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Value Creation in Chemicals

The chemical industry—once a top value creator in BCG’s annual Value Creators ranking—is, today, one of the more challenged. Yet some chemical companies are performing very well. Indeed, BCG has identified enormous disparity between the best and the worst performers of the 189 chemical companies in our global sample—a TSR spread larger than that in any other industry we studied.

The median TSR from 2011 through 2015, the period BCG considered in this year’s Value Creators study, was 9.5% for the chemical industry—considerably below the 12% median of the 28 industries we tracked.

BCG upholds that the primary factor in individual company performance in the chemical industry today is the choice of business model. There are several distinct options. We find that the top TSR performers tend to develop highly differentiated business models, and these models tend to be market-based, rather than asset- or technology-based. The top performers also tend to practice serial M&A; embrace complexity as a source of differentiation and, hence, competitive advantage; and deviate from industry best practices, instead developing opportunities outside of industry trends.

Several powerful trends are shifting value among regions and business models

TSR varies broadly by region

TSR also varies among subsectors

Return on capital employed (ROCE) confirms focused specialties’ outperformance

Business models may drive corporate performance significantly

Chemical companies need to balance business resilience and portfolio coherence

Process Industries & Building Materials
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