SOURCE: Lux Research

Lux Research

March 01, 2016 07:30 ET

Chemical Industry Benchmarking Finds Entegris, DSM, 3M Leading in Innovation

New Lux Competitive Benchmark Also Rates Business Execution, and Points to Undervalued Assets to Come Out of Pending Dow -- DuPont Merger, Says Lux Research

BOSTON, MA--(Marketwired - Mar 1, 2016) - The ability to innovate new and differentiated products is a leading indicator of a company's long-term success, but isn't captured in financial analysis. Now a new Lux Competitive Benchmark, applied to select companies in the chemical industry, compares innovation performance to current business execution, and points to new chances for investors and industry participants to profit, according to Lux Research.

The Lux Competitive Benchmark calls out Entegris, 3M, and DSM as innovation leaders, though with varying business execution scores today. Appling this benchmark to a sector-specific analysis also provides new insights into intra-company dynamics. For instance, it shows how key businesses from DuPont, like industrial biosciences, will be left under-utilized in its merger with Dow, and potentially be available for acquisition or spin-out.

"Traditional financial analysis typically infers technology and other advantages from historical data, such as profitability, but does not capture changes in competitive position that will impact a company moving forward," said Brent Giles, Research Director at Lux Research and creator of the Lux Competitive Benchmark.

"Applied to the industry-shaking Dow-DuPont merger, our benchmarking shows that DuPont's strong innovation engine won't be fully utilized in the new planned companies, particularly within the ill-fitted 'Specialty Products' company," he added.

The Lux Competitive Benchmark compares companies operating in the same space on a business execution axis that looks at its ability to grow and profit, and an innovation metric axis that gauges the strength and value of its technology. When Lux analysts applied the benchmark to select companies in the chemical industry, they found that:

  • Three disparate players top innovation metric. Electronic materials manufacturer Entegris is the most innovative company in this competitive benchmark study, and spends almost 10% of its revenue on R&D. 3M and DSM also scored high on innovation, but DSM lagged on business execution due to weak EBITDA margins.
  • DuPont's innovation engine to be dispersed. While Dow's core businesses are driving the merger, DuPont is the clear senior partner when it comes to innovation, rating well ahead of Dow on Lux's innovation metric. However, the planned break-up of DowDuPont into three companies will leave some of its most innovative groups side-lined.
  • DuPont's Industrial Biosciences business looks undervalued. Its technology is cutting-edge, with an innovation metrics score trailing only DSM's, and its profitability is solid. But in the new DowDuPont specialty products company, its biomaterials will no longer enjoy any synergy with DuPont's other materials offerings.

The report, titled "Merger of Equals? DuPont's breakup in the DowDupont Merger," is part of Lux Research's Corporate Strategic Intelligence: Chemicals & Materials service.

To hear more on the subject, register for the complimentary webinar, "Finding Value in the Fallout from the Dow-DuPont Merger," on March 3rd at 11:00 EST.

About Lux Research

Lux Research provides strategic advice and ongoing intelligence for emerging technologies. Leaders in business, finance and government rely on us to help them make informed strategic decisions. Through our unique research approach focused on primary research and our extensive global network, we deliver insight, connections and competitive advantage to our clients. Visit www.luxresearchinc.com for more information.

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