention of the cost saving projects which Kemira has undertaken such as temporary shout downs in production, closure of the AKD wax production in Vaasa, Finland (March 2009), in addition to the 6 production facilities which have been shut in North America in the last 6 years and the planned closure of the polymer production unit in Colombus, Ohio.

As the BASF acquisition of Ciba takes shape it will be interesting to see whether Kemira adapts its business model to gain an advantage - if Kemira wants to increase the size of its pulp and paper buiness to match that of the new BASF, there are some smaller specialist which could be acquired and help in the further, needed consolidation of the Europen paper chemicals industry.

Deatils of the Kemira performance in the first quarter of 2009 are available on their web site.

Sekisui Chemical buys the Celanese PVOH business

2009-05-04T12:00:00.001+01:00

The Japanese company, Sekisui Chemical has agreed to buy the Celanes PVOH (polyvinyl alcohol) business for USD 173 mio.

The business has sales of around USD300 mio and includes assets in Calvert City, Texas, Tarragona, Spain and the Houston, Texas technology centre. Celeanese had bought this business from Air Products in 2000 for USD326 mio and later added the Acetex business in 2005.

The agreement with Celanese apparently includes a deal for the long supply of vinyl acetate (PVOH raw material) by Celanese to Sekisui.

BASF start to implement the 'Plan' as key people in Ciba are replaced

2009-04-15T08:55:00.006+01:00

BASF has started to implement its 'Plan' for swallowing Ciba. As one of many moves, BASF announced today that it had appointed its Michael Heinz (45) as the new CEO of Ciba. In addition, Heinz has the role of integrating Ciba into BASF.

Ciba's current CEO, Brendan Cummins, has been given an 'advisory capacity for the next few months.'

Federal Trade Commission USA requires BASF sell off some pigment business to receive go ahead for Ciba acquisition

2009-04-03T08:36:00.002+01:00

The chemical giant BASF has been instructed inder the terms of the US FTC consent order, to sell all assets, including intellectual property, to two pigments, bismuth vanadate and indanthrone blue, to a Commission-approved buyer within 6 months. A mere drop in the ocean for a lumbering giant like BASF.

With both the European and USA monopolies regulators sanctioning the go-ahead for BASF to acquire Ciba, the re-organisation of the combined paper chemicals businesses will begin. As a Ciba employee stated recently, 'We just wait for BASF to order us what to do. They have made their plans and we will not be consulted.'

Consumption of tissue, towel and hygiene products to show future growth

2009-03-26T17:53:00.006Z

At the Niece Tissue conference, Esko Uutela has reported that the global consumption of tissue products will continue to grow by around 4% per year until 2011. This is good news for paper chemicals suppliers with a good range of products to offer this industry segment (eg Ashland, Nalco), provided profitable pricing can be achieved.

There are regional differences with the 'old' economies such as Japan, North America and Western Europe showing low relative growth when compared to the growth areas of China, East Europe and the Middle East.

Some specific information reported by Uutela was:

China will add around 4.3 million tons
Western Europe 1.8 million tons
Latin America 1.7 million tons
Eastern Europe 1.2 million tons
The 'At Home' market will grow faster than the 'Away from Home' segment
There has not been further consolidation - the top 4 in 2009 produced 38% of the global tissue, whereas they produced 42% in 1999
Kimberly-Clark remains No 1 and SCA has moved to No 2 following the deal with P&G

The details of Uutela's presentation and other topics covered in the recent conference can be obtained from Tissue World.

Rhodia to cut jobs in bid to save EUR150 million

2009-03-20T09:39:00.001Z

Rhodia announced it would start to implement plans to achieve savings of EUR150 million by 2011. The likley outcome is the loss of 91 jobs, especially at the Novecare and Polyamide production sites.

Clariant ditch the past and prepare for the future - paper chemicals to be slplit off as a stand-alone unit

2009-03-20T07:31:00.003Z

With its lack of strategic direction and slow decision-making, Clariant has found itself in a position where it needs now to make some decisive moves. The complexity of its paper, textile and leather division (TLP) and their non-transparent interrelationships have made it hard for Clariant to off-load any of these businesses as a separate entity. That said, it is hard to see how anyone would want to pay much for these heavily European-based (Germany and Switzerland) businesses - the share price has continued to free-fall, reflecting the value of Clariant.

In one of the changes, described in management speak as, 'enabling each business to be managed as a stand alone unit, providing the operational and strategic flexibility required to improve profitability', Clariant is continuing the process of trying to separate the textile, paper and leather businesses from each other in the hope that any of them would be more attractive to a potential buyer. Too little, too late is the view of many in the industry.

Simultaneously, Hariolf Kottmann, the CEO of Clariant, has retired- off Peter Brandenberg, who was seen as a temporary, Swiss establishment head of the TLP Division as the slow process of deciding on future options for change were made. Brandenberg spent 38 years at Clariant!

In Brandenberg's place, Kottmann has unsurprisingly brought in an ex-Hoechst colleague, Mathias Lutgendorf as head of the TLP Division and a member of Clariant's executive committee. He will lead the continuing process of separating the paper, textile and leather businesses from each other.

Interestingly, Lutgendorf moves to Clariant from the private equity owned DyStar, a textile dyes and chemical producer, so there could be some thoughts of consolidation on the horizon.

EU asks BASF to offload some business to comply with competition concerns - a good deal for BASF

2009-03-19T07:39:00.005Z

The European Comission has concluded its look at the acquisition of Ciba by BASF and ruled that there are concerns in a number of market segments:

DMA3 (dimethylaminoethyl acrylate - a chemical intermediate)
Synthetic dry strength resins (used in the paper industry)
Bismuth vanadate (a pigment)
Indanthrone blue (a pigment)
Styrene acrylic (used as a glue for paper applications) - BASF will, of course remain a dominant producer of styre acrylate emulsion polymers
HALS - hindered amine light stabilisers (used in plastics)
UV filters for skin care products

To resolve the competition concerns, BASF and the EU have agreed that the following will be divested:

BASF's DMA3 production assets in Ludwigshafen, Germany
Ciba's entire EEA (Ethylene ethyl acrylate) synthetic dry strength agent business
Ciba's global bismuth vanadate business
Transfer Ciba's ' know-how of the finishing line', all supply contracts acustomer lists and inventories for the indanthrone blue
Ciba's styrene acrylate business (and polyvinyl acetate, acrylic acid or acrylate) in the European Economic Area at Kaipianen, Finland
HALS - Ciba's entire 'Chimassorb 119 FL' business, including the Chimassorb 119 FL production assets, releveant know-how and customer lists
UV filters - BASF will conclude a UV Filter Licence Agreement, giving third party access to the technology behind Tinosorb S

Further information is available from the European Commission web site if one likes reading and can understand the EU mumbo jumbo.

This list of divestments is very light and a great deal for BASF who will continue to increase their dominance in a number of market segments - especially paper chemicals. It raises the question as to whether this type of deal would have been allowed if the current poor economic environment had not existed. In the last 6 months there have been a number of attempts to protect industries in Europe and past competition rules seem to have been relaxed.

How does transport affect your carbon footprint? CEPI Initiative.

2009-03-18T14:00:00.002Z

Printweek.com has reported on the initiative by CEPI to look at te effect of transport on carbon footprint. At a meeting on the 25th March the aims are to identify the specifics of transport for the European pulp and paper industry, and exchange experiences on how to tackle the environmental impact.

BASF stike a very good deal with EU in meeting competition concerns over Ciba acquisition.

2009-03-12T18:21:00.001Z

BASF has reached agreement with the EU Union anti-trust approval board and found a way forward to complete its acquisition of Ciba Specialty Chemicals.

Last September, BASF agreed to buy Ciba for CHF6.1 billion, but the EU regulators had concerns over the distortion of competition in products used in paper, plastics and skin care. BASF has agreed to sell off some of these businesses in order to win regulatory approval.

The details will become more clear, but the staement was that BASF, '.... will sell chemical plants in Ludwigshafen and Ciba units making synthetic dry strength agents for the European paper industry; the pigment, bismuth vanadate, sold globally; and a Finnish-based business making glue for the paper industry.' The statements were made to confuse and not give a transparent view of what was being sold and to whom. It will all come out within the next few days - it just takes a couple of phone calls to Ciba!

