UBS upgrades Dutch specialty chemical AkzoNobel to 'buy'

02 July 2010 16:10  [Source: ICIS news]

LONDON (ICIS news)--UBS has upgraded its share rating for Dutch coatings, paints and specialty chemical producer AkzoNobel to ‘Buy’ from ‘Neutral’, as the investment bank expects the group to become a global leader in growing markets, it said on Friday.

AkzoNobel’s price target was also raised to €52 from €45, after UBS said the group has witnessed a late-cyclical recovery since the decline of paint and coating volumes which continued until the first quarter of 2010.

“Over the next two years, Akzo will likely benefit from structural growth in profitable emerging market,” UBS said.

“The recovery will likely be bumpy in developed markets, but Akzo generates nearly 40% of sales in emerging markets, where there is structural growth boosted by a positive translational currency impact. Overall, we expect earnings to grow 39% in 2010, and then grow 15-20% in the next three years,” it added.

Additionally, UBS said its estimates for AzkoNobel’s pension and financial debt were now much improved and that the group’s business was well positioned and more resilient compared with the rest of the sector should there be a “double dip” in the economy.

On 2 July, AkzoNobel announced plans to double its revenues from China to $3bn by 2015, bullish on the country's growth prospects as a leading economy in Asia.

In February, the group trimmed its year on year fourth quarter 2009 net loss to €60m from a loss of €1.52bn in the same period a year ago amid ongoing restructuring and cost reduction.

AkzoNobel also said it would exit the recession in a better position than many of its competitors due to the rapid response it has taken in the downturn.

AkzoNobel’s shares were trading at €42.88 at 14:04 GMT on the Amsterdam Stock Exchange, up 1.83% from the previous closing price of €42.11.

($1 = €0.80)

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By: Franco Capaldo
+44 (0)20 8652 3214

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