The AM strategy for second quarter appears to be varied and nuanced across sectors owing varying growth outlooks. The key discussion points are illustrated below:
1. Developments in end markets — trends in key customer segments
The forecast indicates that decrease in overall revenues for multiple companies is going to continue in 2H19 owing to the weakness in key customer segments, such as global automotive manufacturing. The electronics manufacturing activity in China and South Korea, and US residential construction are some of the end markets experiencing this period of low growth. But, government spending on defense in the US and Europe will lead to an increased demand for aerospace and defense (A&D) products and services. The extraction and refining activity by oil and gas, and mining customers is also set to rise, increasing demand for both equipment and chemicals.
2. Critical projects — key project updates crucial for company strategy
As companies acquire new business, timely updates regarding production and milestones relating to key projects will be crucial to forming a successful company strategy. To this end, most of the chemical companies are found investing in efficiency measures ranging from plant upgrades and turnarounds to new enterprise resource planning (ERP) systems.
3. Geographic developments — growth across regions
In China, demand remains high in sectors such as construction, infrastructure and defense along with economic stimulus efforts and projections for consumer holiday spending. North America’s promise of growth is coming primarily from A&D companies, such as defense spending. Growth in industrial and construction markets appears mixed, though an interest-rate reduction may bring greater spending in 2H19. Aside from the currency headwinds, Latin America, particularly Brazil and Mexico, sports stronger signs of growth. But, drier weather conditions and shipping hazards are adding to the challenges faced by chemical companies in Western Europe.
4. Innovation, and new product and service launches — research takes center stage
Digital technologies are increasing both efficiency and safety in manufacturing processes for chemical and IP companies, while lowering operating costs. IP companies are continuing to increase R&D spending to support a pipeline of innovative offerings. A&D is keen on R&D too with the support of growing government defense budgets. Partnerships continue to provide peers with opportunities to commercialize new technologies.
5. Working capital and cash flow management — changes in the outlook
A strong prioritization of working capital discipline, supported by productivity and cost-control programs, is contributing to an improved cash flow system. Improved receivable collection is a growing priority, especially for A&D companies.