Furthermore, the 'statement' goes on to say that, ' ..... Ciba's know-how for making and selling the pigment indathrone blue will be transferred, and aunit making light-stabilisers for plastics will be divested.' It will also strike a licensing deal to allow rivals to use an ultraviolet filter Ciba developed for skin care.

On the face of it, BASF has made a good deal with the EU and will now find themselves in a very dominant position in the paper chemicals industry.

CIBN (Zurich) rose 30 centimes to CHF48.30 and BASF (Frankfurt) rose 84 euro cents to EUR24.26.

Later views:

Cosmeticsdesign.com

White clouds gather over London - Specialist OBA conference to address key issues

2009-03-03T17:49:00.008Z

This week sees a gathering of some European paper optical brightening agent specialists in London to discuss the current state of affairs. In the midst of a continuing, very tough market environment and under threat from a number of key environmental issues, particularly the unsustainability of making paper whiter, whiter and whiter, dark clouds are gathering over this sector of the paper chemicals industry.

It will therefore be inetresting to see if strategies can be developed for improving the sustainability and the environmental impact of using high levels of OBA to produce white papers. It is disappointing not to see any papers which specifically address the environmental impact, but perhaps the titles given by the speakers do not divulge everything which will be presented. It also would have strengthened the programme to have had contributions from the paper and board producers (users of OBAs).

The detailed programme for the conference, Optical Brighteners & Paper Whiteness, is available from the organiser Makowhiteness Project, and the following is a list of contributions:

OBA Market Conditions

Alec Tindal, Makowhiteness Ltd, UK (Consultant)

Factors Affecting OBA Performance

Martinez & Schoenenberger, IGCAR, Spain (Producer)

Lightfastness of OBAs

Olli Jokinen, Ciba SC, Finland (Producer)

Reaching the Highest Whites

David Puddiphatt, Clariant, Switzerland (Producer)

Paper Whiteness v’s Reproduction of Colour

Ole Norberg, Voxvil AB, Sweden (Whiteness Measurement)

White Paper Tinting (Shading Colours Technical)

Michael Kraemer, Kemira, Germany (Producer)

Optical Characterization of Paper as Basis for Printing & as Aesthetic Media

Claudio Puebla, Axiphos, Germany (Whiteness Measurement)

Shade Comparison in High White Papers

Alec Tindal, Makowhiteness Ltd, UK (Consultant)

Clariant, Kemira and Ciba (now BASF) are the leading producers of OBAs in Europe.

BASF pay a dividend - is there any change left in their Euro pockets?

2009-02-26T20:43:00.002Z

BASF decides not to put its dividend into its own pocket! After reporting its first quarterly loss for 7 years, 'The Chemical Company' made a commitment to keep paying a dividend, despite plant closures, job cuts etc. This is unlike rivals such as the Dow Chemical company which cut its payout for the first time in 112 years.

Shareholders will receive EUR1.95 which is similar to pay-outs in previous years.

Some facts - BASF will eliminate 1,500 jobs, idle factories, reduce working hours for 2,500 employees ............ the slump in chemical demand coincides with BASF's decision to buy Ciba Specialty Chemicals. The integration of Ciba will have an additional impact on earnings.

In reality the dividend payment is a 'nice thing' but BASF, like many chemical companies has a tough year ahead. At least BASF are better positioned than many of the other chemical companies which have not joined the essential consolidation of the European chemical industry.

Ashland Hercules to lose Hattiesburg plant

2009-02-25T15:00:00.001Z

After the recent acquisition of Hercules by Ashland, the process of reviewing the organisation and its resources has begun. There will no doubt be a number of cuts and the 'rationalisation' of assets of the merged comapanies, and this week it was announced that a small site at Hattiesburg, USA, will be closed at the end of the year. The economic downturn and the inefficiency of the plant are cited as reasons for the closure.

The Hattiesburg plant manufactures paper chemicals and other miscellaneous products.

Kemira Pulp&Paper - business slows in 2008

2009-02-25T08:43:00.004Z

The Kemira pulp and paper chemicals business slowed towards the end of the year, but the results were not as bad as expected.

Revenue in the last quarter of 2008 increased by 2% (EUR 258.3 million) and by 1.4% for the whole year (EUR1,057.7).

There was a decrease in operating profit as a result of lower sales volumes and higher raw material, freight and energy costs - not to mention the 'one-off' cost of their cost-savings programme! The operating profit (excluding non-recurring items) in the last quarter of 2008 decreased to EUR9.4 million from EUR12.3 million in the same period of 2007. For the year, profit decreased to EUR50.4 million (4.8% of sales) from EUR79.8 (7.7% of sales) in 2007.

The full results and details are available on Kemira's web site.

BASF offer Cocessions in EU review of bid to acquire Ciba

2009-02-20T18:15:00.002Z

In a Bloomberg report today, BASF has offered various undisclosed concessions in discussions with the EU regarding the acquisition of Ciba Specialty Chemicals.

Standard & Poor's and Moody's Negative on Clariant's Initiatives

2009-02-17T12:00:00.004Z

Standard & Poor's have cut the credit outlook for Clariant to 'negative' from 'stable' and almost in the same breath, Moody's Investors Service has cut its rating to non-investment grade or 'junk'.

For details, go to the Bloomberg site.

Tick tock goes the Clariant clock ...... 2008 was no better!

2009-02-17T09:00:00.005Z

Clariant has continued its now medium-term downward spiral, announcing another set of poor results for 2008. Having spent millions on trying to cut its SG&A costs, used consulting company after consulting company, introduced an expensive (and inneffective price management system), suffered the indignity of the resignation of an effective CEO in Jan Secher ........ along came the economic downturn. The Swiss/German clock has been ticking for a while and surely it is now time for Clariant to participate in the ongoing re-structuring of the chemicals industry in Europe. The share price continues to tumble and recommendations not to buy continue to haunt Clariant - the big issue is now whether anyone would want to buy some or all of Clariant.

The impression is that the paper chemicals business remains rudderless, caught up in 'supporting' efforts aimed at helping the larger Clariant survive (especially in Germany and Switzerland) rather than helping the pulp and paper industry through the economic downturn. The focus seems to be on cutting jobs, closing plants, and reducing R&D. There is again very little mentioned of the Paper Business in Clariant's pitch to the media. Waffle such as, 'The Paper Business held up relatively well in the economic downturn'. And, the old mis-management issue of the, '..... supply shortage resulting in escalating raw material costs in the Paper Business'. This is covered in other blogs - the shortage was avoidable. What is Clariant proposing to help its customers? Higher prices, less service and support and fewer (cheaper and less competent?) people?

The end of year report goes on to say that, ' ...... restructuring efforts and cost-cutting measures, in particular in SG&A, proceeded as planned but were not sufficient to compensate for the capacity underutilization that worsened the gross margin.' What management drivel. No mention of the customer in all this stuff. As expected, the exodus of key personnel has continued (willing or not). The sad thing for the paper industry is that many have decided to go into other industries.

Clariant figures for 2008 are available on their web site. An analysis is also carried by sites such as Bloomberg.

BASF Start to Prepare Organisation for Swallowing Ciba

2009-02-04T13:06:00.005Z

BASF has announced that it will optimise its structure and lay the foundation for the rapid integration of Ciba's businesses. Sounds ominous!

The main changes will be in the 'Performance Products segment', and will take effect on the 1st April, 2009, assuming the anti-trust authorities approve the merger. From the end of the first quarter, the 'Discovery Phase', will involve a two month analysis of the joint businesses with the integration expected to start in the second half of 2009. Despite the co-operative tone of the announcement, BASF is not known for consultation and conciliation and it is more than likley that the bulk of the BASF plan will already have been decided and there will be a quick implementation and integration of Ciba.

BASF's performance products 'segment' consists of:

Acrylics and Dispersions
Care Chemicals
Performance Chemicals
Paper Chemicals (a new devision from 1st April) - this division will initially consist of BASF's business with paper chemicals, binders and kaolin minerals. After the so-called 'Discovery Phase', Ciba's paper chemicals activities will be integrated into this division. Dr Ehrenfried (Fred) Baumgartner (56) will move from being head of BASF's Inorganics Divison to head up Paper Chemicals. BASF will then become the largest supplier of chemicals to the world-wide paper industry. The paper industry waits with interest to understand what The Chemical Company's definition is of a 'market-oriented positioning' for the combined businesses'!

