The Top 100 face uncertainty
Sales are weak, but nearly one in four plan to add stocking locations.
By Susan Avery -- Purchasing, 5/1/2003 2:00:00 AM
(Go to the Top 100 List. )
For the nation's chemical distributors, uncertainty is the watchword for 2003.
After a dismal 2001, chemical distributors were cautiously optimistic about sales in 2002. Many industry players believed that they had reached the bottom of the business cycle, and that demand for chemicals could only increase in the months ahead.
The year, however, proved to be a mixed bag for the chemical distributors on PURCHASING magazine's Top 100 list. 'It wasn't as bad as 2001, but it wasn't too much better either,' says James L. Kolstad, president and COO, National Association of Chemical Distributors (NACD), Arlington, Va.
While chemical distributors made productivity gains in 2002, Kolstad characterizes the months ahead as 'an unknown'. 'But we are optimistic that sales are going to be slightly better than in 2002. What we're hearing from our members so far is that sales are running slightly ahead of the same period in 2002 and that's in the face of some incredible increases in costs.' Specifically, he cites rising costs of insurance and recent volatility in oil and natural gas prices which directly impact prices of chemicals distributed by NACD members.
Chemical distributors responding to PURCHASING's Top 100 Chemical Distributors survey report average sales of $139.8 million for 2002, compared to $145.3 million in 2001, a drop of 3.7%.
Still, nearly 65% of distributors on the list had sales gains in 2002. That's an increase of 10% from last year, when 55% reported sales growth. Another 9.4% experienced a year in which sales were flat with 2001. Twenty-six percent recorded lower sales in 2002 compared to the previous 12 months.
Much of the drop in sales occurred among many of the bigger players. Sales among the Top 50 chemical distributors averaged $256.2 million in 2002. A year ago, that figure was $267.9 million. Of distributors with sales of $100 million or more, sales for 2002 averaged $485 million, down from $496.5 million in 2001.
With $2.9 billion in annual sales for 2002, Univar (formerly known as Vopak) is at the top of this year's list, the same position it held a year ago. With $2.4 billion in sales, Ashland remains firmly planted at the number-two spot. Both companies, however, saw sales fall in 2002. Number-three Brenntag recorded sales of $1.6 billion to clinch it the number-three spot again. Its sales remained flat with 2001.
CHEMCENTRAL ($884.45 million) is the highest ranked distributor on this year's list to witness a sales gain, of 2.1%. ICC Chemical Corp. ($475 million), the player in the number-five spot, grew sales by a whopping 21% in 2002. The big chemicals trading company attributes its good year to an increase in orders from corporate buyers working to manage costs by shifting business to products from less pricey offshore sources.
If looked at as a group, the 13 independent chemical distributors that make up the Omni-Chem 136 alliance would fit between Brenntag and CHEMCENTRAL on the Top 100 list for 2003. Its annual sales were $1.2 billion. (A partnership with the European Chemical Distribution Alliance, bringing annual sales to more than $3 billion, pushes the alliance further up the list and gives Omni-Chem 136 a geographic scope that covers not only North America but also Europe and the Far East.) Instead the editors opted to list each company individually; those that belong to the alliance sport the group's logo at the bottom of their listings. The same holds true for chemical distributors that belong to the Chemical Distribution Network (CDN). As a group, these 16 independent chemical distributors had sales of $450 million in 2003, which would place this alliance at number-six on the list, following ICC Chemical. For more information on these alliances and their capabilities, please see the accompanying sidebar below.
This year's rankings
Lower sales figures for 2002 were, for the most part, across the board. While half of the Top 10 chemical distributors saw sales fall last year, there isn't a shift in rankings until the 11th spot. Quadra Chemicals ($188 million), which had a sales gain of 7.4% in 2002 moved up a position while Helm ($179 million), which saw sales drop 1.9% slid into 12th place. Contrast this to last year when several of the big players shifted rankings among themselves.
Among the Top 20, Los Angeles Chemical ($131 million) moved from 18th to 15th place, tied with Superior Solvents & Chemicals ($131 million) which stepped up from the 17th spot. EMCO Chemical Distributors ($109.4 million) clinched the 20th position from the 22nd last year. Falling back a few posts on the 2003 list were Seegott ($118 million) from 15 to 18, The C.P. Hall Co. ($115 million) from 16 to 19 and L.V. Lomas ($125 million) from 19 to 17. Hawkins moved to the 21st rank.
