Re-Shaping Value Creation In The Middle Eastern Chemical Industry
Future value creation of firms in the Middle East relies on their ability to consolidate, extend marketing reach to high-growth markets, leverage digital and innovation
Shareholder returns of large global chemical firms dropped in the past ten years from being the fourth most value creating companies in 2009 to a 17th ranking in 2018, according to a recently published report by The Boston Consulting Group (BCG) titled “Value Creation in Chemicals 2018: The Industry Rebounds and India Surges”. Despite the drop in average value creation, the data shows a huge difference in the total shareholder returns (TSR) created by top performers compared to the rest of the firms.
Ahead of speaking at the 13th annual GPCA Forum, Mirko Rubeis, Partner and Managing Director at BCG Middle East stresses, the importance for Middle Eastern chemical companies in identifying drivers of value creation, and how to get it right.
BCG’s report identified the global market cap of chemical companies to be more than $ 2,000 billion and average shareholder returns of 17% in the past 5 years, with highest returns (19%) in the chemical specialties segments and industrial gasses.
“Among specialties, focused specialties showed superior TSR vs. multi-specialties, reinforcing the importance of a consolidated focused approach to the portfolio of products and specialized capabilities required to generate value. Maintaining portfolio and capability coherence means more focus in management attention, capital allocation, R&D, and go-to-market approach”, said Udo Jung, Senior Partner and Managing Director, at BCG, who is also speaking at the annual GPCA Forum.
Geographically North East Asia experienced the highest shareholder returns of 21%, however BCG found strong performance deriving out of the emerging markets, influenced by a surge in India.
“India is a market targeted by many key players in the industry,” commented Mirko. “In the Middle-East in particular, many companies are exploring manufacturing deals in India, but few have a clear marketing & sales strategy in place to target the booming domestic market, and even fewer with a marketing organization on the ground. The mindset needs to evolve from manufacturing, to supply chain, to marketing”
Additionally, BCG’s report also highlights the need for embracing and embedding digital, innovation, and sustainability deeply into their strategies to generate attractive returns in the future.
“Digital is a key source of future value creation, both in manufacturing, in supply chain, but also in marketing & sales and in corporate functions. In addition, companies in this region must put sustainability and the circular economy at the center of value creation – social value has become a clear driver of business value.” concluded Mirko.
