Europe chem companies will report improved Q3 results - analyst

13 October 2009 15:06  [Source: ICIS news]

LONDON (ICIS news)--Third-quarter results in the European chemical industry are expected to be better than the previous quarter's and sentiment is improving, according to an industry analyst on Tuesday.

“While the third quarter will have been a tough absolute quarter, most companies should show a strong progression from the second quarter – expect upside surprises,” said Deutsche Bank analyst Tim Jones in a note.

A cessation of destocking, cost cutting and strength in China are more than offsetting raw material costs and incremental price erosion, Jones said.

The analyst note predicted that the European chemical industry would see a strong improvement in 2010.

“Even with only modest GDP growth in 2010 and no strong inventory restock[ing], sector volume growth would easily exceed 8-10% due to the easy base. This will combine with cost cutting, implying 20-40% EBIT (earnings before interest and tax) growth in 2010 is easily achievable for many,” he said.

Chemical companies would offer less-pessimistic outlooks when they present their third-quarter results, but not optimism, "given the conservative nature of most management teams and lack of clear evidence of sustainable recovery", according to Jones.

Meanwhile, Cefic has published statistics using European Commission data indicating that the chemical industry,, including pharmaceuticals, was more optimistic about the business climate in September than any other industry.

The EU manufacturing confidence indicator has continued to improve since it hit a low in March 2009.

The data also showed that global chemicals production for the first seven months of 2009 was down 10.7% year on year, while it was down 17.7% in the EU.

To discuss issues facing the chemical industry visit ICIS connect

By: Lucy Craymer
+44 20 8652 3214

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