The improving economy is boding well for chemical industry mergers and acquisitions (M&A), Chemical & Engineering News reports. The number of announced deals priced at more than $50 million in the first half of 2010 was up 45% compared with the same period in 2009, according to a recent survey by PricewaterhouseCoopers (PwC), an audit, tax, and advisory services firm.

The combined value of the 45 agreements announced was $28 billion, compared with $18 billion for 31 deals in the first half of 2009. Among the major deals announced this year are BASF’s $3.8 billion purchase of Cognis and a more than $7 billion takeover attempt of Airgas by Air Products & Chemicals.

The number of large deals actually completed in the first six months of 2010 was 32, which was greater than all those finalized in 2009, reports investment banking firm Young & Partners.

In the first half of 2010, the value of consummated deals totaled $29 billion, compared with $25 billion for all of 2009, Young adds. The 2009 figure was dominated by Dow Chemical’s $15.5 billion purchase of Rohm and Haas.

Strategic industry investors are outpacing financial investors in deal-making, PwC analysts report. Improving financial markets may be freeing up cash for financial investors, but many companies that have come through the downturn with strong balance sheets view mergers and acquisitions as a means to expand their businesses.

Most of the first-half growth was in the first quarter. The total value of $50 million-plus deals was $21 billion in the first three months of the year, PwC reports, when five deals of at least $1 billion were announced. In the second quarter, with just two megadeals, the total fell to $7 billion, which is still in line with 2009 levels.

PwC expects the rest of the year to be even stronger. On the basis of unannounced deals still in the pipeline, Tracey Stover, the firm’s global chemicals leader, anticipates “both the average deal size and total number of deals to increase in the second half of 2010.”

Experts Predict Boom in Bio-Based Resins

Bioplastics experts believe that eventually the majority of bio-based resins will be conventional resins, such as polyethylene and polypropylene, made from renewable resources rather than from petroleum, PlasticsNews reports.

Braskem SA, for example, is expected to begin making sugar-cane based ethylene that will be turned into polyethylene at its plant in Triunfo Brazil, starting in August, with annual output projected to be 400 million pounds. That will be the first plant to produce traditional plastics resins on an industrial scale using a 100 percent renewable feedstock.

Cincinnati-based Procter & Gamble Co. has already announced plans to use Braskem’s sugarcane-derived PE in selected packaging on its Pantene Pro-V, Covergirl and Max Factor products.

Right now, India Glycols Ltd. is making bio-derived ethylene glycol for incorporation into PET, both Cargill and Dow have some soy-based polyurethanes, and a number of companies, including Myriant Technologies LLC in Quincy, Mass., and DNP Green Technology Inc. in Montreal are making succinic acid.

Myriant is scheduled to begin building a $50 million bio-based succinic acid facility in Lake Providence, La., in September.

Bioamber, a joint venture between DNP Green and Agro-Industry Research & Development in France is building the first biobased succinic acid plant in Pomacle, France. In addition, DNP Green and GreenField Ethanol, using a license from BioAmber, plan to build a $50 million succinic acid de-icer refinery in Hensell, Ont.

Growth rates for bioplastics are projected at 15-20 percent for 2011, and long-range growth forecasts range anywhere from 12-20 percent to 30-40 percent annually, depending on how quickly new bio-resins and their markets develop.

COMPANY NEWS

BASF Q2 Earnings Up

Following the upturn in business performance in the first three months of 2010, BASF continued to gain momentum in the second quarter. Sales rose 30% compared with the previous year to €16.2 billion. Second-quarter income from operations (EBIT) before special items rose 94% to €2.2 billion.

Sales in the first six months increased 28% to €31.7 billion and EBIT before special items rose 96% to €4.2 billion. Both sales and EBIT before special items were also above the good level of the first quarter of 2010. These developments were especially due to very high demand in the chemicals businesses, that is, in the Chemicals, Plastics, Functional Solutions and Performance Products segments. This was augmented by inventory restocking along the value chain.

Dr. Jürgen Hambrecht, Chairman of the Board of Executive Directors said: “We expect our sales to grow in 2010 and outpace global chemical production. We anticipate that EBIT before special items will improve considerably and we will again earn a premium on our cost of capital. According to our dividend policy, we expect a higher dividend for 2010.”

