Market Monitor - Chemicals - Belgium 2016

• Payments take 30 days on average
• Growth expected to continue in 2016
• Weakening competitiveness due to high labour costs and environmental standards

The Belgian chemicals and pharmaceuticals industry is of major importance for the Belgian economy. The sector accounts for 20% of total manufacturing employment and, thanks to high productivity, for about 30% of the value added of the entire Belgian manufacturing industry. More than 75% of the production is exported, while, in international comparison, the Belgian chemicals sector benefits from a very high degree of specialisation. Chemicals account for more than 30% of Belgian exports. The sector includes a wide range of segments, from basic organic and inorganic products to pharmaceuticals, biotechnology, products for agriculture, paints, glues, detergents, cosmetics, rubber and plastics processing and many other specialty products such as chemicals for the photography industry.

In 2015, the chemicals sector continued its good performance seen in 2014. Turnover increased to almost EUR 65 billion, while investments in research and development amounted to EUR 3.6 billion. The 2016 outlook remains positive, with turnover forecast to grow 1.5% and stable profit margins expected.

Payments in the Belgian chemicals sector take 30 days on average. The number of payment delays is low, and expected to remain so in 2016. Insolvencies are expected to remain stable, given the already low number registered in the chemicals sector.

However, despite its structural resilience, the Belgian chemicals sector also has some weaknesses: competitiveness is weakening due to labour costs being among the highest in Europe and competition from China has increased. At the same time, Belgian chemicals companies compete with businesses from countries where environmental regulations are less strict and/or energy prices are lower. Further investments and innovations are crucial for the Belgian chemicals sector to preserve its international competitiveness.

That said, given the industry´s continued robust performance, financial health and low insolvency rate, our underwriting stance remains relaxed for the time being. Buyers are reviewed at least once a year on the basis of new accounts or when new information is received. The latest balance sheet is always requested and we also seek to obtain interim results from more sensitive buyers.