UBS raises BASF’s 2007-2009 EPS forecasts

13 July 2007 10:49  [Source: ICIS news]

MUMBAI (ICIS news)--UBS Investment Research on Friday upgraded BASF’s 2007, 2008 and 2009 estimated earnings per share (EPS) following the analyst's recent increase in its oil prices, global GDP and industrial production forecasts.

The brokerage increased the German chemical producer's estimated EPS by 10% for 2007, 25% for 2008 and 4% for 2009.

"However, there are still some concerns about capacity additions in areas such as acrylic acid, methylene di-p-phenylene isocyanate (MDI) and toluene diisocyanate (TDI)," UBS said.

"But if market conditions continue to remain as buoyant as they are currently, the trough of BASF’s cycle is likely to be reached in 2009-2010."

Over the last few months, UBS raised its oil price forecast for 2007 by $7/bbl (€5/bbl) and for 2008 by $3.7/bbl.

It also upgraded the global GDP projection by 3.5% for 2007 and by 4.4% for 2008, while increasing industrial production estimates to 5.8% for 2007 and 2008.

"These changes have resulted in better volume assumptions for BASF in 2007 and 2008, with volume-driven divisions such as performance chemicals and intermediates benefiting the most," it said.

Polyurethane sales were also expected to increase because of delays in capacity additions, such as BASF’s Caojin plant, higher volumes, which have improved the supply-demand balance for MDI, and expected stable capacity utilisation in 2007, it added.

Styrenics are also expected to be more profitable in 2008 than in 2007 because of recent and potential consolidation in the industry, the brokerage said.

The syrenics market is suffering from overcapacity, and unless there is drastic action such as capacity closures from the main players in the industry, profitability is likely to remain low, it added.

By: Divya Chowdhury
+65 6780 4359

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