BASF’s Chairman expects that economic recovery will continue at a moderate pace in the second half of 2010. The necessary consolidation of government budgets around the world will dampen demand, as will the winding down of national stimulus programs. Other risks are primarily associated with volatile raw materials markets, excess capacities, growing geopolitical tensions and protectionism.

All segments help to boost earnings in the second quarter:

· Chemicals segment grew by 64% compared with the second quarter of 2009. EBIT before special items was €429 million higher than the previous year’s figure (plus 166%). Despite the negative impact of the scheduled maintenance shutdown of the Nanjing Verbund site, earnings were up on first-quarter 2010 figures.

· Sales in the Plastics segment were 48% higher in the second quarter compared with the weak level of the previous year. EBIT increased by more than €211 million (plus 153%).

· The Performance Products segment was able to significantly increase second-quarter sales by 29% year-on-year thanks to higher volumes and prices. EBIT before special items rose by €391 million (plus 489%). The strong earnings growth is attributable to the realization of synergies from the Ciba integration, the implementation of our business models and the favorable business environment.

· Sales in the Functional Solutions segment rose sharply in all regions in the second quarter, mainly due to stronger demand from the automotive industry, and increased 40% compared with the second quarter of 2009. EBIT before special items was up €117 million compared with the previous year (plus 244%).

· Second-quarter 2010 sales in Agricultural Solutions were up 3% year-on-year. This was a result of favorable exchange rates and stronger volume sales in South America and Asia. EBIT before special items was €47 million below the previous year’s record high (minus 13%). This was due to lower prices and targeted increases in selling expenses and expenditures for research and development.

· Sales in the Oil & Gas segment were 3% below the level for the second quarter of 2009. EBIT before special items rose by €9 million in the second quarter (plus 2%) due to volume increases in natural gas trading. Sales in Exploration & Production declined mainly because of OPEC production restrictions in Libya.

· The segment Other posted significant sales growth of 32% in the second quarter of 2010. This was largely due to higher prices in the Styrenics business. Earnings improved in the Styrenics business. Provisions for the BASF Option Program reduced earnings because BASF shares significantly outperformed the benchmark index MSCI World Chemicals in the second quarter.

· Sales and earnings increased in all regions

Eastman Doubles Profit, Raises Full-Year Earnings Outlook

Eastman Chemical’s second-quarter net earnings more than doubled, to $148 million, compared with the same period last year. Excluding $3 million in restructuring charges, earnings were $2.05/share, compared with 86 cts/share in the year-ago quarter. Sales rose 38%, to $1.7 billion, on higher volumes and selling prices. All segments saw strong sales increases for the second quarter.

Eastman’s coatings, adhesives, specialty polymers and inks (CASPI) division reported operating earnings up 96%, to $94 million, due to higher sales volume and higher capacity utilization which led to lower unit costs and the favorable shift in product mix.

Sales in second quarter 2010 for the fibers division increased by 4 percent due to higher sales volume, particularly for acetate yarn product lines, and operating earnings increased to a quarterly record of $83 million.

The Performance Chemicals and Intermediates division saw sales revenue increased by 72 percent due primarily to higher sales volume and higher selling prices.

Performance Polymers division sales revenue increased by 20 percent, with operating earnings in second quarter 2010 similar to second quarter 2009

Specialty Plastics sales revenue increased by 44 percent, attributed to improved customer demand due to the rebound in the global economy and the positive impact of growth initiatives for core copolyesters and Eastman Tritan™ copolyester product lines. Operating earnings increased to $21 million in second quarter 2010 compared with $7 million excluding restructuring charges, net, in second quarter 2009.

Commenting on the outlook for third quarter and full year 2010, Jim Rogers, president and CEO said: "Our strong first half results give us positive momentum heading into the second half of the year. We expect to continue to benefit from the combination of the economic recovery and growth initiatives we are implementing. We also expect our volumes will reflect typical seasonal declines in the second half of the year and that raw material and energy costs will be less volatile. Taking these factors into consideration, we expect third quarter 2010 earnings per share to be between $1.65 and $1.75 per share. In addition, we expect full-year 2010 earnings per share to be between $6.20 and $6.40." Any charges related to restructuring actions are excluded from earnings per share projections.

