SMALL CHEMICAL COMPANIES

The world of the chemical industry, like that of other manufacturing industries, comprises a core of giant corporations surrounded by many, many small companies. Generally, the giant corporations are the commodity producers, making large-volume items at low unit cost. The small companies are the specialists, selling a service or making a product usually not attractive to larger companies. Almost any comparison of annual reports shows that the bigger companies have better profit margins and better returns on investments than do the smaller companies. As companies grow their profit margins increase. Therefore, small companies are constantly being challenged to grow. And these small companies want to grow—through forward and backward integration, internal diversification, or by acquisition. That better profit margins can come from growth is shown clearly in income tax returns for the chemical industry compiled by the Internal Revenue Service. Chemical companies with zero assets (for example, a company that leases its facilities) average a ...