NPRA ’09: Wall Street expects sharp earnings drops for chems

29 March 2009 12:00  [Source: ICIS news]

NEW YORK (ICIS news)--Wall Street analysts expect sharply lower earnings for US-based chemical companies in 2009 as executives gather on Sunday in San Antonio, Texas for the 34th International Petrochemical Conference (IPC).

Consensus estimates call for major declines in 2009 earnings per share for diversified chemical firms Dow Chemical (-75% to 45 cents), Celanese (-57% to $1.14) and Eastman Chemical (-46% to $2.38). Huntsman is expected to post a loss of 31 cents versus a profit of 35 cents in 2008.

On the specialties side, bellwether DuPont is expected to post a 29% decline in earnings per share to $1.97. Many other specialty chemical companies are also expected to post double-digit declines.

“We remain cautious on ethylene producers such as Dow,” said Citi Investment Research analyst PJ Juvekar in a research note.

“We reiterate our positive stance on Celanese on signs of recovery in China. Celanese is the lowest-cost producer of acetyls, with four plants in China contributing 33% of EBITDA [earnings before interest, tax, depreciation and amortisation],” he added.

While Chemical Market Associates Inc (CMAI) reported that destocking by producers and converters is nearing an end and that operating rates have pricked up from 55% in December to 75% now, at its 2009 World Petrochemical Conference in Houston, Texas, Juvekar cautioned that a real upturn could be years away.

“Let's not get too excited. We are not calling for an ethylene upturn, as it may still be another two years away,” he said.

“The ethylene cycle lags the economy by as much as six to 12 months,” the analyst added.

Jefferies & Co. analyst Laurence Alexander said he expects the extended downturn to drive consolidation and facility closures in the US and Europe.

“CMAI estimates roughly 50m tonnes/year of petrochemical capacity needs to be idled to bring the industry back into balance by 2012-2013,” he said.

“One topic mentioned by a couple of attendees is that, if and when demand returns, the frequency of accidental outages could increase sharply, leading to the industry tightening faster than demand forecasts might appear to justify,” Alexander added.

The petrochemical downturn will produce winners, however, noted JPMorgan analyst Jeffrey Zekauskas.

“We believe the prolonged downturn in the petrochemical cycle benefits the chemical derivatives buyers including DuPont, paint and adhesives companies including Sherwin-Williams, Valspar, H.B. Fuller, and water treatment chemical companies including Nalco,” said Zekauskas in a research note.

“These trends are unfavourable for ethylene and chlor-alkali producers including Dow Chemical, NOVA Chemical, Westlake, Georgia Gulf and Olin,” he added.

Sponsored by the National Petrochemical & Refiners Association (NPRA), the petrochemical conference runs Sunday through Tuesday.

Visit ICIS at the NPRA on Sunday.
Bookmark Paul Hodges’ Chemicals and the Economy Blog
To discuss issues facing the chemical industry go to ICIS connect

By: Joseph Chang
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly