The proposed updated methodology can be downloaded here.

The proposed update provides increased transparency and a detailed presentation of Scope’s analytical approach for assigning credit ratings to chemicals companies. The methodology continues to be based on a modular rating approach for issuer ratings comprising an assessment of key rating factors that define a rated entity’s business and financial risk profiles, which is supplemented by supplementary rating drivers.

Summary of the proposed key changes

The proposed methodology contains the following changes:

• Merging the rating frameworks for specialty chemicals and commodity-focused chemicals through the development of one framework that can be applied to all chemicals companies;
   
• Changing the assessment of entry barriers to the sub-industry of commodity-focused chemicals to “Medium” from “High”, resulting in a BB assessment for the Industry Risk Profile, thereby reflecting the differences between commodity-focused and specialty chemicals companies and the higher vulnerabilities of commodity-focused chemicals companies which face stronger competition than specialty chemicals companies;
   
• Extending the assessment of size in the market position also to specialty chemicals and introducing recurring EBITDA as a proxy for assessing size in the market position for both specialty and commodity-focused chemical companies, replacing revenues for the latter;
   
• Enhancing the assessment of diversification through the provision of more granular assessment points covering i) geographical diversification, ii) asset diversification, iii) product diversification, iv) supplier and customer diversification as well as v) a chemicals company’s end-market diversification overall and vi) its contribution to highly cyclical end-markets in particular;
   
• Enhancing the assessment of operating profitability through the introduction of assessing a chemicals company’s margin volatility;
   
• Enhancing the assessment of operating profitability through the introduction of return on capital employed (ROCE);
   
• Aligning the phrasing of the qualitative assessment of a chemical company’s market position and R&D activities with the definition from Scope’s Credit Rating Definitions;
   
• Providing typical information and data sources used in the analytical process;
   
• Minor editorial changes.

Call for comments

Scope invites issuers, investors and other interested parties to comment on the methodology by 14 May 2025, as part of the agency’s ongoing commitment to transparency and open dialogue with market participants.

Please send your comments to consultation@scoperatings.com.

Scope will review and publish the content of any written response in accordance with regulatory requirements unless the respondent has specifically requested confidentiality.

Expected rating impact

The proposed methodology could have a positive impact of up to one notch on the issuer rating and associated debt ratings of one rated issuer (specialty chemicals segment). This is linked to a potentially more positive assessment of the rated entity's business risk profile, driven by a more substantiated view on diversification and operating profitability.