Market Monitor Chemicals Czech Republic 2017

The robust economic growth has led to rising demand for petrochemical products, while the rubber and plastics are benefitting from automotive demand.

The Czech chemicals industry is recording increasing demand, but due to decreased producers prices nominal revenues and margins have decreased. The currently robust economic performance (Czech GDP is forecast to increase 3% in 2017) has led to rising demand for petrochemical products, while the rubber and plastics subsectors are benefitting from robust automotive industry demand. Performance of agribusiness-related chemicals segments and pharmaceuticals is stable.

Financing requirements and gearing are both high in the industry. Companies producing chemicals are forced to carry high fixed assets, which are quite often financed with bank loans. While the currently low interest rates provide some relief, the high indebtedness of some businesses limits their ability to invest
Payment duration in the chemicals sector ranges between 30 days and 60 days. In some wholesale segments the payment terms are shorter, starting at 14 days.

Payment behaviour is generally stable, and non-payment notifications are not expected to increase in the coming months. Chemicals sector business insolvencies are rather low compared to other industries. No major change is expected in the coming six months.

Our underwriting stance is open for the plastics and the fine and speciality chemicals segments due to the benign demand situation. However, we are more cautious when underwriting the petrochemicals segment, which benefits from solid demand from transportation, but is also affected by high competition, lower revenues and pressure on net margins (especially in the oil/fuel distribution segment).

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