Overall profitability
Profitability is higher and operating costs are lower for specialty chemicals enterprises in West Virginia compared to the national average and competitor states.
A typical company in West Virginia would realize total cost savings averaging $780,103 versus the comparison states.
Profitability in West Virginia would average 1.7 percentage points higher than in the comparison states.
| Profitability |
U.S.
|
Region
|
W.Va.
|
W.Va. advantage
vs. region
|
| Chemicals |
| NAICS 325188: Specialty organic and inorganic chemicals |
1.3% |
1.9% |
0.9% |
-1.0% |
| NAICS 3256: Soaps, detergents and specialty cleaning preparations |
3.4%
|
3.9%
|
4.7%
|
0.8%
|
| NAICS 3255: Adhesives and sealants |
3.0% |
3.1% |
5.1% |
2.0% |
| NAICS 541690: Technical services to the chemical industry |
4.8% |
9.4% |
14.4% |
5.0% |
| Average |
3.1% |
4.6% |
6.3% |
1.7% |
Source: West Virginia Development Office Cost Model
Labor costs
Labor costs represent almost 26 percent of total production costs in the cluster. That makes West Virginia’s affordable, available work force a competitive advantage when locating a facility.
A typical West Virginia company could save $632,769 in payroll and related expenses compared to competitive states.
This is directly attributable to West Virginia’s low average annual wage for the industry cluster. West Virginia’s average wage of just $51,961 in 2004 is 89 percent of the national average of $58,548 and 94 percent of the competing state average of $55,479.
West Virginia’s low cost of living helps to keep labor costs low. Labor costs are defined as the combined annual costs of wages, workers’ compensation, unemployment insurance and other fringe benefits for a national average operating establishment in the indicated NAICS group.
| Labor Costs |
U.S.
|
Region
|
W.Va. |
W.Va. advantage
vs. region
|
| Chemicals |
| NAICS 325188: Specialty organic and inorganic chemicals |
$22,414,151 |
$21,671,543 |
$22,876,754 |
$1,205,211 |
| NAICS 3256: Soaps, detergents and specialty cleaning preparations |
$16,267,175 |
$15,136,953 |
$13,908,362 |
($1,228,591) |
| NAICS 3255: Adhesives and sealants |
$16,375,012 |
$15,655,523 |
$13,464,656 |
($2,190,867) |
| NAICS 541690: Technical services to the chemical industry |
$3,956,411 |
$3,669,854 |
$3,353,027 |
($316,827) |
| Average |
$14,753,187 |
$14,033,468 |
$13,400,699 |
($632,769) |
Source: West Virginia Development Office Cost Model
Utility costs
The cost analysis reveals that a West Virginia facility would achieve utility cost savings averaging $118,112 annually compared to the competing states.
With electric rates among the lowest in the nation, West Virginia can offer significant savings in electricity costs.
| Utility Costs |
U.S.
|
Region
|
W.Va. |
W.Va. advantage
vs. region
|
| Chemicals |
| NAICS 325188: Specialty organic and inorganic chemicals |
$2,983,263 |
$3,067,933 |
$2,752,988 |
($314,945) |
| NAICS 3256: Soaps, detergents and specialty cleaning preparations |
$1,057,679 |
$1,069,714 |
$990,486 |
($79,228) |
| NAICS 3255: Adhesives and sealants |
$997,237 |
$987,180 |
$910,362 |
($76,818) |
| NAICS 541690: Technical services to the chemical industry |
$103,484 |
$103,797 |
$102,340 |
($1,457) |
| Average |
$1,285,416 |
$1,307,156 |
$1,189,044 |
($118,112) |
Source: West Virginia Development Office Cost Model
Approach
A comparative analysis of operating costs and profitability was prepared for a national average specialty chemicals establishment in West Virginia versus the 10 surrounding states considered the state’s principal competitors: Ohio, Pennsylvania, Maryland, Virginia, Kentucky, Indiana, Michigan, Tennessee, North Carolina and South Carolina.
The average was based on industry average operating and financial characteristics derived from the most current Annual Survey of Manufactures, published by the U.S. Census Bureau; Annual Statement Studies, published by Robert Morris Associates, and national input/output coefficients for various factor costs. This information was used to develop a detailed annual operating expense statement that served as a baseline for estimating costs for West Virginia and the comparison states.
These national baseline costs were adjusted by state-specific cost differentials for various factors (wage rates, utility rates, etc.) to derive operating costs for West Virginia and the comparison states.
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