The Top 100 Chemical Distributors: Demand remains strong despite high prices
Higher prices help drive sales for the nation's chemical distributors.
By Susan Avery -- Purchasing, 5/4/2006 6:00:00 AM
And the Top 100 Chemical distributors are...Click here to find out.
Outstanding is a good word to use to describe the kind of year Purchasing's top 100 chemical distributors had in 2005.
Costs for such feedstocks as petroleum and natural gas were higher, but demand for chemicals was strong. Result: Distributors, responding to the Purchasing top 100 survey raised their prices and saw an average increase of 15% in revenues Chemical distributors also say they have a much better handle on managing costs within their own operations now than they did at any other time in the recent past.
'We had a good year in 2005,' says Gary E. Pruitt, chairman and CEO of Univar, the largest chemical distributor in the U.S., based on its ranking on the top 100 list. 'Certainly we were assisted by the pricing environment over the past four to six quarters. 'Expense management control also served us well during this period.' Univar's sales grew to $3.9 billion in 2005 from $3.4 billion the year before.
'The economy was strong, so demand was reasonable,' says Hank Waters, president of Ashland Distribution. With $3.8 billion in annual sales for 2005, Ashland Distribution takes the number-two spot on the top 100 list. 'On the supply side, we had some unscheduled disruptions such as the hurricanes which had a huge impact,' he says. Product was short for much of the year.' Waters credits strong relationships with his company's suppliers for helping alleviate any major supply problems for customers in 2005.
Distributors report demand coming from a variety of industries for a variety of product lines. 'With such a broad-based manufacturing upswing, just about all industry sectors and product lines participated in the rally,' says Stephen R. Clark, president and CEO of Brenntag North America. 'Clearly the strong demand, short supply and higher prices of 2005 led to unusually high revenue increases for the year.' Brenntag's sales increased to $2.1 billion in 2005 from $1.8 billion the year before. It is number-three on the top 100 list.
While the strong economy has encouraged an increase in merger and acquisitions among chemicals producers, such activity has been relatively quiet among the nation's chemical distributors, with one clear exception. Brenntag has been particularly busy recently acquiring the U.S. operation of Quadra Chemical in the fall of 2005 and Los Angeles Chemical in March of this year. With sales of $186 million in 2005, Los Angeles Chemical is number 15 on the top 100 list.
On average, chemical distributors responding to Purchasing's survey report sales of $196.7 million in 2005, compared to $166.4 million in 2004. Last year, sales at the top 100 chemical distributors increased 11% from the previous year. Then, a revitalized housing sector and strong new-housing starts contributed to the sales gain.
Looking ahead
James L. Kolstad, president and CEO of the National Association of Chemical Distributors (NACD) in Arlington, Va., characterized 2005 as 'one of the strongest, if not the strongest sales year for many, many years' and continues to be optimistic going forward. 'It's going to be tough to duplicate, but we're off to a great start in 2006.'
Already, a bill in Congress on chemical security is moving along better than it has in other years and small business health plan legislation could receive approval from both the House and the Senate in 2006. This legislation would have a positive impact on chemical distributors, says Kolstad, adding that the NACD also has recently raised the bar for its Responsible Distribution Process, a plus for chemical buyers going forward.
Chemical distributors surveyed say expanding operations globally is foremost on the minds of executives at many of the nation's biggest chemical distribution companies. Aceto, for one, is continuing 'to leverage our unique sourcing, technical, logistical and regulatory capabilities,' including its position as the largest buyer of specialty chemicals for export from China.
Most chemical distributors, however, have plans that are closer to home. For example, HELM America is opening an office in Chicago, while Superior Solvent & Chemicals is expanding its surfactant product line and working to grow sales in water-based technology.
Some are exploring opportunities for strategic acquisitions in the months ahead, including Harcros Chemicals, Hydrite Chemical and Hawkins Chemical.
The top 100
Sales increased in 2005 for a whopping 89% of chemical distributors responding to Purchasing's top 100 survey. Another 3% had a sales year that was flat with 2004. Just 8% saw sales fall.
