Prosperity – Profitability

A sustainable financial performance

Source : National Bank of Belgium (data from the Central Balance Sheet Office)

A healthy financial situation is crucial for a sustainable industry. Profitability can be assessed by net income returned as a percentage of shareholders’ equity; i.e. the return to shareholders after the deduction of all costs and taxes. This ratio measures how well a company uses the capital invested by its shareholders, and the return on equity should be structurally higher than the return on long-term government bonds. The difference is called the risk premium.

In the chemicals, plastics and life sciences industry, the return on shareholders’ investment has amounted to an average of 7.4% over the last 10 years. For the first time since 2010, this ratio has been increasing again, up to 6.7% in 2015 and is structurally higher than the risk-free return on long-term government bonds, especially considering current uncertain economic climate.

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