Ciba rating maintained on disappointing Q1 results

10 May 2007 15:02  [Source: ICIS news]

MUMBAI (ICIS news)--UBS on Wednesday reiterated its Reduce 2 rating and price target of Swfr68 ($55.69/€41.25) on Ciba Specialty Chemicals following disappointing first-quarter results.

 

Although Ciba’s margins in the paper business improved nearly 160 basis points in 2006, a slide in the first quarter was puzzling, UBS said in a report to its clients.

 

The brokerage remained cautious about the declining trend in Ciba’s selling prices, which have fallen persistently for four consecutive quarters, while volumes rose only a modest 4%.

 

UBS said the volume growth was not sufficient to create significant positive operating leverage as this was partly offset by steadily declining prices. But a strong euro has helped compensate for the US dollar weakness, it added.

 

Ciba is itself cautious of the high purchasing power of customers and new customers emerging in Asia as risk factors, UBS said.

 

A swift turnaround of the paper business is critical to sustain an upswing in earnings. But, this is unlikely as fixed costs still seem to be high and overall business conditions remain weak, it added.

 

Last week the company reported a 23% year-on-year increase in its first quarter operating income before restructuring to Swfr134m.

 

Ciba Specialty Chemicals’ shares were up 0.07% at Swfr76.95 on the Swiss stock exchange at 14:54 hours local time (12:54 GMT).

 

($1 = Swfr1.22, €1 = Swfr1.65)

By: Divya Chowdhury
+65 6780 4359

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