NOVA sees potential for North American styrenics

20 February 2008 00:07  [Source: ICIS news]

HOUSTON (ICIS news)--NOVA Chemicals CEO Jeff Lipton said on Tuesday that his company sees potential for improvement in the styrenics market.

“We do not know when it is going to happen, but the leverage for NOVA will be significant, and we are no longer bleeding. We have positive EBITDA (earnings before interest, taxes, depreciation and amortisation),” said Lipton, speaking at Morgan Stanley’s Global Basic Materials Conference in New York City.

Benzene prices have been a problem for the styrenics market, Lipton said, because of high crude prices and its impact on polypropylene (PP), a key finished product. Spot benzene on Tuesday was traded at $4.00-4.03/gal FOB (free on board) HTC (Houston-Texas City), according to global chemical market intelligence service ICIS pricing.

“We believe that over time, just as high benzene prices slowed down growth and demand for styrenics, that over time lower benzene pricing, therefore lower styrene cost, should allow polystyrene pricing to become more and more competitive with polypropylene,” Lipton said.

Lipton said styrenics market improvement is possible from consolidation, limiting supply, and some demand growth, based on lower benzene values.

“Any [styrenics] market improvement will have a big impact on our company,” said Lipton.

“A 1 cent/lb of chain margin improvement will mean for NOVA $19m (€12.9m) of EBITDA, and 23 cents/share,” Lipton said. “And remember we will not be paying any income taxes for a long time on this business [the INEOS-NOVA joint venture].”

Lipton also said in his view it would be more valuable for investors to think about NOVA in four segments: its developing performance styrenics business, commodity styrenics, eastern Canadian olefins and polyolefins assets, and Alberta olefins and polyolefins assets.

“Basically, people have asked us to separate our eastern assets and how they have performed from our Alberta assets, so they can get a better picture of how that performs,” Lipton said.

($1.00 = €0.68)

By: Brian Balboa
+1 713 525 2653

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