Cracking the organizational code for growth Chemicals & Materials growth analysis

Transcription

1 Cracking the organizational code for growth Chemicals & Materials growth analysis January 2013

2 Contents Page 1) Key organizational challenges in the industry 2 2) Growth performance of key players 4 3) How Industry players are exploiting organizational levers 13 4) Why participate in Oliver Wyman s study? 17 1

3 Section 1 Key organizational challenges in the industry 2

4 Looking at growth in the chemicals and materials industry While strategic issues impacting this sector have been analysed at length, designing and implementing the right organization remains the key lever to both enable and achieve sustainable growth. Major multinationals need to overcome the organizational challenges associated with: - Migrating from being a product - to solution - and service-provider - Achieving the right power and resource distribution between business lines, regions, and the corporate center - Designing alternative organizational models to address new growth opportunities - Putting in place the right organizational and management models in emerging countries - Implementing customer-oriented processes - Tailoring customer-interaction models and channels - Developing a growth-nurturing culture - Preparing for the future while delivering short-term results Oliver Wyman is currently launching a study to further understand, qualify, and quantify the required organizational levers and how they impact the long-term sustainable growth prospects within the chemicals and materials industries. The following pages provide a preliminary view of recent growth results within the sector, based on publicly available information, in order to showcase the importance of identifying the organizational levers that propelled star performers growth trajectories. 3

5 Section 2 Growth performance of the key players 4

6 Top sector players The industry remains extremely fragmented 2012 market influence of the top ten players (vs. Top 100) Top ten global players in the chemicals industry (2012 B$) % 15% Source : ICIS Chemical Business Note: Chemical activity only Categorization by revenue is relative to the overall top 100 sample 5

7 Revenue Growth (CAGR ) What was the impact of the 2008 economic crisis on the industry? While 55% managed double-digit growth pre-crisis, a full 76% reached this goal after crisis despite the recession 60% BRASKEM SA-PREF A Accelerating Growth 50% CF INDUSTRIES HOLDINGS INC SAUDI IND INVESTMENT GROUP POTASH CORP OF SASKATCHEWAN Decelerating Growth Catching-up 34% of companies YULE CATTO & COMPANY PLC 40% EMPRESAS COPEC SA Superstars 42% of companies RELIANCE INDUSTRIES LTD Anemic 10% of companies EASTMAN CHEMICAL CO HUNTSMAN CORP EXXON MOBIL CORP CHEVRON CORP AKZO NOBEL FORMOSA PLASTICS CORP 30% AVERY DENNISON CORP MITSUBISHI CHEMICAL HOLDINGS 20% -10% AGRIUM INC GEORGIA GULF CORP DU PONT (E.I.) DE NEMOURS BASF SE SOLVAY SA SASOL LTD SIKA AG-BR NOVO NORDISK A/S-B ASAHI KASEI CORP PRAXAIR INC AIRGAS INC AIR LIQUIDE SA FORMOSA CHEMICALS & FIBRE KEMIRA OYJ RPM INTERNATIONAL INC 0% MONSANTO CO LAFARGE SA SCOTTS MIRACLE-GRO CO-CL A MOSAIC CO/THE JOHNSON MATTHEY PLC LINDE AG 10% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% Stalling 13% of companies -20% Revenue Growth (CAGR ) Significant double-digit growth is necessary just to keep pace within the industry. Source : Bloomberg, Oliver Wyman proprietary analysis Note: Origins of each axis set to 10% to differentiate double-digit growth 6

8 Revenue CAGR What are the growth trends in the industry? With a few exceptions, revenue growth after the recession has outpaced growth prior to the recession 100% 90% 80% 70% 60% 50% 40% 30% % 10% 0% -10% % -30% Company Rank Source : Bloomberg, Oliver Wyman proprietary analysis 7

