What Investors In Chemical Manufacturer Really Want To See Is Better Roic

By Author: ada red
Total Articles: 85
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How should the management team of chemical manufacturers view the coronavirus disease in 2019 and other challenges in 2020?

The chemical industry has delivered about 7% of TRS so far this year and has fully recovered from its low in March 2020. At this point, it is important to take a fine-grained view at the sub industry level. The overall growth in demand for chemicals has weakened, but some applications, such as biopesticides, are growing at record rates. In addition, we cannot ignore the impact of capital structure on TRS during major recessions: in our data set, the TRS of companies with the highest debt to equity ratio declined the most due to the magnifying nature of debt to TRS and liquidity concerns.

As economies begin to reopen from the cowid-19 pandemic, management teams should focus on some insights from this and previous crises. First, they must take appropriate actions to ensure the safety of employees, suppliers, suppliers and other stakeholders. Second, they should stress test their business continuity plans. Third, they should prepare scenarios to understand how performance may unfold and what ...
... actions are required for each scenario. Fourth, companies with relatively strong cash position may take advantage of the crisis to seize the opportunity: our research shows that companies that showed flexibility in the global financial crisis from 2009 to 2011 took bold and decisive actions to strengthen the strategy and improve the functional performance.

Our in-depth research on the performance drivers of capital market shows once again that strategic actions must improve the fundamentals of enterprises in order to be recognized by investors. Therefore, in order to create value, chemical manufacturer should return to the basic indicators - ROIC and revenue growth - because other common indicators do not provide real guidance. For example, higher multiples don't really indicate that a company has created value: they just indicate the value investors want it to create. What investors in chemical manufacturers really want to see is a better ROIC. They will only focus on growth when ROIC is at a high level. For example, they don't care at all about rebalancing their portfolios to emphasize expertise unless this strategy improves ROIC and growth. This is not only a theoretical lesson, but also a lesson from our recent research.