Exposure to strong growth trends, high cash generation and frequent special dividends mean speciality chemical businesses seldom come cheap. But the general gloom that hung over equity markets in the latter half of last year triggered share price falls across the sector, amid rising concerns that consumer demand is bottoming out.
A slowdown in Chinese construction, as the country shifts from an investment-driven economy to one led by consumption, has been a problem for some. For Elementis (ELM), this backdrop has seen demand for products that reduce solvent content in paint falter. To make matters worse, supplying additives for drilling is also no longer so lucrative, as the US fracking boom loses momentum.
Synthomer (SYNT), on the other hand, has had more to shout about, even if its emulsion polymers feature widely in the struggling Chinese construction sector. Capital spending, targeted innovation and a crackdown on fixed costs helped the group post underlying profit growth halfway through 2015 for the first time in three years. And if Chinese property prices start to recover after the introduction of local government subsidies for home sales, its sharp discount to peers could soon start narrowing.