Like last year, chemical distributors of all sizes experienced strong sales in 2005. For the top 50 chemical distributors, sales averaged $367.3 million in 2005. A year ago, this figure was $309.8 million, a 15.6% increase. For distributors with sales of $100 million or more, sales for 2005 averaged $586.4 million, up from $492.2 million, an increase of 16%.
The top five chemical distributors remain unchanged from last year—and the year before. One, two and three are Univar, Ashland and Brenntag. Chemcentral, with sales of $1.3 billion, and ICC Chemical, with sales of $770 million, are fourth and fifth, respectively on Purchasing's top 100 list in 2006.
There was some shifting among chemical distributors for the remaining positions on the top 10 list. Moving into the sixth spot this year is HELM with sales of $760.6 million. Last year, HELM was number 11. Likewise Itochu Chemicals America moved up, from the 10th to seventh spot, with annual sales of $350 million. Harcros ($323 million), Aceto ($313 million) and JLM Industries ($301.9 million) round out the top 10.
Falling out of the top 10 is Canada Colors & Chemicals. Sales of $300 million for the year remained flat with 2004 for the chemical distributor. It was number 11 on the list for 2006. With $266 million, Hydrite is number 12, the same spot it held last year.
Rounding out the top 15 (and remaining unchanged for two years) are Quadra Chemicals ($241 million), Interstate Chemical ($220.6 million) and Los Angeles Chemical ($186 million).
As one company, the 15 independent distributors that make up the Omni-Chem 136 alliance would fit between Brenntag and Chemcentral on the top 100 list for 2006. Its annual sales were $1.5 billion. Instead, Purchasing lists each company individually.
The same holds true for the Chemical Distribution Network (CDN). Together the 21 independent chemical distributors belonging to the CDN have estimated sales of $860 million (based on the 15% annual growth rate), which places this alliance at number five on the list, following Chemcentral. Last year, the alliance had combined sales of $750 million. For more information on these alliances and their capabilities, please see the accompanying sidebar on page 32C19.
There was little change in positions on Purchasing's list for chemical distributors that fill out the next 10 spots. With $108 million in annual sales in 2005, Pride Solvents & Chemical breaks onto the top 25. With $106 million, The Plaza Group takes the 26th spot.
Results of Purchasing's annual survey show chemical distributors were managing an average of 11.8 stocking locations at the end of 2005, roughly unchanged from the number they were managing the year before (11.2). Of those responding to the survey question, 20% opened stocking locations in 2005, while 10% closed them. Last year, these figures were 30.1% and 11.1%, respectively. Twenty-eight percent plan to open new locations in 2006, a figure slightly lower than one year ago. Of those that say they'll open new locations this year, 13% expect to open more than one in the months ahead, the same figure as a year ago.
Chemical distributors on the top 100 list have stocking locations mainly in the U.S. and Canada. Many also have branched out with stocking locations in Mexico (11%) and Latin America (7%). Others sell product in Europe (15%) and Asia (9%).
As of December 31, 2005, chemical distributors had an average of 3.7 million gallons of bulk storage capacity and an average of 377,000 sq ft of warehouse space. Respondents have trucks (48), vans (14), trailers (62), tankers (37) and railcars (37) in their vehicle fleets.
New to this year's survey is a question on number of employees. The top 100 has on average 194.6 employees. Average sales per employee is $1.3 million.
In 2005, the top 100 chemical distributors sold products to buyers in these industries: paints and coatings (84%), cosmetics/personal care (83%), food and beverage (76%), adhesives and sealants (73%) and soaps and detergents (70%). Twenty-six percent of chemical distributors say they serve a niche market. Of those who responded to Purchasing's survey, 29% serve customers more than 13 different markets, meaning they are fairly or very diversified. On average, the top 100 sell product to 10 markets.
Chemical distributors on Purchasing's list provide their customers in those markets with a variety of products. Of respondents, 50% offer nine to 16 different kinds of products. On average, respondents carry 13 lines. Classifying themselves as specialized chemical distributors are 27% of the top 100; they offer one to eight products lines. The remaining companies provide customers with more than 17 different types of products.