9 EBITDA Growth (CAGR ) Should growth or efficiency be pursued? 66% of firms that beat average EBITDA did so by pursuing a growth vs. efficiency play 140% 120% Efficiency play 10% of companies YARA INTERNATIONAL ASA Highly profitable growth 27% of companies 100% POTASH CORP OF SASKATCHEWAN 80% TESSENDERLO CHEMIE ARKEMA AGRIUM INC SCHULMAN (A.) INC 60% WESTLAKE CHEMICAL CORP CLARIANT AG-REG INDUSTRIES QATAR SAUDI BASIC INDUSTRIES CORP COOKSON GROUP PLC BRASKEM SA-PREF A 40% WR GRACE & CO CHEVRON CORP EXXON MOBIL CORP FORMOSA PLASTICS CORP DU PONT (E.I.) DE NEMOURS MEXICHEM SAB DE CV-* PPG INDUSTRIES INC DOW CHEMICAL CO/THE SAUDI IND INVESTMENT GROUP SOLVAY SA EASTMAN CHEMICAL CO ASAHI KASEI CORP 20% JOHNSON MATTHEY PLC BASF SE AIRGAS INC BP PLC MITSUBISHI GAS CHEMICAL CO SCOTTS MIRACLE-GRO CO-CL A IRPC PCL RELIANCE INDUSTRIES LTD AIR LIQUIDE SA KEMIRA OYJ SIKA AG-BR 0% AVERY DENNISON CORP -10% LAFARGE SA 0% 10% 20% 30% 40% 50% 60% RECTICEL -20% -40% MONSANTO CO Falling behind 48% of companies Less or unprofitable growth 15% of companies Source : Bloomberg, Oliver Wyman proprietary analysis Revenue Growth (CAGR ) Note: Categorization by revenue and EBITDA quadrant is relative to 8 the overall sample

10 Market Cap CAGR ( ) Market cap and growth are highly correlated Companies that showed highly profitable growth outperformed the market cap growth of their competitors 20.0% 12.1% 11.4% 4.2% 0.0% Falling behind Less or unprofitable growth Highly profitable growth Efficiency play -7.6% Unprofitable growth is sanctioned by the market -20.0% Source : Bloomberg, Oliver Wyman proprietary analysis 9

11 EBITDA Margin ( ) Does company size impact EBITDA growth? Smaller companies showed ability to grow EBITDA at a higher rate, although average growth rate was consistent irrespective of size 45.00% POTASH CORP OF SASKATCHEWAN CF INDUSTRIES HOLDINGS INC 40.00% NOVO NORDISK A/S-B 35.00% 30.00% SIGMA-ALDRICH NOVOZYMES A/S-B SHARES PRAXAIR INC ISRAEL CHEMICALS LTD MONSANTO CO MOSAIC CO/THE RECKITT BENCKISER GROUP PLC 25.00% 20.00% 15.00% 10.00% AIR PRODUCTS & CHEMICALS INC AIR LIQUIDE SA WACKER CHEMIE AG CRODA INTERNATIONAL PLC KURARAY CO LTD SHIN-ETSU CHEMICAL CO LTD EMS-CHEMIE HOLDING AG-REG FMC CORP LONZA GROUP AG-REG LINDE AG SYNGENTA AG-REG ALBEMARLE CORP MEXICHEM SAB DE CV-* LAFARGE SA ROCKWOOD HOLDINGS INC SYMRISE AG GIVAUDAN-REG INTL FLAVORS & FRAGRANCES LG CHEM LTD EASTMAN CHEMICAL CO HANWHA CHEMICAL CORP FORMOSA PLASTICS CORP BASF SE REPSOL SA RELIANCE INDUSTRIES LTD SGL CARBON SE WR GRACE & CO SOLVAY SA JSR CORP WESTLAKE CHEMICAL CORP ARKEMA YARA INTERNATIONAL ASA NIPPON SHOKUBAI CO LTD CELANESE CORP-SERIES A AGRIUM INC PPG INDUSTRIES INC VALHI INC SCOTTS MIRACLE-GRO CO-CL A TAIYO NIPPON SANSO CORP DENKI KAGAKU KOGYO K K FORMOSA CHEMICALS & FIBRE DU PONT (E.I.) DE NEMOURS AKZO NOBEL SIKA AG-BR CEMENTOS PORTLANDVALDERRIVAS CABOT CORP CLARIANT AG-REG ASAHI KASEI CORP COOKSON GROUP PLC SUMITOMO CHEMICAL CO LTD YULE CATTO & COMPANY PLC STEPAN CO SHOWA DENKO K K TORAY INDUSTRIES INC AVERY DENNISON CORP MITSUBISHI CHEMICAL HOLDINGS FERRO CORP HUNTSMAN CORP KANEKA CORP DIC CORP TESSENDERLO CHEMIE DOW CHEMICAL CO/THE 5.00% RECTICEL POLYONE CORPORATION SCHULMAN (A.) INC TISZA CHEMICAL GROUP PLC LA SEDA DE BARCELONA MITSUI CHEMICALS INC JOHNSON MATTHEY PLC ULTRAPAR PARTICIPACOES SA 0.00% Source : Bloomberg, Oliver Wyman proprietary analysis Average Revenue ( ) 10

