Surfactants Monthly - November 2024
Surfactants Monthly
November 2024
Last week was Thanksgiving for our US readers and I’m very thankful for our 10th Asian Conference in KL November 20 - 21 was the biggest and best yet. Here’s a short video which featured 5 fascinating things I heard and saw there.
We look ahead now to the 15th (yes, that’s right) World Surfactant Conference in Jersey City, May 7th – 8th (Here https://events.icis.com/website/8544/). If you would like us to consider you for a speaking slot, please get in touch with me before close of business December 23rd.
The News
Macroeconomics:
For our macro update this month, we go to Capstone Partners Chemical Sector Update for November 2024 and to the Balmoral Advisors Chemicals & Materials Industry Update Q3, 2024. I can recommend the services of Balmoral for middle market investment banking and expertise in Chemicals and materials.
Capstone notes that the broad chemical industry has continued to face pressure on
input prices driven by ongoing geopolitical and broader economic uncertainties but has seen a quarter-over-quarter recovery in sales volumes as destocking eases off. Companies of note include Saudi Basic Industries (SASE:2010), a surfactant manufacturer (among many other things) reported an 11% rise in sales volume, which offset a 2% decrease in average selling price, according to its Q2 earnings transcript. 1
Additionally, Arkema (ENXTPA:AKE) and Eastman Chemical (NYSE:EMN) (which supplies a number of amines into the surfactant markets) noted an end to destocking and subsequent rebounds in volumes.
Capstone further reports that large surfactant (among many other things) distributor, Brenntag (XTRA:BNR) has been active in cost reduction. “In light of the performance in the first half of 2024, we will accelerate and expand our cost-out efforts and initiatives. We also continue to optimize our global site network. In 2023, we successfully closed 29 sites; and in 2024, we have closed an additional 10 sites already. Further shutdown measures are in progress or in preparation phase,” said Dr. Christian Kohlpaintner, CEO of Brenntag, in its Q2 earnings call. Since the beginning of 2024, Brenntag has announced five transactions for a total enterprise value of ~$374 million.
Chemical M&A is coming back – see below
Balmoral is very bullish on US chemicals manufacturing. They note that - In Q3’24, the US chemical industry witnessed a growth in chemical exports and domestic demand. Overall imports rose despite a decline in inorganics, agricultural chemicals, and coatings segment. Higher rise in exports relative to imports led to a continued expansion in trade surplus. Despite an expected 10% hike in capacity utilization, it remains insufficient to meet the projected demand. Over 80% of this demand is attributed to the Industrial sector, with post-COVID reshoring of manufacturing further contributing. [Great to hear].
However, when it comes to the stockmarket, Balmoral confirms again that the chemical sectors various segments lag the broad market, with only chemical distributors staying close to the S&P.
And of course these sectors continue to trade a discount in terms of multiple to the broad S&P.
By the way, ( and this is not from the Balmoral report) can someone tell me what is going on with Croda? The stock roared out of the pandemic and reached a high of 10,410p in December of 2021. Since then, it has lost two thirds of its value, closing at 3,526p on November 26th, a price it hasn't seen since January of 2017.
Some (maybe relevant) data points:
In May 2021, Croda initiated a comprehensive strategic review of its Performance Technologies and Industrial Chemicals (PTIC) businesses to determine the best ownership structure. [stock price 6,968p].
The initial announcement of the sale agreement was made on December 22, 2021, with Croda agreeing to sell the majority of its PTIC businesses to Cargill for an enterprise value of €915 million [stock price 10,010p, close to the peak]
The completion of the divestment was announced on July 1, 2022, with the final gross proceeds amounting to approximately €775 million [stock price 6,894p, already one third off of the peak]
So do we conclude from the above that the divestiture was such a bad deal, in the eyes of the market? In these sorts of situations and in the Wall Street vernacular, the company is supposed to spinoff the “crap” businesses and hold on to the specialty value add ones right? And again in Wall Street’s view, industrial is commonly held to be synonymous with crap. That was certainly the framework used to characterize Bayer’s spinoff of Lanxess and the splitting of Solvay into Syensqo (the specialty bit) and Solvay. Honestly, I’ve no idea. So I asked Perplexity about it – which is what I do in these situations. Interestingly, she / he / it [I think it’s a she. I don't know why] didn't mention the PTIC spinout at all, but listed a bunch of factors which sounded like excuses. Essentially, though it seems like the key factor was a series of big profit warnings and missed profit forecasts. And so while the company was previously seen as a consistent performer and thus enjoyed a stock price premium, it is now regarded with a lot more skepticism. Today’s EV/EBIDTA is about 14 which is close to the Chemical Industry average, so maybe there’s some truth to that. Hmm…I dunno. What do you guys think? Croda people, our anonymous tip line is open. Please get in touch.
