23 December 2008 17:41 [Source: ICIS news]
In a bulletin entitled “Polish Chemicals: All good things come to an end,” the bank said Zaklady Azotowe Pulawy (ZAP), Zaklady Azotowe Tarnow and Zaklady Chemiczne Police (ZChP) had in recent months suffered from some fertilizer prices dropping by as much as 70%.
“In addition to these companies’ direct exposure to the slowing automotive, construction and textile industries, demand for chemical commodities suffered and production cuts followed,” said Wood & Company analyst Barbara Zaleska.
“ZChP and ZAT are the biggest losers because of their sales mix. Although fertilizer and chemical prices are falling, [their stock prices] are still above their long-term averages, and we think the risk remains on the downside,” she added.
On the other hand, said Zaleska, ZChP and ZAT are the “truer commodity stocks and so should be able to lower their cost of raw materials. ZAP, with regulated natural gas and energy accounting for 46% of its cost base (to be increased in 2009), will not be able to adjust its costs properly.”
Overall, Zaleska forecast the companies would be hit by an earnings before interest and tax (EBIT) decline of more than 50% in 2009, with ZChP being the biggest loser with an EBIT decline of 80%.To discuss issues facing the chemical industry go to ICIS connect
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