12 Revenue Growth (CAGR ) Does company size influence revenue growth? The largest companies were able to achieve higher average revenue growth 60% BRASKEM SA-PREF A 50% 40% SAUDI IND INVESTMENT GROUP YULE CATTO & COMPANY PLC CF INDUSTRIES HOLDINGS INC POTASH CORP OF SASKATCHEWAN EMPRESAS COPEC SA 30% 20% 10% 0% MEXICHEM SAB DE CV-* RELIANCE INDUSTRIES LTD EMS-CHEMIE HOLDING AG-REG AGRIUM INC VALHI INC EASTMAN CHEMICAL CO POLSKI KONCERN NAFTOWY ORLEN GEORGIA GULF CORP ULTRAPAR PARTICIPACOES SA TISZA CHEMICAL GROUP PLC ISRAEL CHEMICALS LTD JOHNSON MATTHEY PLC MITSUBISHI CHEMICAL HOLDINGS COOKSON GROUP PLC HUNTSMAN CORP STEPAN CO DU PONT (E.I.) DE NEMOURS ALBEMARLE CORP SOLVAY SA MITSUI CHEMICALS INC BASF SE CABOT CORP MITSUBISHI GAS CHEMICAL CO LA SEDA DE BARCELONA SASOL LTD DOW CHEMICAL CO/THE ARKEMA NOVO NORDISK A/S-B FERRO CORP TOSOH CORP REPSOL SA CYTEC INDUSTRIES INC PRAXAIR INC AIRGAS INC SHERWIN-WILLIAMS CO/THE AIR LIQUIDE SA SIGMA-ALDRICH DIC CORP AIR PRODUCTS & CHEMICALS INC HANWHA CHEMICAL CORP RECTICEL FORMOSA PLASTICS CORP AVERY DENNISON CORP SAUDI BASIC INDUSTRIES CORP MONSANTO CO LAFARGE SA SCOTTS MIRACLE-GRO CO-CL A -10% -20% CEMENTOS PORTLANDVALDERRIVAS -30% Source : Bloomberg, Oliver Wyman proprietary analysis Average Annual Revenue in M USD ( ) 11