Sales through chemical distributors consist mainly of these products: surfactants (76%), amines (69%) and inorganics (68%). Other chemicals which make up a bulk of distributor sales are: esters (61%), alcohols (60%), food additives (60%), solvents (57%), acids (57%) and glycol ethers (54%). Rounding off the list are: Resins (52%), chlor-alkalis (51%) thickening agents (47%), fatty chemicals (44%), chelating agents (44%), ketones (44%).
All the distributors on the top 100 list import some of these products: On average, they import 21% of the chemicals they sell.
Services are the hallmark of distribution. Chemical distributors provide their customers with a host of services, with 25% of those on the list offering an extended range of services (five or more).
Purchasing also queried chemical distributors on their customers' biggest concerns on this year's survey. Among them are pricing increases/price stability (67%), fuel/energy/transportation costs (31%), and overseas competition/manufacturing moving off-shore (21%.) Other buyer worries include product availability, regulatory compliance and the economy. For more, please see accompanying sidebar onp. 11.
2006 distributor profile
| Source: Purchasing |
|
| Average bulk storage capacity: | 3.7 million gal |
| Average warehouse space: | 377,000 sq ft |
| Average delivery fleet size: | 142 vehicles |
| Of those who say they have | % that have one or more |
| Trucks: | 48% |
| Vans: | 14% |
| Trailers: | 62% |
| Tankers | 37% |
| Railcars: | 37% |
| Other vehicles: | 8% |
Sales per employee
| Source: Purchasing |
|
| Average number of employees in 2005: | 194.6 |
| Average sales per employee: | $1.3 million |
Extra services offered
(beyond delivery and warehousing)
| Service | % |
| Source: Purchasing |
|
| Blending | 67% |
| Contract packaging | 52% |
| Technical training | 45% |
| Safety training | 38% |
| Manufacturing | 35% |
| Customer product research | 35% |
| Hazardous waste removal | 16% |
| Solvent reclamation | 10% |
| Other | 13% |
| No extra services offered | 14% |
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 |
|
| Europe | 15% |
| Mexico | 11% |
| Asia | 9% |
| Latin/South America | 7% |
| Other areas | 4% |
Industries which purchase through distributors
| Market | %* |
| *Percentage of distributors surveyed with products in these markets Source: Purchasing survey |
|
| Paints and coatings | 84% |
| Cosmetic/personal care | 83% |
| Food and beverage | 76% |
| Adhesives and sealants | 73% |
| Soaps and detergents | 70% |
| Primary chemical processing | 67% |
| Pharmaceuticals | 66% |
| Plastics | 64% |
| Pulp and paper | 55% |
| Electronics | 48% |
| Market | %* |
| Automotive | 47% |
| Municipal | 43% |
| Petroleum refining | 36% |
| Tires and rubber | 34% |
| Metals | 34% |
| Textiles | 34% |
| Agriculture | 34% |
| Glass and refractory | 26% |
| Appliances | 12% |
| Other | 19% |
Most popular lines among distributors
| Product line | %* |
| *Percentage of distributors surveyed Source: Purchasing And the Top 100 Chemical distributors are...Click here to find out. |
|
| Surfactants | 76% |
| Amines | 69% |
| Inorganics | 68% |
| Esters | 61% |
| Alcohols | 60% |
| Food additives | 60% |
| Acids | 57% |
| Solvents | 57% |
| Glycol ethers | 54% |
| Resins | 52% |
| Chlor-alkali | 51% |
| Thickening agents | 47% |
| Fatty chemicals | 44% |
| Chelating agents | 44% |
| Ketones | 44% |
| Product line | %* |
| Polyglycols | 44% |
| Plasticizers | 43% |
| Pigments | 42% |
| Chlorinated solvents | 42% |
| Lubricants | 39% |
| Hydrogen peroxide | 39% |
| Specialty quats | 35% |
| Catalysts | 31% |
| Flavors and fragrances | 31% |
| Adhesives and sealants | 20% |
| Aldehydes | 19% |
| Industrial gases | 12% |
| Institutional maintenance | 7% |
| Other | 34% |
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