The updated methodology can be downloaded here.

Scope Ratings has today published its updated Chemicals Rating Methodology, which clarifies and refines its analytical approach while keeping the core principles unchanged.

Scope invited market participants to comment on the methodology until 15 May 2025. Scope did not receive comments from market participants during the request-for-comments period. The methodology is now final.

The 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.

Rating impact and reviews

The updated 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.

Summary of the key changes

The updated 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 chemicals 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.