Over 50 percent of participants in Simon-Kucher & Partner’s chemicals, construction and base materials annual study believe 2013 will bring a ten percent profit increase, while one-fifth predict profit losses. Yet two percent growth is considered realistic for these industries. The optimistic frontrunners want efficiency improvements - especially in sales (75 percent), personnel and logistics (70 percent). The less optimistic concentrate on costs.

Dr. Fabian Braun, partner and study co-author explains, “Optimistic, forward-thinking companies develop profit-optimising measures at market side where considerable improvement potential exists; cost cuts don’t offer similar opportunities.” Extending the product and service portfolio and penetrating new markets can also drive profits.

Successful companies reinvest profits

Over half the respondents plan to invest significant profits in research and development; superior products are essential to long-term competitiveness. Dr. Lars Olbrich, study co-author and consultant states, “Companies should spotlight changing customer needs regarding performance requirements, quality and security”.

Efficiency boosting projects top 33 percent of the companies’ lists - with sales projects in the lead. Olbrich adds, “Sales is a powerful lever when successfully utilised. An integrated approach covering structures, processes and monitoring is essential.”

Prioritise price and R&D

To service new market and customer segments, respondents plan to increase production throughout 2013. Those with profit increase expectations concentrate less on procurement and administrative costs (49 and 33 percent) than those who anticipate decreasing profits (59 and 43 percent respectively). Managers with a more positive outlook plan more frequent price increases (54 percent), investing more in personnel development (53 percent) and R&D (58 percent). Cost-oriented companies work less sustainably, investing less in employees (28 percent) and innovations (46 percent).

Sebastian Strasmann, partner in Simon-Kucher’s UK office comments, “We don’t recommend boosting volume at any cost; growth should be targeted and focus on value for higher, stable prices.”

Reaching profit targets

To achieve profit targets, Simon-Kucher recommends making action plans analysing the demands of customers, sales and the competitive environment and pinpointing the weaknesses of products, pricing and sales. This teaches companies where to create programmes to succeed.

Braun comments, “Increasing raw material costs must be passed on to customers. Companies must also defend and maintain prices, thus avoiding price wars, which only hurt the industry.”

Full release here.