India and China are the top two growth markets for chemical industry, according to a recent study by consulting firm KPMG.
“India remains a key consumption market for global chemical players as demonstrated by recent expansions announced. We are also witnessing increasing demand for specialty chemicals, especially around end user industries like pharmaceutical, cosmetics, and food,” Vikram Hosangady, head (transaction services), KPMG in India, said in a statement.
The survey also pointed out that strategic acquisitions and product development would be the key growth drivers for chemical companies in the coming years. Chemical companies had said that the significant cash on balance sheets would be used in acquisitions and product development to tackle increasing input costs and competition, according to the study.
The KPMG survey, which was conducted in the US, Europe and Asia Pacific with 156 senior level executives in the chemical industry, had indicated that about 72% of the companies surveyed have significant cash on their balance sheet, while about 51% had said that their cash position have improved from the previous year, according to the study.
“Despite economic headwinds, the chemicals sector has experienced some positive momentum in the past year. The improved cash positions at many of these companies will allow them to be more aggressive to drive growth and innovation – both organically and inorganically,” Mike Shannon, Global leader of KPMG’s Chemicals and Performance Technologies practice, said in a statement.
The study also mentioned that about 63% of the companies surveyed had indicated increase in capital expenditure over the next year. Priority investment areas include new products or services (35%), and the acquisition of a business (33%), the survey added.
Over the next two years, the companies intend to deploy their cash in geographies like China, the US and Europe.
According to the KPMG study, companies are hopeful of better revenue this year, but executives are less optimistic about hiring in the chemical industry globally. However, companies in the Asia Pacific region are bullish on hiring, as 77% of the respondents indicated possibility of increase in headcount over the next one year.