More news:
I am always happy to get news from Unilever. And no, it’s not only because it gives me the opportunity to appeal to your prurient interest with pictures of (certain) UL board family members. No, it’s also because Unilever is such a large and important consumer of surfactants. So – kidding aside ( was I kidding? I don't think so) – This seems like huge news. On November 26th UL announced (quoting directly): Through a new partnership, we’re aiming to develop a variety of sugar cane to extract plant-based oils for use in our cleaning ingredients.
The press release goes on to read (in part):
Unilever and Nufarm, a global agriculture innovator, are partnering to develop and commercialise a crop of the future. The project aims to cultivate a crop with significant biomass to produce sustainable oils. The biomass oil – derived from plant material, including the leaves and stems – will be a source of fatty acids, a core base ingredient for our laundry detergents and beauty and personal care products. Typically, plant oils like sunflower and canola are produced in the seeds and fruits. The breakthrough of this technology is that the oil will be grown using the entire plant – including the leaves – in crops like cane and sorghum (a cereal grain).
Nufarm has previously developed and commercialised a variety of sugar cane called energy cane, a sustainable crop which generates significantly more plant matter and sugar than traditional sugar cane. Our investment will leverage recent breakthroughs in biotechnology to develop a new, commercially viable variety of energy cane that can also produce biomass oil.
Future ambitions
The goal of this technology is to reduce our reliance on petrochemical-based ingredients and would be the first time a biomass crop has been optimised to produce the plant-based oil which, if successfully grown at scale, will be used as an ingredient in consumer goods products. In its current form, energy cane already has sustainability benefits such as climate stress tolerance, drought resistance and more efficient protection of soil against erosion. It also has harvesting benefits for farmers and the environment. The project aims to replicate and build on these traits in the new crop which would contribute to our greenhouse gas (GHG) emission reduction ambitions in ingredient sourcing.
Unlocking the power of nature
As well as being more robust, the aim is for no parts of the crop to go to waste. In addition to oil, the plant will also continue to produce sugar, which we hope could be used in other biotechnology processes to generate speciality ingredients such as fragrances and enzymes. We’ll also explore if the leftover plant fibre can be used to produce paper and board for packaging.
The release goes on with some quotes and stuff about GHG reduction. There’s video. It’s below, featuring Neil Parry, UL’s head of biotech. Who I expect we will have at one of conferences next year (I haven’t asked him yet, but I will).
So, what about Nufarm? They are an Australian agricultural chemical company headquartered in Melbourne. Their website says they are a global agricultural innovator providing crop protection and seed technology solutions in a rapidly changing world. That’s interesting, ‘cos I write a surfactant blog in a rapidly changing world. (Sorry, bit punchy today). The energy cane’s the thing though, so I searched for that on the site. Nothing. But there is a press release which in summary tells us that Nufarm is expanding its bioenergy platform through strategic R&D partnerships with the University of Florida, Instituto Agronomico Brazil, and CSIRO, Australia's national science agency. These partnerships aim to advance Biomass Oil trait technology acquired, by Nufarm, from CSIRO, which enables the production and accumulation of oil in plant tissue, leading to new sustainable oil feedstock for various industries. This technology focuses on high-biomass crops like energy cane and forage sorghum, where lipids can be extracted and refined into biofuels or used in consumer goods, while the remaining sucrose can be used for bioethanol production.