In the same announcement, BASF has indicated its intention to 'review its strategic options for leather and textile chemicals' - this is probably management code for exiting these businesses.

Nalco struggling - 4th quarter very poor

2009-02-03T09:05:00.001Z

Nalco announced its 2008 year end results with the rhetoric not joined up with the reality of the financial figures. The devil is in the detail, so to say.

The news for Paper Services was not great. Revenues declined by 2.3% (organic) with the 4th quarter very poor and forcing Nalco to write off goodwill in this segment. Only Latin America showed any spark. In management speak, 'Nominally, direct contribution dollars declined 23.5% to $93 million, with direct contribution margins falling from 15.7% in 2007 to 12% in 2008'. When will companies learn to write in plain english! We know you had a very bad result, we can look at the numbers - say it in simple english!!

Dow Chemical back out of Rohm and Haas acquisition.

2009-01-26T12:03:00.001Z

The Dow Chemical Company has confirmed that the acquisition of Rohm and Haas has stalled and will not take place on the 27th January, 2007 as planned. This comes soon after the announcement by Dow that they had received FTC clearance to go ahead with the acquisition.

The usual econnomic reasons have been given but the key event for Dow has been the failure in December to complete a deal with Petrochemicals Industries Kuwait (PIC) and form the K-Dow JV. There is still an interest from Dow to make the acquisition, but no clear position regarding when and if the financial situation will improve sufficiently.

Can you trust market data?

2009-01-25T12:42:00.004Z

It was interesting to read a recent advert for a study by Frost & Sullivan. The title is, ' European Pulp & Paper Chemicals - is Consolidation the Response to a Mature Market? What is striking is the market data shown for the European paper chemicals industry - there are only three significant players in a chart that is described as, '..... the market shares of the leading companies in the European pulp and paper manufacturing process chemicals market in 2008.

The segmentation of the pulp and paper chemicals market shows a complete lack of market knowledge and then to suggest that Kemira, Eka Chmeicals and Solvay have 85% of the process chemicals market is claptrap. Further comments could be made on the report but it it not worth the effort.......... when the data are suspect, how can one trust the conclusions.

Akzo Nobel acquire chlo-alkali business in Germany

2009-01-19T08:29:00.001Z

Akzo Nobel announced that it has completed the acquisition of LII Europe, a business based in the old Hoechst Industrial Park near Frankfurt, Germany. The business and assets are focussed on chlorine and caustic and other related chemicals.

Kemira find further cost-cutting opportunities - Happy Christmas!

2008-12-18T08:50:00.000Z

Kemira sent its employees home for the Christmas holidays with yet a further cost cutting and restructuring announcement. In the middle of 2008 a cost-saving programme was announced with a target of saving EUR 50 million. Now, Kemira has pulled another EUR 10 million out of the bag. The additional savings are expected to be realised in 2009 and 2010.

In the announcement it is stated that Kemira has closed and will further close production capacity of its low-profitability polymer and paper chemicals. No specific details were given.

Clariant 'streamline' their board of management - time for change and decisions?

2008-12-11T09:27:00.000Z

Clariant announced that it has 'streamlined' its board of management. Watch this space? Will Clariant managment actually do something effective to save the ailing company or is this another piece of expensive window dressing?

Huntsman to cut 470 jobs

2008-12-03T09:37:00.003Z

Huntsman has announced that it will cut 470 jobs in a new effort to trim costs in the unit manufacturing and supplying dyes and chemicals. The cuts represent about 12% of the 3,900 employees in the Textile Effects business acquired in June 2006 from Ciba Specialty Chemicals.

Huntsman is in the throes of fighting to complete its buyout by a unit of Apollo Management LP.

ALTANA acquire Dick Peters from Clariant - wax emulsions and some paper chemicals

2008-11-24T09:47:00.003Z

ALTANA has signed an agreement to acquire Clariant's Dutch wax additive manufacturer, Dick Peters BV, from Clariant. Dick Peters is a remnant of Clariant's acquisition of Hoechst in 1997 and specialises in wax-based formulations, although it does have a portfolio of paper chemicals, some of which are toll manufactured. Their turnover is around EUR 24 mio.

Dick Peters will be integrated into BYK Cera BV which is part of the BYK Additives & Instruments Division of the ALTANA Group.

The sale of Dick Peters is part of Clariant's continued drive to cut costs and reduce its asset base in Europe.

Even "The Chemical Company", BASF finds the going tough - what of the rest?

2008-11-19T08:36:00.010Z

BASF announced that it will temporarily close 80 plants world-wide and cut production at a 100 more in a move which will affect over 20,000 workers over the next two months. In effect, BASF will reduce output by 25%.

Three weeks ago, BASF said it was coping with declining demand and that 2008 sales would top last year's EUR 97.5 bn with operating earnings matching 2007 (EUR 7.32 bn). All has changed. BASF has now issued a profits warning for this year.

In the view of the FT and industry experts, the move by BASF is a pre-cursor to a huge bout of restructuring among Europen companies, including job cuts and factory closures.

Where does this leave the paper chemicals industry?

For the stong companies:

BASF is in the process of acquiring Ciba on the wave of their gloomy announcements. So, tough times for Ciba under their new masters.
Kemira - has recently announced significant lay-offs and a restructuring programme.
Ashland and Hercules are well placed to take advantage of the current climate, further investing in Europe would be folly, but they could help in the market consolidation. However, a recent Forbes.com article puts Ashland in a different light - Trashland!
Dow Chemical - announced last week that a fall in demand would force them into a restructuring before year end.

Then there are the question marks:

Nalco - quiet at the moment but in need of a freshening up. Their cost-cutting waves have left them rather thin on the ground. Rumours abound.
Clariant was struggling before the economic crisis - time to make some significant strategic and tactical moves? Don't hold your breath, but desperate times require desperate measures. The share price is moving close to being considered a 'penny stock'. Their leading global paper group (technical and manufacturing) in the UK is on schedule to shut before year end in what appears to be an attempt to protect their high-cost Swiss base. A good move when the Swiss franc gains against sterling?!
Eka Chemicals - solid in their protective Akzo Nobel net but again, the economic crisis may force some moves affecting paper chemicals which is not core business for the mighty Akzo. The inability to sell National Starch has been a recent issue.
Buckman - recently there has been news that this smaller company has struggled, but it is not beyond them to find an innovative way forward. They are more agile than the larger companies.

As we have stated many times in this weblog, the Chinese paper chemical companies are well positioned to take advantage of the Chinese growth market and further squeeze the sluggish European and North American manufacturers, cutting down their options to show any future growth.

Difficult times, for sure, but there are opportunities for the sharp strategic thinkers.

Dow Pick New Team After Rohm & Haas Acquisition

2008-11-17T22:42:00.000Z

After the USD 18.8 mio acquisition of Rohm and Haas, Dow has picked its organisation- the deal is not yet complete, however.

CEO, Andrew N Liveris has decided the formation of the Rohm and Haas Advanced Materials Division, a new Dow division which will incorporate six specialised businesses from both companies. It will be lead by Pierre Brondeau who is currently the president and COO of Rohm and Haas.

Ashland Announce Organisation after Hercules Acquisition

2008-11-17T22:16:00.004Z

After the USD 3.3 bn acquisition of Hercules, completed on the 11th July, 2008, Ashland has announced the new consolidated company will be organised into 5 divisions.

So where does that leave the paper chemicals activities of Hercules? On the face of it, not much change. Paul C Raymond, Hercules' current boss will head up the Ashland Hercules Water Technologies Division. The other division are, Ashland Aqualon Functional Ingredients, Ashland Performance Materials, Ashland Consumer Markets and Ashland Distribution - this is now a company with USD10.7 bn sales for the 12 months ended September 30.

Kemira Acquire Brazillian Nheel Química

2008-11-17T20:02:00.001Z

Kemira has announced the acquisition of the Brazillian water treatment chemical company, Nheel Quimica to strengthen their position in Latin America. Nheel Quimica is the second largest producer of iron salts and the largest aluminium salt producer used in water treatment.

A load of hogwarts ......... green marketing spin.