The first company to drop off the list is Gallade Chemical which declined to participate in this year's survey. Others absent from this year's rankings are Captree Chemical Corp. which was purchased by Mays Chemical and Chemical Distribution Inc. which shut its doors in 2002.
Taking a closer look at some of the bigger players on this year's list turns up additional uncertainties. While there were no big acquisitions as in the recent past (i.e., Brenntag's purchase of Holland Chemical International and Vopak's of Ellis & Everard), distributors near the top of the list are said to be poised to acquire smaller players in efforts to expand the number of product lines they offer their customers and/or their geographic scope. Kolstad of NACD, for one, sees the merger and acquisition of the recent past continuing, particularly among small to mid-size companies.
Most notable acquisition activity among the big three players in 2002 include:
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Univar's spin off from Royal Vopak, which occurred after the parent company was unable to find a buyer for the chemicals distribution business. It took its new name after the spin-off and in the words of CEO Gary Pruitt, 'signals a renewed commitment to optimize physical and capital assets, technology and process improvements.' Later in 2002, Univar acquired specialty chemical distributor Stochem of Toronto, Canada.
Earlier this year, Univar divided its North American business unit into two separate organizations, one focusing on the company's core industrial chemical business and the other on specialty distribution services. Looking ahead, Univar plans to expand its presence in the U.S. and some areas in Western Europe and is open to future acquisitions of some smaller players. -
The announced sale of Brenntag. Its parent company Stinnes was recently purchased; its new owners plan to divest the chemicals distributor. Brenntag, meanwhile, continues to acquire other smaller distributors, namely Fenil Quimica in Sao Paulo, Manti in Sofia and Droqsa in Barcelona. Earlier this year, it began to jointly distribute industrial chemicals with Wilhelm E.H. Biesterfeld in Hamburg, Germany.
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Ashland's announcement that it might sell some or all of its Ashland Distribution subsidiary. Early in the year, it restructured its business, combining its plastics operations in North America and Europe.
Meanwhile, CHEMCENTRAL announced its intention to purchase the specialty additives business of The C.P. Hall Co. at the end of 2002, as part of a strategy to expand its product line and Quadra Chemicals acquired Sega International, a distributor of specialty chemicals located in Portland, Ore., strengthening its presence in the U.S. and Canada.
More survey results
Results of PURCHASING's Top 100 Chemical Distributors survey show chemical distributors were managing an average of 11.2 stocking locations at the end of December, 2002. Of those responding to the survey question, 26.5% opened stocking locations in 2002, while 13.4% closed them. Looking ahead, 23.6% plan to open new locations in 2003. Of this figure, 8.9% expect to open more than one stocking location in the months ahead.
Chemical distributors on PURCHASING's list have stocking locations mainly in the U.S. and Canada. Many also have branched out as respondents report stocking locations in Mexico (32.3%) and Latin/South America (22.6%). Others sell product in Europe (38.7%) and Asia (29%).
As of Dec. 31, 2002, chemical distributors had an average of 3.01 million gal. of bulk storage capacity and an average of 365,000 sq. ft. of warehouse space. On average, chemical distributors have 47 trucks, 14 vans, 58 trailers, 32 tankers and 45 railcars. All told, they have an average fleet of 131 vehicles.
In 2002, the top 100 chemical distributors sold products to buyers in these industries: paints and coatings (87%), adhesives and sealants (78%), soaps and detergents (78%), cosmetic/personal care (76%) and primary chemical processing (73%).
The distributors on the list are a diversified group: Forty-three percent of those responding to the survey offer 9-16 product lines. On average respondents carry 13 lines. Twenty-eight percent classify themselves as specialized chemicals distributors; they offer one to eight products. The remaining companies provide their customers with more than 17% different types of products.
Sales through chemical distributors consist mainly of these products: surfactants (78%), inorganics (69%), amines (68%), alcohols (59%) and acids (58%). Other chemicals which made up a bulk of sales in 2002 are: solvents (57%), food additives (56%), esters (54%), thickening agents (54%) and resins (52%). Rounding off the list are: chelating agents (49%), glycol ethers (48%), chlor-alkali (48%), pigments (46%) and fatty chemicals (45%).
