BoA lowers US Albemarle estimates on weak demand

22 December 2008 17:46  [Source: ICIS news]

HOUSTON (ICIS news)--Bank of America (BoA) lowered on Monday its earnings estimates for US plastic-additives producer Albemarle due to weak demand in electronics, housing and automobiles.

Bank of America's downgrade followed Albemarle's announcement of a $40m (€29m) cost-savings programme.

Bank of America lowered its estimates because sales would likely decline in Albemarle's polymer additives business. In November and December, electronics, automobiles, housing and other key end markets deteriorated significantly.

Already, auto production and sales are down by more than 20% worldwide, Bank of America said. At the same time, de-stocking and weak consumer demand are exacerbating what is already a cyclical decline in electronics.

In addition, demand for Albemarle's catalysts could fall because refineries are decreasing operating rates, Bank of America said. Also, internal sales could decline for bromine.

However, in the company's fine-chemicals segment, demand from pharmaceutical and agricultural end markets should offset declines for bromine and drilling fluids, Bank of America said.

In all, BoA lowered its estimate for Albemarle's fourth-quarter earnings to 42 cents/share, down by 21 cents. BofA now estimates that Albemarle will report 2009 earnings/share of $2.15, down 55 cents.

Late last week, Albemarle warned that weakening consumer demand has affected both the volumes and profitability of the company's polymer-additives segment. 

Until consumer markets rebound, 2009 will be a challenging year for the segment, Albemarle said.

Because next year's prospects appear so weak, the company plans to achieve $40m in annualised cost savings by accelerating existing cost-savings programmes and by "resizing its business footprint", Albemarle said.

($1 = €0.72)

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By: Al Greenwood
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