SABIC Innovative Plastics put on CreditWatch - S&P

04 January 2008 16:50  [Source: ICIS news]

LONDON (ICIS news)--Standard and Poor’s (S&P) on Friday put SABIC Innovative Plastics on CreditWatch with negative implications after a drop in third quarter earnings and weak prospects for polycarbonate markets in 2008.


S&P said SABIC Innovative Plastics' third quarter operating profit was significantly below expectations, with pro forma earnings before interest tax, depreciation and amortisation (EBITDA) of $115m (€78m) – a year-on-year drop of $156m.


“The weaker results are largely due to inflated raw material costs and a 3% decline in volumes in the third quarter,” said S&P credit analyst Tobias Mock.


“Although third-quarter selling prices were up 1%, this did not offset the inflationary pressure from raw materials. We had expected the company to show stronger pricing power and to pass on its higher raw material costs to its customers," he added.


Formerly GE Plastics, the company was bought by chemicals major Saudi Basic Industries Corp (SABIC) in for $11.6bn August 2007.


“We expect that SABIC will likely have to offer some parental support in 2008 to protect its subsidiary SABIC Innovative Plastics from a distress scenario,” said Mock.


S&P said it planned to resolve the CreditWatch placement after meeting the management of SABIC Innovative Plastics and its parent company in the coming weeks.


($1 = €0.68)

By: Mark Watts
+44 20 8652 3214

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