Celanese Corporation Reports Strong Second Quarter Results; Raises Full Year Outlook

Celanese Corporation (NYSE: CE) recently reported second quarter 2010 net sales of $1,517 million, a 22 percent increase from the same period last year. The increase was primarily driven by significantly higher volumes across its business lines as the global economic recovery continued in the period. Net sales in the quarter also benefited from higher pricing in the company’s Acetyl Intermediates and Industrial Specialties businesses.

Operating profit was $156 million compared with $89 million in the prior year period as operating margins expanded versus the prior year. Net earnings were $160 million compared with $109 million in the same period last year. Equity in net earnings and dividend income from the company’s strategic affiliates were $117 million, a $29 million increase versus the prior year period.

Operating EBITDA in the second quarter of 2010 was $332 million compared with $248 million in the prior year period.

Wacker Chemie Reports Higher Sales and Earnings in 2Q

Wacker Chemie (Munich) recently reported an 81% rise in second quarter Ebitda to €309 million ($403.8 million) compared with the year-earlier period, on 30% higher sales of €1.2 billion. Group Sales in the second quarter of 2010 rose 30 percent year over year to €1.20 billion. It expects full-year group sales to reach about €4.5 billion with Ebitda exceeding 2008's record level of €1.06 billion.

Huntsman Reports 2Q Earnings

Chemical maker Huntsman Corp (HUN.N) posted a higher-than-expected quarterly profit for its second quarter that ended June 30 as sales, volume and pricing jumped across its units.

Revenue was up 27 percent to $2.34 billion. Net income for the period was posted at $114 million compared with $406 million in the year-ago period.

The Woodlands, Texas based company said sales in its polyurethane business rose 34 percent and pricing increased 11 percent. Polyurethane accounts for about half of the company's profit. Huntsman also saw demand increase for its pigments business, which sells paints for cars and closely competes with DuPont.

Chief Executive Officer Peter Huntsman warned that the third quarter will be seasonally weaker than the second, but added he sees "significant long-term upside to our business earnings."

Europe, the company's largest operating area, and North America "still show relatively modest growth," Huntsman said.

Despite the strong quarter, questions remain about the company's use of cash, especially given its large debt load. Huntsman now owes $3.87 billion, well above its market cap of $2.55 billion.

Compared with the same period last year, the company's cash fell 66 percent to $773 million, with most of that drop being used to cull debt, which is down 17.4 percent.

Yet Huntsman said last week it would buy the chemical business of an India-based company for about $20 million. The company also offered more than $300 million in notes during the period.

ACQUISITIONS / EXPANSIONS

Ube to Expand Synthetic Rubber Production in Chiba, Japan

Ube Industries, Ltd. recently announced that it has decided to expand its facilities for manufacturing synthetic rubber (butadiene rubber) at the Chiba Petrochemical Factory in Ichihara City, Chiba Prefecture, Japan. The move is in response to growing demand for butadiene rubber (BR) in the Asia region including Japan and China. The expansion will add a further 15,000 tonnes of production capacity per year, increasing the plant's total production capacity for BR to 110,000 tons annually, up from 95,000 tonnes. The capital investment for the expansion is estimated at 1.4 billion yen, with the facilities scheduled to be brought online in August 2012.

The main applications for BR are for use in tires, high impact polystyrene (HIPS), and shoe soles. Demand for BR is expected to grow by almost 5% in the future, centering on the Asian market which comprises the biggest market for BR. In the tire market, many BR users centering on major tire manufacturers are moving forward with plans to increase their production capacity. Ube Industries' expansion plans will position it to capitalize on the subsequent growth in demand for BR.

Ube Industries currently maintains a global framework for BR production with plants in Japan, China and Thailand. The annual production capacity in Japan through the Chiba Petrochemical Factory currently stands at 95,000 tonnes, with a capacity of 72,000 tonnes and 50,000 tonnes respectively in Thailand and China. The total annual production capacity of 217,000 tonnes makes Ube Industries the fourth largest manufacturer of BR in the world.