Virtually all of the distributors on the Top 100 list import some of these products; on average they import 21.1% of the chemicals they sell.
Chemical distributors provide their customers with a host of services, with nearly one third of those on the list offering an extended range of services (five or more). Another third provide a limited number (one or two). Among the most popular: blending (61%), contract packaging (52%), technical training (46%), safety training (35%), manufacturing (33%), customer product research (33%) and hazardous waste removal (18%).
Most popular lines among distributors
| Product line | (%) |
| Surfactants | 78 |
| Inorganics | 69 |
| Amines | 68 |
| Alcohols | 59 |
| Acids | 58 |
| Solvents | 57 |
| Food additives | 56 |
| Esters | 54 |
| Thickeners | 54 |
| Resins | 52 |
| Chelating agents | 49 |
| Chlor-alkali | 48 |
| Glycol ethers | 48 |
| Pigments | 46 |
| Fatty chemicals | 45 |
| Plasticizers | 44 |
| Polyglycols | 44 |
| Chlorinated solvents | 43 |
| Specialty quats | 42 |
| Ketones | 41 |
| Hydrogen peroxide | 41 |
| Lubricants | 33 |
| Catalysts | 32 |
| Flavors & fragrances | 30 |
| Aldehydes | 23 |
| Adhesives & sealants | 23 |
| Industrial gases | 11 |
| Institutional maintenance | 8 |
| Other | 34 |
| SOURCE: PURCHASING |
|
2003 distributor profile
| SOURCE: PURCHASING |
||
| Average bulk storage capacity: 3.0 million gal. | ||
| Average warehouse space: 365,000 sq. ft. | ||
| Average delivery fleet size: 131 vehicles | ||
| Of those who said they have... | % who have one or more | Average number in service |
| Trucks: | 59 | 47 |
| Vans: | 38 | 14 |
| Trailers: | 52 | 58 |
| Tankers: | 45 | 32 |
| Railcars: | 14 | 45 |
| Other vehicles: | 4 | 9 |
Change in sales between 2002 and 2001
| SOURCE: PURCHASING |
|
| Increase | 64.6% |
| Stayed same | 9.4% |
| Decrease | 26% |
| 2002 sales (average): | $139.8 million |
| 2001 sales (average): | $145.3 million |
What percent of chemical products are imported by distributors?
| SOURCE: PURCHASING |
|
| More than 50% | 13% |
| 11% to 50% | 27.2% |
| 6% to 10% | 23.9% |
| 1% to 5% | 34.8% |
| None | 1.1% |
| Average: | 21.1% |
Other regions with stocking locations
In addition to the U.S. and Canada, the Top 100 chemical distributors have stocking locations in the following regions:
| SOURCE: PURCHASING |
|
| Mexico | 32.3% |
| Latin/South America | 22.6% |
| Europe | 38.7% |
| Asia | 29% |
| Other areas | 12.9% |
Extra services offered (beyond delivery and warehousing)
| Service | (%) |
| Blending | 61 |
| Contract packaging | 52 |
| Technical training | 46 |
| Safety training | 35 |
| Customer product research | 33 |
| Manufacturing | 33 |
| Hazardous waste removal | 18 |
| Solvent reclamation | 11 |
| Other | 19 |
| No extra services offered | 17 |
| SOURCE: PURCHASING |
|
Industries which purchase through distributors
| Market | (%) |
| Paints and coatings | 87 |
| Soaps and detergents | 78 |
| Adhesives and sealants | 78 |
| Cosmetic/personal care | 76 |
| Primary chemical processing | 73 |
| Pharmaceuticals | 70 |
| Food and beverage | 68 |
| Plastics | 67 |
| Automotive | 53 |
| Agriculture | 48 |
| Pulp and paper | 47 |
| Electronics | 47 |
| Textiles | 43 |
| Tires and rubber | 42 |
| Metals | 42 |
| Municipal | 41 |
| Petroleum refining | 30 |
| Glass and refractory | 23 |
| Appliances | 12 |
| Other | 19 |
| SOURCE: PURCHASING |
|
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