2008-11-13T16:33:00.003Z

Enjoyed a recent blog by Steven Kiernan in printweek.com, 'The spin cycle of greenwash'. He makes some good points about some of the 'unjoined up thinking' in some of the green marketing we see nowadays. Worth a read.

PS Reminds us of one of our earlier blogs on the the Emirates airlines being righteous about removing their in-flight magazine to save the environment - the fact that they were removing paper from a new Airbus A380 super jumbo jet weighing 650 tons at take-off and a guzzler of tons of fuel seemed to get forgotten in their green marketing moment!

Hercules Shareholders Approve Takeover by Ashland

2008-11-05T19:15:00.002Z

Shareholders of Hercules have voted to approve the USD 2.6 bn takeover by Ashland. More than two thirds of Hercules' shareholders supported the proposal which values each Hercules share at USD 18.60 in cash plus 0.093 of a share in Ashland common stock.

3Q08 Results: Ciba report 8% drop in profit.

2008-11-05T10:53:00.000Z

With the acquisition of Ciba by BASF seemingly on track with only the regulators now in the way, Ciba's results now become of little interest. They posted a drop in profits of 8% which was better than the 15% they predicted.

Sales of the Water & Paper Treatment Division were CHF 1,829 mio (-5% but +2% in local currencies). Local currency growth was mainly driven by Asia and the USA as Europe continued to decline. Profitability was lower than the same period last year, with EBIT at CHF 64 mio compared to CHF 80 mio in 2007. Raw materials and the lag in increasing prices was blamed.

Ciba's shares rose slightly to CHF 49.30 which is not far from BASF's offer of CHF 50.00.

3Q08 Results: Clariant show glimmers of improvement - paper chemicals still a problem.

2008-11-04T08:25:00.001Z

Clariant announced its third quarter results for 2008 and there is a glimmer of improvement in the company performance, although the textile, leather and paper (TLP) business continues to be a problem. The shares which had crashed to all-time lows showed some recovery. Speculation continues that Clariant is preparing to be split up and that something will have to be done with the uncompetitive TLP business.

Clariant posted third-quarter net profits of CHF 78 mio compared to a loss of CHF 51 mio in the same period last year. Sales decreased slightly to CHF 2.o9 bn and EBITDA increased from CHF 132 mio to CHF 198 mio. So, some glimmer of improvement.

What of the paper business? Buried in the TLP division, which continues to decline, there is little sign of a new strategy and leadership. The only solution seems to be 'cost leadership' which is OK if you are a big volume producer. The core business of OBAs and Dyes continues to face stiff competition and although the closures of Horsforth and Selby sites in the UK may help the TLP Division it does little to help the competitiveness of the paper chemicals business - moving production to high-cost Switzerland and loosing key personnel is not a recipe for a successful future. There is little mentioned in the 3Q08 report about the paper business except for a statement, 'The bottom line of the Paper Business suffered from an unprecedented hike in raw material costs.' Yes, there has been a big hike in raw material prices, but Clariant's 'unprecedented' position regarding dye and OBA raw materials is of their own making (see earlier blogs).

This next year will be the making or breaking of Clariant's paper business.

For another view: Yahoo Finance - Clariant Downgraded to "Sell"

BASF hold 68.1% stake in Ciba - acquisition is on track.

2008-11-03T17:24:00.003Z

At the end of the tender offer period, the 28th October, BASF announced that they owned 68.1% of the share capital of Ciba AG. BASF has therefore exceeded the minimum acceptance threshold of 66.67% which was a condition listed in the offer prospectus.

There is now an additional acceptance period which begins on November the 3rd, 2008 and ends at 4pm CET on November the 14th, 2008. During this period, Ciba shreholders who have not tendered their shares have the opportunity to do so for the same price (CHF 50) and avoid becoming minority shareholders in Ciba and holding limited liquidity.

Essentially, BASF has cleared its biggest hurdle and it should now be a matter of time before Ciba is swallowed by 'The Chemical Company'.

No surprises - Kemira report 33% decline in net profit for the third quarter 2008.

2008-10-29T08:01:00.001Z

The 3Q08 financial results reported by Kemira were as predicted with no real surprises. Pre-tax profits fell to EUR 48.8 mio from EUR 68.3 mio in the same period last year (net profit declined 33% to EUR 35.4 from Eur 52.9 mio last year). High raw material and energy costs were blamed. July to September net sales rose 7% to EUR 780 mio from about EUR 730 mio a year ago.

For the pulp and paper chemical activities, Kemira reported a rise in revenue from July to September of 9% (EUR 259.7 mio) with an organic growth in local currencies of 13%. Operating profit, excluding non-recurring items, declined to EUR 15.3 mio (-32%). The reasons for the decline were given as:

Currency exchange (-EUR 8 mio)
Competitive environment - by this they probably mean that producers in the USA, China and India had an advantage, especially in the growth markets. This has made it difficult for Kemira to offset their increasing costs by raising prices.
Closure of paper mills - pulp and paper production has increased over the same period and as Kemira point out, the market has declined in Europe and North America and increased in the growing markets (especially China) where Kemira has not been as competitive against strong local companies.
High raw material, freight and energy costs - there was some gain in raising prices (EUR 9 mio) and an increased volume (EUR 7 mio) but European paper chemical producers continue to find it hard to compete.

From January to December, 2008, Kemira's pulp and paper chemical business has seen a moderate revenue growth to EUR 799.4 mio (+ 1%) and a decline in operating profit to EUR 41.0 mio (-39%).

The one significant non-recurring item was the EUR 10.15 mio fine imposed by the European Commission on Finnish Chemicals (acquired by Kemira) for their part in the sodium chlorate cartel.

It will now be interesting to see how once largest pulp and paper chemical producer manages the threat from the now larger combination of BASF and Ciba speciality chemicals. Kemira will remain big in pulping chemicals but are now dwarfed by the new BASF when it comes to speciality chemicals used in papermaking. The biggest threat to these larger European chemical companies will continue to come from the smaller, lower-cost, flexible companies emerging in the growth markets.

Swiss take-over board reject attempt to extend offer period for Ciba acquisition

2008-10-20T13:10:00.002+01:00

The Swiss Take-over Board has rejected a request from the Bestinver Investment Group to extend the offer period for the public take-over of Ciba Holding AG by BASF. As a result, the offer period will end on the 28th October, 2008 (4pm CET) as specified in the offer prospectus.

BASF has welcomed the decision and are confident that more than 66.67% of the shares will be tendered by the end of the offer period.

Chelating agents - Biodegradable alternatives to EDTA and DTPA

2008-10-15T11:21:00.002+01:00

EDTA and DTPA are widely used in the pulp and paper industry for chelating metal ions, especially in the bleaching of chemical or recycled fibres with peroxide where many metal ions increase the decomposition of peroxide.

Initially in Germany and later in a number of other countries, the poor biodegradability (persistence) of EDTA and DTPA in the environment raised questions about the efficacy of using these chemicals. Not surprisingly, there has been considerable research into finding alternatives, especially by the peroxide producers and suppliers.

Recently Kemira R&D has developed some alternative chemistries which are starting to show promise. As is often the case with greener alternatives, there is a price to pay as the cost/perfomance of the new products is inferior. Nevertheless, there is now a good environmentally-friendly option. The products marketed by Kemira under the Fennobio trademark are based on aspartic acid diethoxysuccinate (AES).

There is a more detailed article by Kemira on this topic.

Can you measure your carbon footprint? Södra can.

2008-10-15T09:54:00.000+01:00

Sodra Cell announced that it has a carbon footprint of just 100 kg of carbon dioxide per ton of pulp produced. Following a series of investments, Sodra has managed to move from being a net energy user to an energy supplier. In the next few years there will continue to be debate as to exactly how carbon footprint is measured and Sodra has used the framework for paper and board products devised by CEPI (Confederation of European Paper Industries). Will this approach or method become a standard across the industry?

Kemira announce R&D investment in Brazil

2008-10-13T08:25:00.003+01:00

In building on the plans reported in a recent blog, Kemira has announced that it will open a technological centre in Sao Paulo, Brazil. The new R&D centre is expected to start up in 2009.