Ube Industries already has plans to add a further 22,000 tonnes of annual production capacity in China, to be brought online in late 2011. In addition, the Company is presently considering plans for a second expansion phase that will add another 15,000 tonnes of annual production capacity in China, to be brought online in August 2013.

The expansion plans will enable Ube Industries to best leverage its global production framework, and further strengthen the presence in the growing Asian market while meeting the expectations of users.

Huntsman to Purchase Indian Chemicals Business

The Associated Press reports Huntsman Corp. said it has agreed to acquire the chemicals business of India's Laffans Petrochemicals Ltd. The business has annual sales of about $45 million. Huntsman expects the acquisition to be completed in the first half of 2011 but did not disclose financial terms.

Huntsman is developing its chemicals business in Asia to capitalize on the region's rapid growth. It recently announced an expansion of its polyetheramine facility in Singapore as part of the strategy. Polyetheramine is a material used in industrial applications, such as fuel additives or construction materials.

If finalized, the acquisition from Laffans will boost Huntsman's sales in India to about $260 million, or 3 percent of total sales. The Laffans business manufactures amines, which are used in some detergents, automobile waxes and some personal care products, and surfactants, primarily used in detergent and consumer products applications. Laffans Petrochemicals is based in Ankleshwar, India.

Eastman to Expand Resin Production at Facilities in The Netherlands and Texas

Eastman Chemical Company recently announced plans to expand production of hydrogenated hydrocarbon resins at both its Middelburg, The Netherlands, and Longview, Texas, facilities.

The Middelburg expansion, which is the third expansion of its Regalite™ hydrogenated hydrocarbon resins at this site since 2006, will increase current capacity by more than 20 percent. It is expected to be completed in the second half of 2011. In Texas, the company is planning a capacity increase of greater than 10 percent for its Eastotac™ hydrogenated aliphatic hydrocarbon resins. This expansion is planned for completion in early 2011.

"Around the world, demand continues to grow for Eastman’s hydrogenated hydrocarbon resins," said Brad Lich, vice president and general manager of Eastman's coatings, adhesives, specialty polymers and inks business. "These investments are a demonstration of our commitment to growing with our customers and to meeting demand in developing regions in advance of further capacity investments.”

Eastman’s hydrogenated hydrocarbon resins are used as raw materials essential in hot-melt and pressure sensitive adhesives, and as binders in nonwoven products such as disposable diapers, feminine products, and pre-saturated wipes. They are also used in a wide range of applications including plastics and rubber modification. Due to their versatility and broad compatibility, Eastman’s hydrogenated hydrocarbon resins can be formulated with a wide range of Styrenic and Polyolefinic polymers, and offer excellent color, stability, and adhesion.

"We are proud to announce these expansions in Middelburg and Texas,” said Ruud van der Eerden, business manager, hydrogenated and C9 hydrocarbon resins. “These two expansions will better allow us to serve growing markets and assure our customers that we are well positioned to reliably meet their needs now and in the future.”

Dupont Expands in East Africa

U.S. chemical major DuPont is expanding its operations in East Africa by establishing its first office in the region after operating for a decade under a proxy company.

DuPont plans to use its consultative arm—DuPont Safety Resources—to raise its market share in the region to contribute to the company’s earnings in the coming years. The activities "boost our presence in the emerging markets, and grow our consultative brand in the same line as most of the multinational clients," DuPont's regional business-development manager Derrick Sibanda said

DuPont’s will focus on offering consultation services on organisation risk and safety management, which it considers the most urgent need, after carrying out a market assessment. The firm will target manufacturing, petrochemicals, mining and agriculture sectors.

Though initially set up as a chemicals manufacturer 200 years ago, DuPont has evolved over the years, resulting in the creation of the consultative arm which advises companies on best practices on safety, capital effectiveness, asset productivity efficiency and environmental solutions.

Sibanda said many of the region’s businesses do not always comply with certified safety procedures, thus affecting their output which in the long run creates huge losses.

