European chemicals companies mostly posted strong quarterly results on Thursday, after volume growth continued to firm, boosting hopes for sustained sector gains in the face of economic headwinds, according to Reuters. The improved second-quarter volumes continued a trend of rising demand seen in recent months after an unprecedented downturn at the start of 2009, when recession fully set in, and added to evidence chemical makers are out of the woods. "(The development of the business cycle) has been a positive surprise. The second half will be somewhat slower, but I don't see any dark clouds in the next two quarters," Kepler Capital Markets chemical industry analyst Lutz Grueten said. The STOXX Europe 600 Chemicals index has fallen 1.2 percent since the start of this year, slightly underperforming the STOXX Europe 600 index, which is up 1.3 percent. Germany's BASF, the world's largest chemicals supplier by sales, said second-quarter earnings before interest and tax (EBIT), adjusted for one-off items, almost doubled to 2.2 billion euros ($2.9 billion), beating the average estimate of 2.03 billion euros from a Reuters poll. BASF reiterated that adjusted operating profit was set to improve significantly this year compared with the crisis-fraught 2009, when its operating margin hit an eight-year low. Belgium's Solvay, a leading maker of polyvinyl chloride (PVC) used in construction, also reported sharply improved operating profit at its chemicals and plastics units after selling its pharma unit early this year. Back in Germany, drugs, plastics and pesticides maker Bayer also saw a rebound in plastics, but its quarterly earnings fell short of market expectations because of generic competition for its two best-selling drugs. Its pesticides unit, however, suffered from unfavourable weather conditions, dampening the group's results. Swiss chemicals maker Clariant raised its full-year outlook as the industrial recovery and weaker euro drove demand for its products, helping it to swing to a net profit, despite missing consensus estimates. Clariant hit a note of caution, however, saying demand in the second half was likely to soften due to a weaker economy. With massive overhead costs, chemicals companies have widely made rigorous cost savings during the recession to support margins and are emerging leaner and meaner from the recession. Dutch AkzoNobel, the world's largest paints maker, beat estimates with its quarterly results last week as it also achieved its operating margin target 18 months ahead of schedule. ($1=.7684 Euro)
