Deutsche Bank lowers estimates of US chem firms

07 October 2008 19:22  [Source: ICIS news]

HOUSTON (ICIS news)--Deutsche Bank cut on Tuesday its 2009 earnings forecasts for American chemicals producers, forecasting a mild recession in the US and Europe that will continue to squeeze the industry.

"Within this weaker macroeconomic context, we expect end-market demand for US chemicals producers will be broadly challenged, particularly as the flat US outlook is coupled with a decline in Europe and slower growth in Asia," analyst David Begleiter said in a note to investors.

Deutsche Bank lowered its estimates for US chemicals producers by an average of 5%, noting that the industry's valuations already reflect a recession and that declining energy prices are not reflected in current share prices.

The bank's top stock picks for next year include Celanese, Chemtura, Cytec Industries, Rockwood and Solutia.

Valuations for US chemical public companies are approaching a historically low level, the bank said. The median price-to-earnings ratio for the industry is at 10, which is nearing 2000's low of 9.5.

Though most chemicals producers should expect "significantly slower growth," Deutsche Bank said it expected raw-material costs to continue current declines and lead to improved margins.

The bank revised its economic forecast for the US to no growth (0%) in 2009, and a slight decline in Europe (-0.2%). Deutsche Bank expects GDP growth in China of 8.4% and across Asia of 2.8%.

For European chemical producers, Deutsche Bank warned on Tuesday that profits could be slashed by over 40% for some companies if the situation got dramatically worse.

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By: Lane Kelley
+1 713 525 2653

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