13 EBITDA Margin ( ) Does revenue growth influence EBITDA? Higher sales revenues growth often comes at the expense of EBITDA 50% INDUSTRIES QATAR 45% POTASH CORP OF SASKATCHEWAN CF INDUSTRIES HOLDINGS INC 40% SAUDI BASIC INDUSTRIES CORP 35% NOVO NORDISK A/S-B 30% 25% LAFARGE SA 20% PRAXAIR INC SIGMA-ALDRICH MONSANTO CO NOVOZYMES A/S-B SHARES RECKITT BENCKISER GROUP PLC SASOL LTD ISRAEL CHEMICALS LTD MOSAIC CO/THE AIR PRODUCTS & CHEMICALS INC AIR LIQUIDE SA WACKER CHEMIE AG SHIN-ETSU CHEMICAL CO LTD KURARAY CO LTD SYNGENTA AG-REG CRODA INTERNATIONAL PLC FMC CORP EMS-CHEMIE HOLDING AG-REG LONZA GROUP AG-REG ALBEMARLE CORP MEXICHEM SAB DE CV-* SYMRISE AG ROCKWOOD HOLDINGS INC GIVAUDAN-REG LG CHEM LTD CHEVRON CORP INTL FLAVORS & FRAGRANCES EASTMAN CHEMICAL CO FORMOSA PLASTICS CORP NEWMARKET CORP AIRGAS INC REPSOL SA BASF SE RELIANCE INDUSTRIES LTD SGL CARBON SE JSR CORP SOLVAY SA WR GRACE & CO ARKEMA YARA INTERNATIONAL ASA AGRIUM INC TAIYO NIPPON SANSO CORP 15% FORMOSA CHEMICALS & FIBRE DU PONT (E.I.) DE NEMOURS PPG INDUSTRIES INC AKZO NOBEL VALSPAR CORP VALHI INC RPM INTERNATIONAL INC SIKA AG-BR WESTLAKE CHEMICAL CORP ASAHI KASEI CORP CABOT CORP SCOTTS MIRACLE-GRO CO KEMIRA OYJ CYTEC INDUSTRIES INC DOW CHEMICAL CO/THE EMPRESAS COPEC SA COOKSON GROUP PLC AVERY DENNISON CORP SHERWIN-WILLIAMS CO/THE KANEKA CORP DIC CORP MITSUBISHI CHEMICAL HOLDINGS HUNTSMAN CORP YULE CATTO & COMPANY PLC 10% SUMITOMO CHEMICAL CO LTD TESSENDERLO CHEMIE FERRO CORP GEORGIA GULF CORP RECTICEL MITSUI CHEMICALS INC POLSKI KONCERN NAFTOWY ORLEN POLYONE CORPORATION JOHNSON MATTHEY PLC ULTRAPAR PARTICIPACOES SA SCHULMAN (A.) INC 5% LA SEDA DE BARCELONA TISZA CHEMICAL GROUP PLC SAUDI IND INVESTMENT GROUP BRASKEM SA-PREF A 0% 0.00% -20% -10% 0% 10% 20% 30% 40% 50% 60% Source : Bloomberg, Oliver Wyman proprietary analysis Sales Revenue CAGR ( ) 12

14 Section 3 How industry players are exploiting organizational levers 13

15 THE DOW CHEMICAL COMPANY COMPANY AT A GLANCE Sales 2011: $60 billion 52,000 people worldwide 197 sites Worldwide presence in 36 countries Revenue CAGR ( ): ~15%. KEY ORGANIZATIONAL ATTRIBUTES STRATEGY Target to triple cash flows between 2012 (1.25B$) and 2015 (2-3B$) EBITDA growth to come from margin growth, ethylene cycle and innovation VALUES Sustainability is the centerpiece of DOW s product development and partnerships around the world TALENT & REWARDS Hire and reward systems changed to foster innovation ACQUISITIONS Strong use of joint ventures in Middle East and Asia KEY ORGANIZATIONAL ATTRIBUTES (con t) ORGANIZATION Move to a Global Business Unit model & Empower GBU Presidents GBU grouped by customer segments / business models with oversight from EC members One president in each key regional area Dow s Corporate Centre will be responsible for meeting GBU needs Creation of a vice president of Strategic Development and Planning position. INNOVATION Focusing on unique, innovative, high-margin products (i.e. solar shingles) Dow Commits $25 Million per year to advance research in leading universities Leveraged innovation capabilities to improve operational and overhead efficiencies TRANSFORMATION Adaptation of the organization every 2 to 3 years Reduce costs, to be more responsive on capturing opportunities Turn resources toward the customers and markets Less structure at the top of the Company with more deployment and implementation in the market Become a more agile, flexible and customer-focused company Support its global strategy: strong Investments in the Middle East Source : Public information, annual report 14