“After carrying out an assessment on the East African market, we identified that the biggest challenge is on safety standards in working environments,” said Mr Sibanda.

The company met with the Kenya Association of Manufacturers to explore ways in which to enter the regional market.

DuPont to Expand in Production of Materials for Lithium-Ion Car Batteries

DuPont Co. plans to expand production of a material used in electric-car batteries to challenge market leaders Polypore International Inc. of the U.S. and Asahi Kasei Corp. and TonenGeneral Sekiyu K.K. of Japan.

DuPont is building a factory to make separators for lithium-ion batteries in Chesterfield County, Virginia. The plant will be able to supply 20 percent of current demand for hybrid and electric vehicles when it opens early next year, the Wilmington, Delaware-based company said recently in a statement.

Energain separators, made from spun nanofibers, boost power 15 percent to 30 percent and increase battery life as much as 20 percent compared with competing materials, DuPont said. The global high-performance lithium-ion battery market will be worth $7 billion by 2015, DuPont said.

“We have got an invention here that looks very promising,” Thomas G. Powell, president of DuPont Protection Technologies, said in a telephone interview. “Our material is fundamentally different from any that is used elsewhere.”

DuPont, the third-largest U.S. chemical maker, made initial quantities of the separator material in Wilmington and Seoul for evaluation by battery producers and automakers. The Virginia plant will cost about $20 million to build, with additional production investments to be made as demand merits, Powell said.

The three largest producers of lithium separators -- Polypore, Asahi Kasei and TonenGeneral -- have 90 percent of the market, Polypore said in March. TonenGeneral is a unit of Exxon Mobil Corp.

Ineos Sells PVC Film Business to Bilcare

The British Group Ineos has entered into a binding agreement for the sale of its global Films business to Indian pharmaceutical packaging company Bilcare for approximately €100 million.

The deal comprises the business, assets and personnel related to Ineos’ Films operations located in North America, Europe and India.

Iain Hogan, chief executive INEOS Films, said: “The Films business is no longer core to the Ineos Group as the company focuses its attention on its large-scale petrochemicals businesses. This agreement with Bilcare will put INEOS Films assets and people at the centre of a new business with the innovation and drive necessary for it to grow and further develop, which is good for the business and its customers globally.”

“This transaction presents a unique opportunity and enhances our offer to apply our innovation led approach to a broad range of industries, currently served by Ineos Films, particularly in Europe and USA.”, adds Heinz Gaertner, newly appointed Executive Chairman of Bilcare AG, the Bilcare’s German subsidiary will buy Ineos Films.

Ineos Films produces PVC films for pharmaceutical blister packaging, printing and decoration, shrink film for sleeves, capsules, and plastic credit cards. The company employs around 1,300 people across manufacturing sites in Germany, Italy, India and North America.

The transaction is expected to be completed at the end of August, subject to necessary regulatory filings and approvals, including German Court and approvals under applicable antitrust laws and regulations.

Israeli Polyethylene Maker Palziv Opening First North American Plant

Cross-linked polyethylene foam manufacturer Palziv North America is about ready to open its first U.S. plant in Louisburg.

In an Aug. 2 news release, officials said the factory and will produce cross-linked continuous rolls and buns from PEX for packaging, automotive, construction, insulation, toys, orthopedics and other end makets.

“Palziv’s strong presence in North America and the reach of our international research and development team will enhance Palziv’s global leadership position within the thermoplastic cross-linked foam industry,” Gregory Brooker, Palziv North America president and CEO, said in the release.

A spokesperson at the plant said production is to begin in late summer, once all machinery is in place.

The company spent $7.8 million to open the facility, which also houses its North American headquarters. The 165,000-square-foot plant sits on 42 acres.

Palziv custom builds its own extruders and uses a proprietary process to make closed-cell PEX blocks and rolls. The company has a distribution center in Anna, Ohio and a plant in Coburg, Ontario, that operates as PXL Cross-Linked Foam Corp.

Palziv North America is a subsidiary of Palziv Ltd. of Kibbutz Ein HaNatziv, Israel. Palziv has PEX and synthetic rubber foam manufacturing and distribution operations in Israel and Romania in addition to its North American businesses.

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