Partner Peter Hall comments on the Valence Global Chemical Indices

15 June 2012

Fertilizer Industry Performs Best, Biofuels Worst among Chemical Sub-Sectors

The fertilizer industry has been the best share performer over the past five years, and biofuels industry shares performed worst during the same period of time according to the Valence Global Chemicals Indices, a unique benchmark and share performance tool for the diversified global chemicals industries.

The Valence Group is a specialist investment bank offering M&A advisory services exclusively to companies and investors in the chemicals, materials and related sectors. The tool breaks down the overall chemicals sector into more than 30 sub-sectors in order to track their individual share performance. Chemical sub-sectors’ stock performance can now be measured relative to each other, as well as to broader share price indices. The Valence Global Chemical Index (VGCI) is an aggregate of nearly 250 public chemical and materials companies from all geographies. Companies with limited stock liquidity or equity value below ca. $100m have generally been excluded.

Sub-sector developments can be extracted and analyzed in many ways. The fertilizer industry, for example, has been the best performer over the past five years, reflective of the increasing need for food and rising commodity prices globally. In contrast, the worst performer has been the biofuels industry, due in part to skepticism over government resolve to support alternative energy sources and the on-going debate over diverting resources (corn etc.) from the food chain to biofuels production.

The VGCIs hence facilitate comparison of specific companies to the performance of a directly relevant peer group, rather than a less comparable broad ‘chemicals’ index. Importantly, the various indices can also provide useful leading economic indicators, as chemicals are often key elements of many production processes, applied at a very early stage in the manufacturing and supply chain.

Commenting on the indices, Peter Hall, Partner at Valence said “Chemicals sub-sector indices with this level of granularity have not previously existed. They provide highly accessible insights into the performance of this complex industry at a much more detailed level than just ‘commodity’ and ‘specialty’ – increasingly meaningless phrases.

They also provide a great leading view on what is happening on the manufacturing floors around the world and are a great bellwether for the economy as a whole.”