Raiffeisen downgrades Poland’s Ciech on soda ash market

17 September 2010 17:11  [Source: ICIS news]

PRAGUE (ICIS)--Raiffeisen Centrobank has downgraded Poland's Ciech, citing stagnation in the soda ash market and cheap competition from Turkey that is undermining its Romanian subsidiary, the bank said on Friday.

Reducing its rating on Ciech stock to 'Hold' from 'Buy', it said margins in the soda ash business were stuck at very low levels.

"There is no improvement in the soda ash business: regardless of the dramatic situation on the soda market Ciech is optimistic about the fourth quarter and expects higher prices, but we are more sceptical regarding the future margin as there is neither relief on the costs side nor an increase in product prices in Q3 and we therefore cut our profitability estimates for the soda ash segment," wrote analyst Dominik Niszcz.

The average soda ash contract and spot prices in Europe fell by almost 20% year on year in the second quarter of 2010 and remained flat at low levels in July and August of between €165/tonne ($217/tonne) and €175/tonne, Raiffeisen said.

Looking at Ciech's Romanian subsidiary, US Govora Ciech, Niszcz noted that even though it had benefited from the shutdown of a local competitor, a soda ash unit owned by India's GCHL, it was still reporting significant losses.

"And in view of the huge cost-effective trona-based natural soda ash production launched in Turkey (and another one million tonnes/year of soda output planned in that country to start by the beginning of 2013 by Eti-Soda) we see a very small chance of US Govora Ciech becoming profitable," he added.

US Govora Ciech's net loss stood at zloty (Zl) 57m ($18.9m, €14.4m) for the first half of 2010.

($1 = €0.76, $1 = Zl 3.02, €1 = Zl 3.95)

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By: Will Conroy
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