Kemira reported a turnover of EUR 100 mio in the region in 2007 - a 67% increase on the previous year - so the region is important for their business and justifies having one of the 5 strategically-placed technical centres. As part of the justification for the location, Kemira stated that it expects the chemicals for pulp bleaching in Latin America to increase by 5.7% per annum from a USD 275 mio in 2007 to USD 385 mio in 2012 m - this of course depends on whose market data you use and when it was compiled. Pulp is not the only growth area as South America also realises the potential in moving up the value chain and producing more paper and board.

This announcement is part of Kemira's plan to establish 5 significant global technical centres and consolidate its activities in the key regions, rather than have the 17 dispersed R&D sites they have today.

Kemira move forward with plans to cut personnel

2008-10-08T21:21:00.001+01:00

Kemiar announced that it has concluded its, 'co-determination negotiations', with staff at Oulu, Espoo, Vaasa, Helsinki and Äetsä.

In other words, and to be specific, 298 people will loose their jobs in Finland - 191 will go and another 107 will be retired early or layed off as they are temporary staff.

The full announcement can be read on the Kemira web site.

Deserved Wallenberg Prize for Holmbom and Eckerman of Åbo Akademi

2008-10-07T08:11:00.000+01:00

At a ceremony presided upon by no less than the Swedish King Carl XVI Gustaf, Prof Bjarne Holmbom and Christer Eckerman were awarded the 25th Marcus Wallenberg prize for their pioneering research on, 'Winning Chemicals from Trees.'

The Wallenberg citation reads:

The Laureates have created an understanding of the fundamental chemistry of spruce tree knots, i.e. the part of the branches that is embedded in the stem. They developed technical separation methods to extract tree knots from the pulping process and to isolate and purify chemicals from the tree knots, opening the field for many potential applications and uses. The selective removal of knots from the pulping process brings opportunities for additional benefits by reducing process disturbances, reducing the use of bleaching chemicals and energy, and allowing more consistent quality of the paper products to be produced.

By methodical research of the highest quality, the Laureates have significantly contributed to creating a platform for the forest products industry to improve and broaden its role and commercial prospects with a range of new products and implications e.g. for chemicals, energy, production efficiency and sustainability.

"The awarded research holds promise of adding value and enhancing the image of our business as capable of bringing benefits to society. As such it will also serve as a pointer to the future of our business, demonstrating that new ground is still to be explored when it comes to more fully developing the forest products industry to sustainably serve future society" said Marcus Wallenberg, Chairman of the Marcus Wallenberg Foundation at the award ceremony.

Sasol surprised by EU cartel fine

2008-10-02T11:48:00.000+01:00

Sasol has issued a statement in response to the EU's fine of EUR 318,200,000 imposed on Sasol Wax GmbH and Sasol Limited as a result of the formation of a cartel in the paraffin wax industry and the violation of anti-trust laws. As a reult of Sasol's co-operation with the EU Commission, the fine was reduced by 50%.

Sasol is surprised by the magintude of the fine and will lodge an appeal.

Paraffin waxes are used in paper coatings, barrier coatings, and other paper chemical formulations and have been under increasing scrutiny because of issues related to the recycling of paper and board containing waxes.

Korttmann tries to console employees - Clariant is not for sale!

2008-10-01T14:15:00.002+01:00

In an attempt to quash the tide of rumour, the new CEO of Clariant has written to employees with the message that Clariant will not be sold, broken up into pieces or merged (see the source article). The main priority is to improve cash flow ...........

Employee letters such as these have little effect as everyone knows that Clariant has to do something to survive. Clariant has been too late to make a significant strategic move in a chemicals industry that continues to need to consolidate, despite a number of recent events. It has always appeared that paper chemicals is not a priority for Clariant and the recent move by BASF to acquire Ciba has left Clariant with few options to survive.

Just what will the new CEO do? Can Clariant rise from the ashes without being sold, split up or merged? Not likely! Time for some clear and creative thinking - break the mould Clariant.

See an earlier blog on Clariant being broken up ............

BASF publish Offer Prospectus for the acquisition of Ciba

2008-10-01T12:46:00.000+01:00

BASF have now published their 'Offer Prospectus' for the acquisition of Ciba. the next step is for the Ciba shareholders (66% of them) to agree to the deal.

PPI publish list of top 100 paper companies

2008-09-30T15:10:00.000+01:00

Pulp and Paper International has published its Top 100 list with IP, StoraEnso and P&G retaining their lead (based on their 2007 turnover). There is also a ranking of the big pulp and paper producers. International Paper (14.4 mio tonnes) hold onto the number one spot followed by StoraEnso, UPM Kymmene, AbitibiBowater, and Oji Paper.

The Chinese have moved up the rankings. To quote the PPI article:

Unsurprisingly, the major Chinese producers have again moved up the table. Shandong Chenming is now at 43, Nine Dragons has moved up to 54, Lee & Man has jumped to 61 and Shandong Huatai is at 85th place. Overall, Asian companies make up 16.3% of the net sales of pulp, paper and converting among the Top 100 firms in the industry. For the first time this year, there are more European companies on the list than North American, but the US and Canadian companies still account for the largest percentage of net sales at 37.4% compared to 36.0% for their European counterparts. In terms of production, the Million Tonners’ club has 55 members this year (compared to 57 companies last year), but they produced more tonnes of paper and board as a group.

Paper whiteness - Clariant's OBA crisis!

2008-09-29T15:01:00.004+01:00

Clariant has tried to make a case for the current situation in the global OBA (optical brighteneing agent) business (see the recent RISI article) referring to it as an 'OBA Crisis'. It is well worth reading the views expressed in the article but we would leave it to you to make a judgement on the position taken.

First, Clariant has struggled in this market, and made a strategic mistake of relying entirely on the Chinese (or any other supplier were they to be available) for their raw materials. They were then unable to raise prices to cover their escalating raw material costs. The Chinese are now uniquely positioned to move upstream and market OBAs, more cost-effectively, to the world. The move by the Chinese government to abolish the VAT refund on Chemical exports and the squeeze on production from the 'Beijing Olympic Effect' has only hightened the weakness in the strategy - if you do not control your raw materials do not expect to control the market (see earlier blog).

Second, is there really a need to use so much OBA in papermaking? As the industry strives to find sustainable solutions, is the move by North America (and perhaps Japan) to match the rediculously high whiteness levels found in Europe really necessary? It is also questionable whether OBAs are, 'The most cost-effective means of raising the whiteness of paper,' especially when one takes a cradle to cradle assessment.

Furthermore, just how white do we need our paper to be and just how many thousands of tons of OBA do we need to pour into our environment to get a few points more in whiteness? In time, when 'cradle to cradle' approaches to product development (chemicals and paper) are more widely adopted, the whiteness folly will be exposed for what it is. In 2006 Clariant boasted in an advert that it had sold over 1 million tonnes of OBA for papermaking - is this a sutainable soultion?

Keywords - OBA, FWA, Clariant, Environment, Sustainability, C2C, whiteness, papermaking, paper, pulp, chemicals.

Kemira consolidate R&D - invest in Technology Enterprise Park at Georgia Tech

2008-09-23T22:12:00.001+01:00

Kemira announced that it has signed a lease on a new R&D centre located at Technology Enterprise Park (TEP) in association with the Georgia Institute of Technology in Atlanta, Georgia, USA. The new centre will open in summer 2009 and employ 85 R&D professionals.

This move is part of Kemira's plan to consolidate 17 existing R&D sites into 5 global facilities. The sites will be at TEP, Gerogia; Northern Europe; Continental Europe; Asia; and later one in Latin America.

The five centres will be strategically focused on Kemira's customers locally and globally, meeting the needs of the pulp and paper, water treatment, oil and mining industries.

Who owns the National Starch and Chemical Company?

2008-09-23T09:26:00.001+01:00

After Akzo Nobel moved to acquire ICI there has been speculation and confusion regarding which bits of ICI were kept by Akzo and which went to Henkel. It is now pleasing to see that the National Starch web site has moved to clarify the situation (somewhat).

The situation is:

National Starch & Chemical Company's organisation is in transition
On January 2, 2008, Akzo Nobel N.V. became the new owner of National Starch and Chemical Company as part of its acquisition of ICI
The businesses of National Starch are in the process of being integrated or sold.