16 BASF COMPANY AT A GLANCE Sales 2011: $73.5 billion 111,000 people worldwide 370 production sites Worldwide presence in 80 countries Revenue CAGR ( ): ~20% KEY ORGANIZATIONAL ATTRIBUTES PURPOSE We create chemistry for a sustainable future STRATEGY One is greater than the sum of the parts: we add value as one company Long term growth prevails on short term results Move from commodities to specialties to functionalities ACQUISITONS Acquisition to support key capabilities (i.e. Becker to bolster crop protection), innovation driven, reducing cyclicality, strict financial criteria (ROI > 8%) 15 B$ of acquisitions and 10 B$ of divestments over the last 10 years KEY ORGANIZATIONAL ATTRIBUTES (con t) ORGANIZATION 5 business segments with 14 divisions 70 Global & Regional BUs Division bears operational accountability Regional division ensures financial reporting and optimize infrastructure Executive team double hatted on regional and functional role TALENT Competencies adapted by business and customer interaction model Best team strategy: excellent people, excellent place to work, and excellent leaders INNOVATION AND R&D Global technology platforms combined with decentralized development units VALUES Creative, Open, Responsible, Entrepreneurial TRANSFORMATION Latest update of the organization structure in November 2012 Realignment of product groups in Chemicals segment to enhance operational and technology excellence New division performance materials in the functional materials & solutions Source : Public information, annual report 15

17 BRASKEM COMPANY AT A GLANCE Sales 2011: $23.8 billion 7,600 people worldwide 36 industrial units Worldwide presence in 60 countries. Revenue CAGR ( ): ~55% KEY ORGANIZATIONAL ATTRIBUTES PURPOSE / VISION Be the world leader in sustainable chemistry, innovating to better serve people STRATEGY Maximizing growth while improving efficiency Provide high qualified service based on the premise of responsible and active operations in line with sustainable development Industrial base in Latin America to enjoy access to raw materials and competitive conditions ACQUISITONS Acquisition of Quattor to increase the scale and diversify feedstock Acquisition of Sunoco Chemicals to increase US footprint Acquisition of Dow poly propylene footprint in US and Germany Currently capturing the synergies resulting from both integrations KEY ORGANIZATIONAL ATTRIBUTES (con t) ORGANIZATION 3 business units (Polymers, Basic Petro Chemicals, International BD) 2 technology and innovation centers EC composed of 11 members (Units and functions) TALENT CEO and former CEO were both homegrown Objective to develop entrepreneur profiles and attract international talent to support international growth INNOVATION AND R&D Focus on meeting client needs to add quality to the end products Bolstered by open innovation, working through partnerships. Numerous partnerships with research centers, scientific community and universities 12% of revenues over the last three years coming from innovations developed in the period CULTURE AND VALUES Culture based on Odebrecht s values: client satisfaction, responsible operation, confidence in people, people self development, decentralized operations, reinvestments of results, returns for stakeholders and investors TRANSFORMATION Operational excellence program in partnership with SAP, standardize business processes, simplify application map, create management platform to support growth Source : Public information, annual report 16

18 Section 4 Why participate in Oliver Wyman s study? 17

19 Why participate in Oliver Wyman s study? To understand the organizational drivers behind the variations in growth results - looking beyond the typical strategic contributors Reasons for participating The most comprehensive study in the sector on the subject High caliber of global corporations participating within your industry Privileged access to insights on the key trends to face industry challenges Customized report highlighting how your company s measures against best practices Flexible approach to optimize your involvement (a short interview or online questionnaire) Complimentary participation For more info, or to register for participation, please contact us at OT@Oliverwyman.com Cracking the Organizational Code for Growth: Feedback Report - Company X 1. Key Industry Trends A comprehensive view of key trends and their impact on the industry Perspectives on how these trends have had an impact on growth within the industry Conclusions as to what has contributed to the success of the Superstars and those companies achieving highly profitable growth 2. Customized analysis: how Company X measures up against the industry A detailed comparison of Company X against each of the identified organizational levers and best practices Comparison to peers with respect to the application of the levers and best practices and the resulting growth success 3. Key highlights and best practices A summary perspective of Company X relative to the industry and our best practices analysis 4. Backup Flat report with answers from Company X 18

20 CONFIDENTIALITY Our clients industries are extremely competitive. The confidentiality of companies' plans and data is obviously critical. will protect the confidentiality of all such client information. Similarly, management consulting is a competitive business. We view our approaches and insights as proprietary and therefore look to our clients to protect 's interests in our presentations, methodologies and analytical techniques. Under no circumstances should this material be shared with any third party without the written consent of. Copyright