Strategies for a post COVID-19 world – The chemical industry

As a key industrial link between a volatile oil and gas market and changing consumer needs, the chemical industry has been challenged by the COVID-19 pandemic. Deemed essential critical infrastructure by the Department of Homeland Security, the chemical industry continues to maintain relatively robust operational supply chains for critical items such as filters, masks, rubber gloves, cleaning supplies, personal care products, and pharmaceutical intermediates.
Initially, most chemical companies were rightly focused on the safety of their employees and security of their operational supply chains. Most have worked hard to improve liquidity, manage working capital, limit discretionary spending, and minimize stock buybacks to secure their short-term financial situation. Now management faces tough decisions around: fundamental changes to the manufacturing footprint; raw material sourcing; regional versus global supply chains; repositioning the portfolio on a regional and/or end market basis; and whether to pursue opportunistic M&A.
Based on our analysis of over 70 publicly traded chemical companies, we have identified six common characteristics of leading performers through the five-year period to the end of 2019. We have found that these same characteristics have also resulted in greater resiliency over the past four months. In this paper we discuss the implications of these findings for management as we navigate through the crisis and transition to a new post-COVID-19 world.