Only one in five chemical companies earned their cost of capital in 2025

By Robert Henske, Alexander Baumgartner, Everett Johnson and Brad McMullin

The chemicals industry entered 2026 under pressure beyond the disruptions seen in the pandemic era. A combination of significant capacity build-out in China, sluggish demand in automotive and construction, elevated energy costs in Europe, geopolitical tensions affecting feedstock availability, and an uncertain US tariff environment have combined to create sustained headwinds across the sector. Against this backdrop, the industry significantly underperformed broader equity markets in 2025 – and the gap between those navigating this environment successfully and those who are not has rarely been wider.

A structural reset, not a cyclical correction

Roland Berger's Chemical Winners 2026 report – which monitors 131 publicly listed chemicals companies across the Americas, Europe, and Asia Pacific – points to a sector undergoing structural change rather than a temporary downturn: In North America, the CEX Chemicals index returned -3.0% in 2025, compared to +16.4% for the S&P 500. In Europe, the MSCI Europe Chemical Industry index returned +4.1% against +31.9% for MSCI Europe.

This level of underperformance relative to the broader market is not a one-year anomaly – it reflects compounding structural pressures that have built over several years.

Capital efficiency tells a similar story. Revenue per unit of invested capital edged upward slightly in 2025, but remains far below levels achieved in the early 2010s. Only 21% of companies in the Roland Berger sample earned their cost of capital in 2025, down from 34% in 2023. Gross margins held broadly stable, but EBIT margins continued to narrow, reflecting a high fixed-cost base, energy cost headwinds in Europe, and persistent pricing pressure from overcapacity across chemical segments.

The market is bifurcating – and penalizing undisciplined capital deployment

The Winners analysis classifies companies across two dimensions: invested capital growth and risk-adjusted profitability, measured as return on invested capital (ROIC) minus the weighted average cost of capital (WACC). The resulting four quadrants – Winners, Cash Generators, Underperformers, and Profitless Growers – reveal a clear pattern in 2025. Winners and Cash Generators delivered positive total shareholder returns. Profitless Growers – companies that expanded their capital base without generating returns above their cost of capital – delivered the weakest total shareholder return of all four groups, underperforming even Underperformers. The market is now explicitly rewarding capital discipline and penalizing growth for its own sake.

This bifurcation is evident across segments, though the underlying dynamics differ. Industrial gases and specialty chemicals delivered positive weighted average risk-adjusted returns over the five-year period from 2021 to 2025. Diversified players, agricultural chemicals producers, and distribution businesses have, in aggregate, destroyed value over the same period. Winners and Underperformers exist within every segment – but the direction of travel at the segment level has clear implications for portfolio strategy.

What it takes to win in today's chemical industry

As structural challenges persist, companies must act with greater intentionality. Roland Berger's Winners analysis identifies four principles that consistently differentiate top performers. Genuine business leadership – setting the agenda within a segment rather than simply competing for revenue – allows companies to capture a disproportionate share of economic value. Strategic coherence, meaning being the highest-value owner of a portfolio with clear industrial logic, reduces conglomerate discounts and supports profitability. Financial scale provides resilience: companies that lack it risk becoming financially irrelevant as market capitalizations contract and institutional investors rotate toward activist positions. And a proven ability to execute matters because investors have long memories – companies that consistently deliver on commitments around synergies, margin improvement, and value creation preserve and extend their valuation multiples.

The transaction landscape is shifting in ways that will create both pressure and opportunity. Roland Berger anticipates a wave of consolidation driven by forced asset sales from stressed sellers, private equity seeking exits, and the industrial logic of combining complementary value chains. Management teams that assess their strategic position clearly today – and act on it – will be best placed to lead that consolidation rather than be shaped by it.

Download the full Chemical Winners 2026 report to see how 130+ chemicals companies rank across the Winners framework and what the data reveals about your competitive position.