H&R GmbH KGaA's ROCE Trajectory: A Compelling Indicator of Recovery and Future Growth?

In the low-margin chemicals industry, where capital efficiency is paramount, H&R GmbH KGaA’s Return on Capital Employed (ROCE) trajectory offers a nuanced lens to evaluate its recovery and growth potential. As of June 2025, the company’s ROCE stands at 3.3%, a modest figure relative to the Chemicals industry average of 6.4% [1]. Yet, this metric masks a critical narrative: H&R has transitioned from negative returns (indicating losses) to a positive 3.3% over five years, signaling a hard-won path to profitability [1]. However, the ROCE has declined from an average of 9.7% five years ago, raising questions about the sustainability of its capital utilization [4].

A Tale of Two Trends

H&R’s ROCE trajectory reflects a dual narrative. On one hand, the company has clawed its way out of losses, a feat that underscores operational resilience in a sector plagued by soft demand and overcapacity [4]. On the other, the declining ROCE—from 9.7% to 3.3%—suggests that the returns on reinvested capital have weakened, despite increased capital employed [1]. This divergence highlights a critical challenge: while H&R has stabilized its operations, it has not yet achieved the compounding returns that define high-performing businesses.

The trailing twelve months (TTM) ROCE of 3.3% remains flat, contrasting with the industry’s growth in ROCE [3]. This stagnation is further compounded by the company’s EBITDA and EBIT figures, which dipped to €40.1 million and €10.9 million, respectively, in the first half of 2025, down from €41.1 million and €11.7 million in the same period of 2024 [4]. These figures, while modestly positive, underscore the fragility of H&R’s recovery in a sector where margins are razor-thin.

Segment Dynamics and Strategic Rebalancing

The company’s segment performance reveals deeper insights. The ChemPharm Refining segment, a key driver of earnings, reported EBITDA of €26.9 million for the first half of 2025, up from €20.6 million in 2024 [4]. This growth, albeit incremental, suggests that H&R’s strategic focus on refining could yield better capital returns. Conversely, the Plastics segment swung to a €1.9 million loss in 2025, a stark reversal from a €1.2 million profit in 2024 [4]. Such volatility within segments complicates the ROCE narrative, as underperforming units drag down overall efficiency.

Calculating the Path Forward

To assess H&R’s ROCE trajectory more precisely, investors must calculate the metric using EBIT and capital employed. For 2023, the company reported an EBIT of €30.3 million and total assets of €903.2 million, with current liabilities at €297 million [3]. This yields a capital employed of €606.2 million, resulting in a ROCE of 4.99% (€30.3M / €606.2M). While this is an improvement from the 3.28% average ROCE cited for the 2020–2024 period [4], it still lags behind the industry average of 9.7% [5].

Industry Context and Strategic Implications

The chemicals industry’s average ROCE of 7% from 2020 to 2024 [4] sets a high bar for H&R. The sector’s struggles with overcapacity and cost pressures have eroded margins, making H&R’s 3.3% ROCE a below-average performer. However, the company’s ability to move from losses to positive returns—despite these headwinds—suggests a potential for further improvement.

For H&R to close the gap, it must address structural inefficiencies. The Plastics segment’s losses, for instance, highlight the need for cost rationalization or strategic divestment. Meanwhile, the ChemPharm Refining segment’s growth indicates that capital reallocation toward high-margin units could boost ROCE. The company’s 2025 guidance for operating profit of €77–90 million [4] reflects cautious optimism, but achieving this will require tighter cost controls and operational discipline.

Conclusion

H&R GmbH KGaA’s ROCE trajectory is a mixed signal. While the company has transitioned from losses to modest profitability, its ROCE remains below industry benchmarks and has declined from historical highs. In a low-margin industry, this suggests that H&R’s capital efficiency is a work in progress. Investors should monitor segment-level performance and the company’s ability to reallocate resources toward high-return areas. For now, H&R’s ROCE trajectory is a sign of recovery, but not yet a harbinger of robust growth.

Source:
[1] H&R GmbH KGaA's ROCE and industry comparison [https://finance.yahoo.com/news/h-r-gmbh-kgaas-etr-114805049.html]
[2] H&R GmbH KGaA 2025 Half-Year Report [https://www.marketscreener.com/news/h-r-gmbh-half-year-report-2025-ce7c51deda8af421]
[3] H&R GmbH KGaA 2023 Annual Report [https://www.eqs-news.com/news/corporate/hr-gmbh-co-kgaa-publishes-annual-report-2023/50285e05-aa28-491b-b194-73313abb9bf1]
[4] Chemical industry ROCE trends [https://www.bcg.com/publications/2025/chemical-companies-wont-recover-doing-more-same]
[5] H&R GmbH KGaA EBIT and capital employed data [https://stockanalysis.com/quote/etr/2HRA/statistics/]