So, look this is super cool and it’s completely different from what Solazyme or Amyris were doing with sugarcane. They were fermenting sugar. This Nufarm technology is using the cane plant to make – in the plant – oil. So, for example, instead of a palm tree, making 1214 type oils in the palm kernel, there is the opportunity to engineer this sugar cane to produce 1214 oil in the plant. And of course other types of oils. This is huge, if it works at scale and at the right cost. There’s a long way to go from here to there, a whole infrastructure to extract and purify the oil(s), but I for one am quite excited about the prospect. We’ll definitely be hearing more about this. And in the meantime there’s this…
In biosurfactant news: I’ve been staying close to Locus since their participation in my conference in May and their recent restructuring and new $30M financing deal, bringing total funding to date to over $250M. Not bad in this market. (BTW – there’s seems not to be a fulltime CEO there at the moment.) An October press release from the company noted the following – which is worth emphasizing. “Locus Fermentation Solutions… becomes the first and only domestic producer of commercial quantities of biosurfactants in the USA”. In summary, The press release announces that Locus Fermentation Solutions (Locus FS) has received expanded approval from the US Environmental Protection Agency (EPA) for its biosurfactants under the Toxic Substances Control Act (TSCA). This approval allows Locus FS to become the first and only domestic producer of commercial quantities of biosurfactants in the United States. The company’s full line of glycolipid biosurfactants are now certified for all industrial and consumer applications, including agriculture, energy, industrial and consumer products. This expansion solidifies Locus FS’s position as a leader in domestic biosurfactant production and addresses the growing demand for sustainable and high-performing alternatives to chemical ingredients. Notably, the approval enables Locus FS to manufacture unlimited quantities of biosurfactants annually, providing a significant advantage over other biomanufacturing companies that are limited to importing these ingredients. Their VP of regulatory goes on to say ““Other biomanufacturing companies are limited to importing biosurfactants at a significant cost and cannot produce them within the US. Locus FS’ TSCA approval allows us to domestically manufacture an impressive annual volume far larger than what’s typical. This regulatory expansion grants Locus FS a significant advantage.” Interesting right.? What do you think?
In more biosurfactant news: Belgian AmphiStar has secured a €2m ($2.2m) grant from SPRIN-D, the German federal agency for disruptive innovation. The grant will support the development of the Ghent-based company's advanced biotechnology platform, which focuses on creating biosurfactant molecules for personal and home care applications. The company previously secured €1.5m in the programme’s initial phase last year and is now competing for an additional €2m in the final round of funding, to be awarded next year to two top-performing teams. During the first year of the SPRIN-D programme, the AmphiStar team successfully performed a continuous biomanufacturing process for 75 days - 15 days longer than the 60 days anticipated by SPRIN-D - using only waste materials to produce a completely novel and promising biosurfactant molecule. So – that’s pretty cool.
Some academic insight: For those wondering which APG’s to use in which type of applications, this paper (DOI: 10.1002/jsde.12800) published in the Journal of Surfactants and Detergents (AOCS) is helpful. Basically, the length of the hydrophobic chain and the number of glucose groups significantly affects the stability of the resulting foam. Surfactants with longer chains and more glucose groups produce more stable foams due to stronger intermolecular forces. This information has real-world relevance for industries that rely on foam production and stability, such as those involved in detergency, food production, cosmetics, firefighting, and mineral flotation.
In contrast, no doubt, to the CEO of Croda, Christophe Beck, the Ecolab CEO told the MN Star Tribune that he has ‘rarely felt better’ about the St. Paul-based company. Now that’s what I like to hear. Here’s a photo of him looking like he has indeed rarely felt better.
Now, this was no mere puff piece for a local company. The article went on to note that Beck, who is a native of Switzerland, met with 29 companies and eight governments during a global tour.
“It’s the first time in 17 years in the company where I really got the loud message that water is becoming an issue for most countries and most industries, and especially driven by digital and AI,” Beck said.
Water products are a core strength for St. Paul-based Ecolab. The company not only provides cleaning and hygiene products but also helps clients meet sustainability goals, especially around water conservation. Ecolab reported third-quarter financial results. While its $4 billion in sales gained just 1% from the year-ago quarter, earnings increased 80% to $736.5 million, or $2.58 a share.
