Recent announcements from two of the UK's leading chemicals companies, Croda and Elementis, make for very positive reading.
It’s no surprise that the key messages to come out of both businesses are familiar – a focus on R&D, new product development and selective M&A to acquire specialist technology/IP. These are familiar themes across the spectrum of UK chemicals companies, regardless of size. However, whilst they may be familiar, successfully implementing a strategy based on these principles is far more difficult.
From Croda, the messaging is very much more of the same. The business has maintained a relatively consistent strategy in recent years, benefitting from a focus on providing specialist and differentiated products into growing end markets. This strategy has not only resulted in strong top line growth, it has also consistently been reflected in the share price. Continued growth across its key verticals of personal care, life sciences and performance technologies, combined with a product range bolstered by both acquired and organically created new technologies, puts the business in a good place for the future.
Elementis started 2017 in a weaker position, with certain disadvantaged assets and the lack of a clear strategic vision. The recent “reignite growth” strategy has led the business to focus on higher growth end markets and rationalise its product offering to reflect this. Successful disposals of the US colourants and surfactants businesses, combined with the acquisition of SummitReheis (a specialist in AP actives) have been positive stepping stones in working towards this goal. Whilst the less attractive Chromium division will likely remain a cash cow, this cash can be put to good use in the Specialties division, which is now well placed to capitalise upon growth in its end markets. A core focus on coatings, but more importantly on personal care (where Croda has had significant success), will position the business well for 2018.
As both Elementis and Croda continue to seek new technologies to enhance growth, it will be interesting to see how M&A features in their strategies during 2018.
We have entered 2018 with momentum and a platform on which to deliver long-term growth. In the year ahead, we will continue to invest in fast growth technologies, both organically and by acquisition; in R&D, through our successful Open Innovation and Smart Partnering programmes; in manufacturing, through improved operating capabilities; and in our people