AkzoNobel has retained the businesses previously grouped under SPG.
Elotex is now part of Functional Chemicals and Personal Care
Alco Chemical is now part of Surface Chemistry
AkzoNobel has announced that it intends to divest National Starch's Natural Polymers Group sometime in 2008 --> this includes the group handling products sold to the paper industry and re-branded as National Starch with a new green and yellow logo.
On April 3, 2008, Henkel AG & Co. KGaA acquired National's Adhesives and Electronic Materials Groups

Struggling Clariant could be broken up

2008-09-21T18:14:00.002+01:00

The struggling company continues to be on the receiving end of rumours about its future. Unnamed sources are fueling speculation that the company will be broken up and with additional investigation it appears that the following is planned:

the pigments and additives division will be sold to a competitor
textile, leather and paper will be acquired by a private equity company

This would leave the company as two businesses - masterbatch and functional chemicals (about half the current turnover of Clariant). Speculation was fueled after the departure of CEO Jan Secher and Clariant's inability to find a sustainable strategy. After the BASF move to acquire Ciba, the needed consolidation in this sector has driven Clariant into a vulnerable position where it has no choice but to make a move to survive.

The article in SontagsZeitung is worth reading.

Buckman USA to move leather technologies into its performance chemicals division

2008-09-16T17:41:00.000+01:00

Effective 1st October, 2008, Buckman USA (Buckman Laboratories Inc) will incorporate the activities of their leather technologies group within the performance chemicals division.

This move affects only the USA domestic market, and has no effect on other regions of the world.

The intention stated by the company is to take advantage of complementary technical, product and sales expertise. To the outsider, this looks like a 'cost-saving' opportunity.

Big bang - BASF bid for Ciba

2008-09-15T16:55:00.001+01:00

After days, weeks, months (years!) of speculation, BASF have made the big move and bid to acquire Ciba Specialty Chemicals.

The implications, developments and impact of this move on the paper chemicals industry will be analysed further in this blog ...............

Take a look at this mornings presentation.

Ciba to acquire Clariant - further speculation

2008-09-06T10:59:00.000+01:00

There is further, increased market speculation (eg Bloomberg) that Ciba will make moves to acquire Clariant, especially since the departure of the CEO, Jan Secher. There has been speculation that both Ciba and Clariant are acquisition targets (see earlier blog), but another option is for for the ailing Swiss companies to get into bed with one another - difficult to see a positive outcome, but perhaps Ciba could make a go of the venture, although their assimilation of past acquisitions has not been exemplary.

In 1988 Ciba and Clariant held unsuccessful merger talks, but as the Bloomberg article points out, Clariant Chairman Juerg Witmer has a reputation as favouring mergers and acquisitions and may have clashed with Jan Secher's wish for Clariant to go it alone. Witmer has since stated that Clariant do not want to sell their Textile, Leather and Paper Division, which would make sense if the two Swiss companies joined forces, allowing them to re-jig the entire, combined portfolio after merging.

Ciba and Clariant will have to do something to survive .............. watch this space for more news.

Back to the future - Clariant appoint Kottmann as new CEO

2008-09-05T08:21:00.003+01:00

Following the shock departure of Jan Secher, Clariant has appointed Hariolf Kottmann as the new CEO. In a move that appears to recapture the control of the company by the old Hoechst alliance (Clariant acquired the larger Hoechst organisation in 1997), it will be interesting to see whether Kortmann can bring about the changes required to re-vitalise Clariant. Kottmann is from the old Hoechst Germany school - Is this back to the future or will we see a fresh, modern approach?

Jan Secher calls it a day and leaves Clariant to an uncertain future

2008-09-04T07:57:00.004+01:00

Clariant CEO, Jan Secher, is leaving the company, "To pursue new activities outside of Clariant." Further details have not been disclosed, and little has been said of Secher's fresh wind of change and valiant attempts to turn around the ailing Swiss/German company.

With fierce competition from Asia, and the inability to raise prices in the face of unprecedented hikes in raw material and energy costs, it appears that the changes Secher (a Swedish outsider) would have had to implement to turn the company around would have been unpalatable to the Swiss/German organisation. Some of the key requirements for Clariant to survive in the future have been pointed out in earlier blogs (eg FT view).

This leaves Clariant in the position of having to appoint a new CEO and to implement a survival strategy for the future. The moves being considered by Ciba and others will be covered in future blogs.

Nalco appoints Melin to lead Asia Pacific Operations

2008-08-26T17:30:00.001+01:00

Nalco announced that it has appointed Eric Melin to lead its Asia Paciifc operations.

Melin was working a sa consultant with the Nalco team in Asia. Prior to this he was:

Chief Operating Officer, President and Board Member of Isola Corporation, a private-equity-owned global designer, developer and manufacturer of high-performance materials used in electronic systems.
He worked for 24 years at DuPont, most recently as Vice President and General Manager of a performance coatings business with $2 billion in revenues and 5,000 employees. Melin was instrumental in the growth of that business in Asia through development of local leadership and rapid expansion of marketing, sales, technology and manufacturing capability.
Prior to that, he was the Singapore-based Global Director of a DuPont engineering polymers business and has additional experience in manufacturing, strategic planning and business operations.

FT view - Ciba Braces for Further Cuts

2008-08-20T09:40:00.001+01:00

The Financial Times has also commented on the recent half-year results for Ciba Specialty Chemicals. The comments included:

Ciba prepared employees and investors for further pain yesterday, as the Swiss specialty chemicals maker plunged into loss after sharply weaker margins and huge impairment charges.
In almost permanent restructuring in recent years, Ciba warned of cuts ahead with the potential sales of its struggling paper and publication inks activities.
The moves came alongside a one- off SFr595m goodwill impairment in water and paper treatment, pushing the group into a SFr569m ($521m) net first half loss. Sales fell by 7 per cent to SFr3.09bn.
The scale of task facing Ciba, and many other European counterparts such as cross-town Clariant, was highlighted in the second quarter, when surging raw materials and energy costs prompted a SFr11m loss, even excluding impairment. Including the latter, Ciba lost SFr606m, compared with a modest net SFr27m profit in the same period last year and analysts' expectations of a SFr42m gain this time.
Two attributed quotes of financial analysts were: 1) "Even though further strategic options are under evaluation, the company is still facing strong headwinds and has to achieve a turn around in difficult times," noted Oskar Schenker at Sarasin, the Swiss private bank; and 2) "We expect demand to weaken further in the coming months, particularly in Europe, but also in Asia, and therefore believe the group's guidance is too optimistic," added Martin Flückiger at Helvea, the Swiss brokerage.
Ciba blamed its problems on its inability to pass higher costs to customers, many enjoying long-term contracts. The impairment charge was ascribed to rapid changes in the paper industry, especially a structural shift in growth to Asia [as pointed out in earlier blogs, this structural shift is not recent!]
It also blamed about two-thirds of the charge on Allied Colloids, the UK manufacturer bought for £1.42bn ($2.65bn) in 1998 - [this has been an old excuse which Ciba should have been able to recover from by now! Clariant blame the acquisition of BTP for many of their woes - is there something about the ability of Swiss companies to analyse, acquire, and leverage business opportunities? It would be interesting to see how a Chinese company would transform Ciba or Clariant were they to acquire them - significant value generation?]

The Times also highlighted 'endemic lethargy', as seen in the belated sale in 2006 of Ciba's textile effects division in the face of a sharp but predictable shift in production to Asia. What we have highlighted in earlier blogs has been lethargy elsewhere in Ciba:

The strengthening of the Asia market has been staring the industry in the face for many years!
Asian paper chemical producers will lead in the drive for acquiring market share in China (the fastest growing paper chemical market).
There is a strong need for consolidation of the paper chemicals business in Europe.

See earlier, recent blogs on the Ciba/Clariant situation:

Please contact us if you would like further insight into any aspect of the paper chemicals buisiness world-wide.

Forbes article also points to Ciba and Clariant as acquisition targets

2008-08-19T18:44:00.002+01:00

A further article, this time by Forbes, suggests the efforts of Ciba to streamline its business seem to have been in vain. The article gives views on Ciba's 2nd half 2008 financial results where they posted a larger loss than analysts were expecting, possibly making Ciba vulnerable to a takeover bid.

