FRANKFURT/AMSTERDAM European chemical groups warned of slowing demand in the construction industry on Thursday, compounding problems with rising raw materials costs as they reported third-quarter results on Thursday.
Global chemical industry leader BASF (BASFn.DE) reported higher-than-expected quarterly earnings, but warned that growth was slowing as customers run down inventories.
"BASF's customers planned more cautiously, reduced inventories, and partially delayed orders in expectation of possible falling prices," it said in a statement.
The chemical industry's dependence on highly cyclical investment goods makers, car manufacturers and the construction industry makes it especially vulnerable to a downturn.
In addition, the overhead costs tied to its massive plants drag earnings lower when demand and capacity usage drop, although a dip in the price of oil since May has eased some cost inflation for some petrochemical raw materials.
"Europe looks to be the worst of all. We have been fairly downbeat on growth prospects, if we can even talk about growth at all," said ING analyst Jan Hein de Vroe. "They all stick to their guidance, but these were never really challenging."
He said underlying results for the sector are worse than the headline consensus estimates and the companies are currently relying on cost cuts to protect earnings.
Belgium's Solvay (SOLB.BR), which bought French rival Rhodia in September, said demand for vinyls and special chemicals has slowed, but stuck to its full-year outlook for improved core profit at its chemicals and plastic units.
Solvay said the slowdown in global demand for PVC, used in construction "should be emphasized." The impact was stronger in Europe, it added.
French specialty chemicals group Rhodia reported quarterly REBITDA of 273 million euros, up 16 percent from the year-ago period.
Germany's Bayer (BAYGn.DE) said its MaterialScience unit, which makes the transparent plastic for the panoramic roof in Daimler's (DAIGn.DE) Mercedes SLK convertible, would have adjusted full-year EBITDA of 1.3 billion euros.
The group had previously predicted the unit would achieve a gain on last year's level of 1.36 billion and cited higher raw material and energy costs for the revised outlook on Thursday.
Belgian chemicals and plastics group Tessenderlo (TESB.BR) said its plastic pipe system and profiles unit suffered a decline in profits, hit by low demand in construction.
Even though construction and automobile markets remain weak, U.S. chemical maker DuPont (DD.N) reported higher-than-expected quarterly profit on Tuesday, boosted by price hikes for products such as titanium dioxide, a white pigment known as Ti02 that is used to make paint.
Dutch group AkzoNobel (AKZO.AS), the world's largest paints company, last week abandoned its 2011 profit outlook citing slowing economic growth and rising cost, such as Ti02.
(Reporting By Aaron Gray-Block)