October 20, 2022

Are chemicals safe in the case of Solvay?

Are chemicals safe in the case of Solvay?

Chemical industry is one of the safest industries to invest into in challenging times and Solvay is one of the world's largest chemical companies, so we were rather happy to have stumbled upon them on our Belgian BEL20 Top 10 list for 20th of October. We decided to give it a go, making our stock pick this week a rather conventional one.

As Solvay produces different chemicals and composites for industries ranging from aerospace and automotive, over agriculture and pharma, all the way to consumer electronics, their business is rather safe, but also future safe according to their latest investments into solar energy for their plants, advanced anti-pollution filters and online composite startups like Plyable.

On a different note, they may not be well financed with Obermatt ranks for Safety being rather low. Let’s review in detail.

PRO: The following three points speak for a buy:

  1. A well known name in chemicals, well diversified across industries.
  2. Future-proof with recent investments into sustainability and modern startups.
  3. Chemicals do good in challenging times as no other industry can do without them.

CONTRA: The following three points argue against it:

  1. Rather risky Obermatt ranks. Safety is at 39 with Liquidity being only 25. High debt may lead investors to give up on Solvay.
  2. Fairly priced: you may not benefit much in short time periods.
  3. They are currently in the process of separation into two public companies, one of them dealing only with modern speciality materials - maybe that will be a better buy if you are not sure about traditional and dirty chemicals.

In our opinion, pro and con points are similarly weighted, with close future maybe not being the brightest, but we still decide we buy Solvay for the Obermatt Wikifolio for the long run.

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