In this report, S&P Global Ratings ranks its rated global chemical companies from strongest to weakest. We rank companies by the rating, outlook, stand-alone credit profile (SACP), business and financial risk profile, and liquidity assessment. Investment-grade companies are ranked by business risk profile, then financial risk profile. Speculative-grade companies are ordered by financial risk profile, then business risk profile. Companies are then listed in alphabetical order, if not distinguished by these factors.

In line with our corporate rating methodology, the final rating may differ from the SACP, where government, group, or rating above the sovereign considerations apply. Where the SACP differs from the anchor, as it does for more than a quarter of the ratings, we apply one or more modifiers, which may include that for liquidity. We note the anchor and active modifiers of each company for informational purposes only. For our more detailed analysis, please refer to the company-specific pages on RatingsDirect via the hyperlinks below.

As shown in the charts and comments at the end of this report, most of our business risk assessments are closely correlated with the corresponding competitive positions. Where they diverge, it is usually because we consider country risk higher, and this constrains the competitive position. An explicit rating factor for about 16% of the companies is government or group ownership or sovereign rating.

For our sector outlook and analysis, please refer the Related Research section at the end of this article.

Table 1

The table and charts in this publication provide an overview of the 158 entities we rate in the chemical industry. We rate 69 entities as investment-grade ('BBB-' and above) and 89 entities as speculative-grade ('BB+' and below).

About 56% of chemical companies carry ratings below 'BBB-'. Financial sponsors own about 48% of these companies, and they carry a comparatively higher financial risk.

Chart 1

About 68% of rating outlooks are stable despite the challenging market environment reflecting much higher input cost and still higher energy prices. Margin resilience, quality of earnings, and financial policy support adequate rating headroom. While 25% of rating outlooks are negative, reflecting slower-than-expected economic recovery and a significant drop in consumer confidence especially in the second half of 2023 amid persistently high inflation which led to subdued demand.

Chart 2

Our business risk profile assessments typically mirror our view of competitive positions in this sector (see chart 3). Where they diverge, it is usually because we consider country risk higher, and this constrains the business risk profile.

Chart 3

The most common financial risk profile assessments in this sector are significant and highly leveraged (see chart 4). About 67% of the issuers with significant assessments have relatively high business risk assessments of satisfactory or above, and about 50% of them carry an investment-grade rating.

The highly leveraged assessments typically reflect companies with stretched balance sheets and sponsor-backed holding company loans. In an economic crisis, companies with stretched balance sheets are the most vulnerable. About 93% of companies with a highly leveraged assessment are rated B+ or lower

Chart 4

Roughly 27% of the ratings incorporate one or more modifiers. Often, this is the comparative rating analysis that we use for credit considerations that we have not already factored into the ratings. In the remaining cases our assessment of a company's financial policy refines the view of a company's risks beyond the conclusions arising from the standard assumptions in the cash flow/leverage assessment. This could, for example, capture the risks related to a company's appetite for large-scale debt-financed merger and acquisition, or shareholder distributions that cannot be confidently predicted regarding amount and timing.

We consider most of our rated chemical issuers to have liquidity that is adequate or better (see chart 5). This reflects the sector's good access to debt markets. The amount of cash that chemical companies maintain, combined with their cash generation and liquidity resources, will typically cover the uses of cash to which they have committed over the next 12 months by 1.2x or more.

Chart 5

The ratings and scores in this document are as of Jan. 29, 2024.

Related Criteria

• Group Rating Methodology , July 1, 2019
• Rating Government-Related Entities: Methodology And Assumptions, March 25, 2015
• Corporate Methodology, Jan. 7, 2024
• Corporate Methodology: Ratios And Adjustments, April 1, 2019

Related Research

• Industry Credit Outlook 2024: Chemicals, Jan. 9, 2024
• Financial And Refinancing Risks Run High For Low Speculative-Grade U.S. Chemical Producers, Oct. 31, 2023
• Credit FAQ: Europe's Chemical Sector Feels The Chill In A Cooling Economy, Sept. 13, 2023
• Sector Review: Recovery Won't Be Quick For Asia Chemicals, July 20, 2023
• Industry Top Trends Update: Chemicals EMEA, July 18, 2023
• Industry Top Trends Update: Chemicals North America, July 18, 2023
• Industry Top Trends Update Asia-Pacific: Chemicals, July 18, 2023