Ciba's shares fell 16.6%, or 5.30 Swiss francs ($4.83), to 26.60 Swiss francs ($24.23), in Zurich on Tuesday morning, after it reported a loss of 606.0 million Swiss francs ($552.0 million), during the second quarter of the year, following a profit of 27.0 million Swiss francs, a year earlier. The company also took a 595.0 million Swiss franc ($542.1 million) charge on its water and paper-treatment unit.

Like the rest of the chemicals industry Ciba has been struggling with rising raw material costs, as well as quality competition from Asia. (See “Clariant Collapses On Costs.”).

The article goes on to point out that, 'With a market capitalization of 2.2 billion Swiss francs ($2.0 billion), Ciba is trading at 9.2 times its 2009 earnings, and its shares have fallen 44.9% since the start of the year. That compares to a 14.0% drop in the Dow Jones EuroStoxx index of European chemical companies.'

As reported in an earlier Bloomberg article, Ciba and Clariant, its fellow Swiss rival, could find themselves the target of takeover interest from a number of Germany chemical giants such as BASF (analyst at Bayerische Landesbank).

Ciba announce half year results - paper chemicals not seen in future recovery plans

2008-08-19T07:56:00.014+01:00

Ciba announced their half-year financial results and after a series of poor results for speciality chemicals businesses it was expected that Ciba would not bring much cheer to investors (Share price immediately dropped 15%). The group highlights were:

Sales of CHF 3,088 million (2007: CHF 3,308 million) were flat in local currencies and 7 percent lower in Swiss francs.
Gross profit margin was 26.8 percent (2007: 29.0 percent) - significant impact of high raw material and energy costs
Good sales growth in Asia in first half year, some slowdown in Europe
Significant sales price increases taking effect from mid June - time will tell!
Goodwill impairment of CHF 595 million in Water & Paper Treatment
Strategic options under evaluation for paper and publication inks businesses
Acquisitions and JV planned for Q3 to strengthen Plastic Additives and Coating Effects
New industry focused operating model to be effective early 2009

After earlier pronouncements that Ciba had lost patience with its paper chemicals business and in an attempt to prepare the media before the announcement of their first-half results Ciba is now clearly prepared to participate in the much needed consolidation of the paper chemicals industry. This is especially needed in Europe.

Ciba's statements relating to their paper chemicals business are:

A number of options are being evaluated for the paper business - it is not performing in line with expectations and requires additional strategic action to improve their market position.
Decisions will be taken on an appropriate course of action in the next few months. Ciba state that, 'The market dynamics of the paper industry have changed considerably in the last three years, (the timescale has been far longer!) and the structural shift of growth to Asia, along with dramatically increased raw material costs have further compounded an already difficult business environment. Although a new business model was successfully implemented in 2007, it was not sufficient to counter balance the difficult market conditions and it has not been possible to achieve satisfactory profitability levels. The Board of Directors of Ciba has decided to evaluate a number of strategic options to ensure a sustainable future for the business.'
In accordance with accounting requirements, goodwill levels have been adjusted for the Water & Paper Treatment segment, which brings Ciba into a loss for the second quarter. Their statement was, 'In the first half, the Company conducted a strategic review of the paper business and concluded that further strategic options needed to be evaluated for this business, as market dynamics had changed considerably over the last few years and previously forecast profitability levels would not be met.' There has therefore been an adjustment of goodwill, resulting in a non‑cash impairment of CHF 595 million.

The changes in the paper chemicals industry which Ciba highlight have not happened 'in the last 3 years' (eg move of the business to Asia) and it is their slow strategic thinking which has lead to the situation which they find themselves in today. The big questions are just how much of the Asia market does a company like Ciba expect to get in Asia? Will Ciba actually be able to compete with Asian (Chinese) companies of the future? I have my doubts. Ciba has also struggled to effectively integrate their acquisitions, especially Raisio, and to structure their organisation world-wide, despite many changes in their senior management.

Recently there have been a number of moves to further consolidate the paper chemicals industry and more is needed to counter the shifts and consolidations in the customer base (pulp and paper industry):

Ashland acquire Hercules
Dow acquire Rohm and Haas
Ciba loose patience with paper chemicals and announce strategic review
Clariant, a dye and FWA (OBA) specialist, continue to struggle to find a sustainable paper chemical strategy as corporate decisions appear to compromise their paper business (eg site closures; Swiss-centric approach) - the company's share price continues to lack any sparkle and they have recently been removed from the Swiss blue-chip index (SMI). However, today has seen a jump as acquisition speculation continues.
Nalco is looking at options for its paper chemicals business

In addition there are three other major players:

Kemira (Market leader) - looking at cost savings and re-structuring but stll want to be in this business in the long-term
BASF - in the strongest position financially and probably waiting to see what it can pick off
EKA Chemicals - part of the bigger Akzo Nobel but so far there have not been any comments in the media that it expects to get out of the paper chemicals business. Again they may be waiting to acquire additional market share.

There are also a number of smaller suppliers such as Buckman Laboratories and a growing group of Asian manufaturers and suppliers.

One could envisage a number of effective consolidations, but will the strategic thinkers be able to carve out a sustainable business or businesses - it will need an independent look at this business (eg private equity company) with a forward looking approach to match how the paper and paper chemicals industries will develop in the future. The USA has seen some consolidation; Europe is in need of consolidation; and Asia is developing its own industry.

Two points to consider:

China will be the biggest consumer of paper chemicals in the next 10 years!
China has its own thriving paper chemicals business!

Bloomberg update: Clariant or Ciba may be targets for Dow, BASF or Sabic

2008-08-16T15:08:00.000+01:00

A recent Bloomberg update (Clariant May Be Bait for Dow as Oil Hammers Shares) makes for some interesting reading. The gist of the article is:

Clariant AG trades at 15 percent under book value and less than half what it fetched a year ago. That may make the Swiss company a $4 billion takeover target for BASF SE or Dow Chemical Co., which are shopping for acquisitions.
It is suggested that Clariant and Ciba Holding AG of Basel, would be logical targets for Dow Chemical, as it is looking for opportunities, and in the U.S. there isn't much that is attractive.
Clariant and Ciba, spinoffs of drug companies in the 1990s, never "took off'' because they were unable pass along higher raw material costs.
Clariant is a good buy with a P/E ratio is 7.80.
BASF, Dow and Riyadh-based Saudi Basic Industries Corp., or Sabic could all be in line to bid.
Ironically, Clariant was today's second-best performing share in the benchmark Swiss Market Index, rising 3.8% to 9.31 Swiss francs at the close of trading in Zurich, giving the company a market value of 2.06 billion francs ($2.1 billion).

Further consolidation of the paper chemicals market it may well involve acquisitions into larger companies rather than spin-offs into pure paper chemicals companies. Watch this space as there is considerable activity in the market today.

Buckman Laboratories to close library in Memphis

2008-08-05T08:43:00.000+01:00

Buckman Laboratories, a successful private-owned paper chemicals company has decided to cahnge how it does some things and do away with its famous library in Memphis. The news feed states that:

Buckman Laboratories is eliminating 23 jobs, but it's not because of the economy.

"Over the last few years, we've grown from $330 million to $550 million (in sales) and done it profitably," said Lela Gerald, spokeswoman for the Memphis-based chemical manufacturer. "There are new things we need to be doing and old things we don't need to be doing."

For example, Buckman is cutting its library staff from four to one and using marketing firms instead of having an internal operation because of the need for ad agency help, Gerald said.

Buckman has 1,500 employees worldwide including 300 in Memphis.

Some additional comments are given in a Memphis Public Library blog.

Kemira go on cost-cutting rampage after disappointing 2nd quarter results

2008-08-04T14:53:00.002+01:00

After the recent disappointing financial results, Kemira, the leading supplier of paper chemicals, has launched a global savings program to improve its profitability (see press release).

Kemira plans to save more than EUR 50 million per annum, of which more than EUR 20 million is planned to come from Kemira's Finnish operations. It will start 'co-determination negotiations' at 5 of the group's Finnish sites - Oulu, Vaasa, Äetsä, Espoo and Helsinki. The restructuring and savings program may involve a net reduction of up to 300 jobs in Finland but none of the Finnish sites will be closed.

Kemira has approximately 10,700 employees worldwide, almost 3,000 of whom are based in 13 sites in Finland. The company has spent its way to being the largest supplier of paper chemicals by making a series of small to medium-sized acquisitions which have proven difficult to integrate. As it becomes clear where the cost-savings will impact on Kemira's paper chemicals operations, the information will be published on this weblog.

