Strategies for chemical companies management teams to confront COVID-19

Novel coronavirus pneumonia and other challenges in 2020?

So far this year, the chemical sector has delivered about 7% of the TRS and has fully recovered from its low point in March 2020 (Table 5). Here again, it is important to make a fine-grained observation of the sub industry level. Overall growth in demand for chemicals has slowed, but some uses, such as fungicides, have grown at record rates. More importantly, we cannot ignore the impact of capital structure on TRS during major recessions: in our data set, the TRS of the companies with the highest debt to equity ratio fell the most, because debt magnifies the nature of TRS and liquidity concerns.

As economies begin to reopen from the covid-19 pandemic, chemical companies management teams should focus on some insights gained from this and previous crises. First and foremost, they must take appropriate action to protect the safety of their employees, suppliers, suppliers and other stakeholders. Second, they should stress test their business continuity plans. Third, they should prepare a series of scenarios to understand how the performance might unfold and what actions are required in each case. Fourth, companies with relatively strong cash strength may take advantage of the crisis to seize opportunities: our research shows that those companies that proved to be risk resilient during the global financial crisis of 2009-11 have taken bold and decisive actions to enhance their strategies and improve their functional performance.

Our in-depth study of the driving factors of capital market performance once again shows that strategic initiatives must improve the fundamentals of enterprises in order to be recognized by investors. Therefore, in order to create value, chemical companies should return to the basic indicators - ROIC and revenue growth - because other commonly used indicators do not provide real guidance. For example, higher P / E ratios don't really indicate that a company has created value: they just indicate the value investors want the company to create. What chemical companies really want to see is a better ROIC, and only when it's at a high level, they're also focused on growth. For example, they don't care at all about rebalancing their portfolios to emphasize expertise, unless the strategy improves ROIC and growth. This is not only the lesson of theory, but also the lesson of our recent research.