In September, Ecolab released its second Watermark Study that show the public’s concern about water stewardship around the world. The study shows that concerns about the availability of clean and safe drinking water worldwide with people in Latin American, China and the U.S. showing the most concern. {hmm – that’s kind of a self-serving survey, but this next piece is interesting….] The expansion of data centers and need to power and cool more fast-running artificial intelligence chips has raised the awareness of issues around water scarcity. The Electric Power Research Institute (EPRI) estimates that data centers consumed 4% of U.S. energy production in 2023 and that it could increase to more than 9% by 2030. [That’s big. Interestingly the EPRI study notes that the “United States is returning to a period of rising electricity demand, with total energy demand potentially growing ~15-20% in the next decade.” To me, this seems low and I’d like to see it higher honestly. Yeah – I know conservation and net zero and all that but energy is life and I’d like to see more of that]. In any case, these industrial applications are a growth opportunity for Ecolab, the Star Tribune says and I can’t disagree.
Let’s see how the stock’s doing, eh?
Looks like after swooning at the end of 2021 when the COVID driven cleaning frenzy abated, it’s back up to an all time high. Good for them.
Some of you thought I was a bit hard on L’Oreal last month for marketing age treatments to teenagers, so here’s some positive news. Cosmetics Business reported that L’Oréal Paris managed to secure more than US$1m in sales on TikTok Shop UK’s first-ever Super Brand Day, surpassing expectations. Apparently, It delivered everything from exclusive discounts and new product launches, to a first-of-its-kind live beauty shopping event which was promoted by L'Oréal Paris brand ambassadors like model Kendall Jenner. Now there’s a lot of conflicting data out there but my sense is that there’s a fair few young ‘uns on Tiktok. This article says 25% in the 10 – 19 bracket, mostly girls.
OK here’s some genuinely positive news from L’Oreal. Tech Funding News reported that Abolis Biotechnologies secured €35M from L’Oréal and others to develop sustainable microbial ingredients. The funding round for the Frenc startup was led by an group of investors that includes L’Oréal’s venture capital fund, BOLD, and Evonik Venture Capital. The investment will be used to help the company expand into global markets and increase research and development efforts. Abolis Biotechnologies was founded in 2014 and provides industrial solutions based on microorganisms to offer a more sustainable alternative to petrochemical-based products. The company plans to use the funding to scale its biomanufacturing operations, accelerate business development, develop its own line of products, and expand the activities of its Microbiome Studio. [We’re hearing more and more about the microbiome and it your products are not compatible – may be a problem.]
I used to do marketing full time and I always wanted to get a huge billboard somewhere with some surfactant or something on it. I could never get any support for the idea. Should have just gone ahead anyway. Check this video out. Mio is a Moroccan detergent brand from Ama. I love it.
There was a lot of talk about palm oil last week at our conference. Mongabay reports that a new RSPO standard for the oil is facing backlash before it’s even issued. It’s a long article but worth a read. The key points are :
The Roundtable on Sustainable Palm Oil (RSPO) is expected to issue a new standard for its member companies to abide by when it holds its annual general meeting mid-November.
The new standard, an update to the existing guidelines issued in 2018, brings improvements in environmental and social safeguards, according to the RSPO.
But advocacy groups say it introduces loopholes that could allow for greater forest loss, including a new definition of what constitutes high-carbon stock forests, a dispensation for deforestation on Indigenous lands, and allowing deforestation as long as it’s compensated for.
The RSPO has refuted these interpretations, saying the new standard is designed to be even more stringent than the current one and that undoing the progress it’s made would be “ill-advised.”
I’d be interested in reader comments on this new standard as they come to grips with it.
We’ve written here before about Unilever and Arzeda’s efforts in cleaning. A new company called EvolutionaryScale caught my eye as having similar potential in our surfactants space. It’s an AI biotech startup that has developed LLM called ESM3 for protein design and engineering. The company's AI model can simulate up to 500 million years of protein evolution, allowing it to generate novel proteins with specific functions. ESM3 is trained on data from 2.78 billion natural proteins and can reason about a protein's sequence, structure, and function simultaneously. This capability enables scientists to design and create new proteins for various applications, including drug discovery, materials science, and environmental solutions. So, while not explicitly mentioned on the website, ESM3's protein engineering capabilities could be relevant for surfactants and or cleaning:
Novel surfactant design: The AI model could potentially design new protein-based surfactants with improved properties or specific functionalities.
Enzyme engineering: ESM3 could be used to create or modify enzymes that catalyze the production of surfactants or break down existing surfactants for environmental applications. Of course, enzymes for cleaning could also be a target.