The reaction to the announcement has been:

An employee walkout at the Vaasa facility (see press article)
........ other details will be added as they arise

Yet another record-breaking month for the paper chemicals weblog

2008-07-31T13:49:00.001+01:00

July 2008 has been another record breaking month for our weblog. Thanks to all those that contribute information and to the authors who research and find stuff to write about.

Please let others know of the site ............ we will also try to set something up in Facebook in the near future.

With well over 1,000 unique readers last month, we are targeting the 2,000 mark and beyond!

Keep the ideas and stories coming and we will do our best to provide a portal for anything newsy on paper chemicals!

Do we have the best people managing our paper chemicals businesses - paper chemicals or pickles?

2008-07-31T11:52:00.002+01:00

Much has been written by the management gurus on what it takes to be a good leader of a business, but recently there was a study in which the top 32 business executives of the FTSE 100 companies were asked to list the essential qualities of a good senior manager. Three were highlighted:

Experience of senior management
Five years in the post
Experience of the sector in question

How do the leaders of our paper chemical businesses stack up? There were times when a certain management school tried to convince their students that if you could run a pickle factory you could run any other business! There are certainly some paper chemical businesses headed by 'pickle-factory-manager-types', others at least score something in the three criteria listed above, but what is of most concern is the last criteria - experience of the sector in question.

There are some paper chemical companies which have repeatedly brought in new people who have zero experience of the business as if a fresh, ignorant start, would somehow improve things. In good times things trundle along, but when we hit periods such as now, when experience of the paper chemicals business is essential, they start to waver.

How does your company stack up? Paper chemicals or pickles?

Kemira first-half results - tough times for pulp and paper chemicals

2008-07-30T12:52:00.000+01:00

Kemira announced their first-half, 2008 results today - these are clearly troubled times for the paper chemicals giant, but they are not alone. Highlights for the Pulp and Paper business are (1H08):

First-half sales of EUR 517.5 mio (down from 529.7 mio in 2007) - Kemira point to mill closures in Europe and North America for loss of sales with some effect of unfavourable currency exchange rates
Operating profit 5% of sales (down from 8.7% in 2007) - Unable to increase sales prices sufficiently and compensate for the cost hikes - especially higher oil and energy-related costs
There was an impact on cash-flow from the EU fine for operating a chlorate cartel (see earlier blog)

Kemira has made a commitment to paper chemicals and will no doubt be able to survive the current market climate. It is doubtful that they will, in the short term, participate in the future market consolidation as they are yet to effectively integrate their recent acquisitions.

Clariant announce first half results - questions remain for paper chemicals

2008-07-29T17:40:00.005+01:00

These are tough times for the speciality chemicals industry and Clariant continues to struggle to achieve a competitive strategy. The first half results show:

Sales reduction (in CHF term) with a small increase if sales are measured in local currencies
42% fall in Q2 net profits
Heavy reliance on China for raw materials requiring higher inventories.
S&GA costs up at over 20% despite significant staff culling and efforts at cost reduction.
Some progress in increasing prices but difficulties in recovering energy and raw material costs

The paper chemicals business in Clariant is part of the Textile, Leather and Paper Division (TLP) and again the performance of all three businesses was poor. The first half results and report highlight the following points for the paper business:

'Volume decline' - in management speak this means a loss of business
Reliance on China for raw materials (especially for optical brightening agents - OBAs) - a lack of strategic vision lead to higher prices having to be paid and probably higher inventories (see earlier blog). In the report it states that this has lead to, '... an unprecedented raw material cost escalation that could not be compensated for by the significant price increases that were realised.'
The announcement that Clariant will close one of its key European paper chemical production sites (see earlier blog) in Horsforth, Leeds, UK.

With all the turmoil in the paper chemicals market, it will be interesting to see what commitments, if any, Clariant makes to this segment. The reading of the first half results seems to indicate that the future for Clariant is in other businesses (eg Masterbatches, Functional Chemicals) ......... look out for the 'portfolio shaping', as they say.

What others are saying - Bloomberg, Gulf Times, Basler Zeitung,

Nalco deliver revenue and growth in 1st half of 2008 - paper struggling somewhat

2008-07-29T15:36:00.000+01:00

Nalco benefit form the low dollar exchange rate to announce improvements to sales and profitability.

However, there is a similar story across the whole paper chemicals industry with Nalco Paper Services announcing, '.... organic revenue declined modestly, 1.7 percent, with weaker results in most regions and price activity lagging cost increases. Performance is expected to improve in the second-half behind growth in Asia. About 20 new Asia-based paper machines on which Nalco has been awarded business are expected to start production by year-end. Direct contribution in the quarter fell $7.6 million.'

These results come at a time when the Nalco management are looking at future options for the paper chemicals business (see earlier blog).

Clariant to shut Horsforth/Leeds UK Production site - paper chemicals to be affected

2008-07-29T09:57:00.006+01:00

As anticipated, Clariant has announced that it will shut its site in Horsforth/Leeds, UK. Over a number of years the site has not received investment from Switzerland despite a long track record of innovation and being at the core of supplying paper chemicals. In discussions with those affected, it is not clear where the production will be shifted but much is expected to go to shore up the (more expensive) Swiss operation in Muttenz. When decisions such as these are made, it is often more cost-effective to close sites in the UK where labour laws are liberal, compensation is lower and it is easier to carry out a closure. Moving production to a higher cost site in Switzerland to fill capacity does not appear to be a long-term recipe for success in paper chemicals.

The site at Horsforth was the main driver for the research, development, production and marketing of Optical Brightening Agents (OBAs, FWAs) world-wide. In a first move, Clariant closed its world-class OBA research and marketing team in the UK (see earlier blog). It has now decided to close the entire site, affecting OBA production and some other paper chemicals (eg products for strength, dye fixation, and the control of interfering substances).

The site in Leeds/Horsforth is designated a Textile, Leather and Paper site, although products from other businesses are manufactured there. Since Clariant's unsuccessful acquisition of BTP (British Tar Products) it has held onto a production site in Selby, UK, although this site has also been caught up in a cost-cutting closure announcement.

Clariant's first-half results were reported today and will be the subject of a separate blog.

What others are saying - See Yorkshire Post article; Clariant UK web site (nothing!).

2nd Quarter Results - Eka Chemicals

2008-07-29T09:11:00.001+01:00

Buried in the financial results of Akzo Nobel and then again in the Speciality Chemicals Division, it is not possible to glean much about the performance of Eka Chemicals the Pulp & Paper Chemicals Group. The only comment in the press release was:

'Pulp & Paper Chemicals experienced weaker demand and higher energy prices in the second quarter.'

Looking closer at the detail you find:

Pulp & Paper Chemicals revenue EUR 247 mio (2Q2008)

Not much for the press to get their teeth into - perhaps that is the intention in these hard times.

Carbon Footprint Labels ....... are paper chemical producers participating?

2008-07-28T13:24:00.005+01:00

There has been a number of initiatives to put labels on products which indicate their environmental impact. The Nordic Swan, Euro flower, the Carbon Trust's Carbon Reduction Label, etc all indicate that a product has met certain environmental requirements or commitments. The labels become recognised by consumers and are helpful in 'green' marketing initiatives.

There is now an increasing demand from consumers to have a label which more closely relates to the product's carbon footprint - the amount of CO₂ and other greenhouse gases (eg methane and nitrous oxide) emitted as part of a product's manufacture, distribution, use and disposal.

For companies marketing directly to consumers it is not a question of if they will use carbon footprint labels but when. Consumers will be making more informed choices when purchasing goods and the carbon footprint label will be there to help them.

Tissue and towel producers followed by other paper product producers will start to use these labels. Where does this leave the paper chemical supplier? There certainly does not appear to be much visible activity at the moment with most of those paper chemical companies I contacted implying that they will wait to see what happens. However, this is a great opportunity to promote 'green' products and to commit to reducing carbon footprints. In time, the papermakers will require chemical suppliers to know and provide figures for the carbon footprints of their products.

If you are interested in the initiative in the UK, it is worth looking at the web site for the Carbon Trust.

Carbon footprint
global warming
climate change