KeyBanc downgrades US specialty chemical firms

12 January 2009 17:51  [Source: ICIS news]

NEW YORK (ICIS news)--KeyBanc Capital Markets downgraded five US-based specialty chemical firms from “hold” to “underweight” on Monday due to deteriorating market conditions.

 “We downgraded several names this morning in our specialty chemical universe that we believe have more cyclical end market exposure and/or are undergoing strategic turnaround efforts,” said KeyBanc analyst Michael Sison in a research note.

The analyst downgraded Ashland, Ferro, HB Fuller, Omnova Solutions and Spartech to “underweight” ratings.

“These names will likely struggle in 2009, given stiff recessionary conditions, and in our minds have limited levers to offset deteriorating demand conditions,” said Sison.

Along with weak markets, Ashland faces the added challenge of integrating its acquisition of US specialty chemical company Hercules.

“We have very low confidence underlying our fiscal 2009 outlook, considering the highly cyclical businesses from ‘old Ashland’ and potential difficulty in integrating the Hercules acquisition during a challenging economic environment,” said Sison.

The analyst said he expects Ashland’s earnings per share to decline from $2.30 (€1.70) in fiscal 2008 (ended September), to $1.75 in fiscal 2009.

“We expect there could be around $0.25 of [earnings per share] downside considering very weak demand,” Sison said.

Shares of Ashland fell by $1.25, or 10.6%, to $10.58 in early Monday afternoon trading on the New York Stock Exchange.

($1 = €0.74)

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By: Joseph Chang
+1 713 525 2653

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