Structure-function relationships: ESM3's ability to reason about protein structure and function could provide insights into the molecular mechanisms of surfactant activity, potentially leading to more effective designs.
[If true, and actionable, the simulation of 500 Million years protein evolution seems like a big deal]
More bulking up by Indovinya prior to the planned IPO next year. And speaking of Croda: Indovinya has agreed to acquire two former Croda brands in the energy extraction sector, targeting Demulsifiers and Flow Assurance products, from Cargill Bioindustrial UK Limited. The acquisition includes trademarks, customer relationships, twenty-five patents, tolling rights, and an R&D facility in Houston, Texas. The KEMELIX and FLOWSOLVE brands are used in demulsification and flow for oil extraction.
The KEMELIX brand includes demulsifiers that facilitate the separation and removal of water from crude oil. The product range covers alkoxylates, polyamine derivatives, and modified polyols. The FLOWSOLVE brand includes asphaltene and wax inhibitors that improve the end-to-end flow of crude oil from the reservoir to the refinery.
I’ve been teaching my Surfactants Business Essentials one-day course now for 15 years and often surprised how many people are not familiar with Shell Chemicals’ role in surfactants. Here’s a handy graphic that puts it in context.
Market Notes:
Fresh from our conference in KL:
The Asian fatty alcohol market saw a price reduction in mid-cuts due to a decline in palm kernel oil prices, while demand for long chains remained strong. Although Indonesian materials were cheaper, a significant price gap between buyers and sellers continued to impact mid-cut deals. At the same time, the US fatty alcohol market saw upward pressure from increasing 1214 oil costs. In Europe, mid-cut fatty alcohol prices rose due to supply tightness. The Asian market for fatty alcohol ethoxylates is experiencing low demand as buyers wait for further price drops. They anticipate this because the cost of feedstock fatty alcohol mid-cuts has decreased.
The linear alkylbenzene (LAB) market is seeing stable pricing due to consistent demand and limited supply. Supply shortages in India are expected to ease.
Correction
Last month I wrote about Alberto Culver and VO5. One of our most avid blog readers [and I’m never sure whether to name folks – so I won’t unless otherwise told to – so please feel free to keep writing in with your comments and tips. I will maintain your privacy] wrote to me to say: “Hey, your VO5 info was a bit off. Alberto Culver owned VO5 for decades, but it was basically two different brands in the US and UK. Unilever's acquisition of Helene Curtis didn't impact VO5 in either territory. When Unilever acquired Alberto they were forced to divest the US VO5 business, which was purchased by High Ridge Brands (HRB) plus Rave. This was because regulators thought that Unilever would have a monopoly over the value hair market in the US between the previous acquisition of Suave via Helene Curtis, their existing Rave, and the potential acquisition of VO5. A bit complicated, I hope it makes sense. [It does, thank you. And thank goodness for such keen regulators!]
Some great ads, still.
The Music Section
This blog really does have the best readers. Here we have comments relating to last month’s piece about Iron Maiden’s Paul Di’Anno from someone who knows:
“I just wanted to share something with you about Paul Di’Anno. I’m actually based in Leeds, and I am acquainted with the promoter who booked him for the Brudenell Social Club. Here’s what John said in a Facebook post:
“I just thought you might find it interesting after your comment about “no matter what” in your blog. The real rock n roll lifestyle for you. I would highly recommend a visit to the Brudenell Social Club if you’re ever in these parts, it’s a very special venue. It only holds about 400 people and that makes for a very intimate gig. You get all the new up and coming bands there and all the old bands that are either feeling nostalgic or can’t sell out the big venues like they used to. It is well known on the international music scene and is usually up there in the top 2 or 3 best small venues in the UK every year.”
Wow! – right? The very best blog readers.
Music Section
I’ve been listening to a lot of Frank Zappa recently. His body of work is truly enormous and it seems like he recorded everything he did. At the time, in the early seventies, I got the sense he was influential but little appreciation for how much. Here are some pieces of music that I think illustrate the incredible talent of Zappa as a composer, guitarist and innovator.
Here are some tracks from a session with an incredible lineup.
Here’s Frank and Steve Vai - guitar duo.
This is a classic - one of his more popular.
And this is my personal favorite. Only Zappa could pen something like this.
That’s it see you in Jersey City! https://events.icis.com/website/8544/