Fitch gives EMEA chemicals sector a stable outlook for 2011

21 January 2011 11:39  [Source: ICIS news]

LONDON (ICIS)--Fitch Ratings has given chemical companies in the Europe, Middle East and Africa (EMEA) region a stable outlook for 2011 as the industry witnesses improving market conditions, it said on Friday.

Fitch added that chemical companies were entering 2011 with strong balance sheets and comfortable liquidity.

"Rating headroom has generally improved beyond the levels anticipated a year ago and affords sufficient flexibility for the sector's expected shift towards cautious expansion in 2011," said Myriam Affri, director in Fitch's Industrials team in London.

Fitch forecast low-to-mid single digit top-line growth for EMEA chemicals and expected some margin contraction due to rising input costs. However, it added that this would be slightly offset by cost savings from the restructuring programmes that had been implemented across the sector.

“Fitch does not expect the exceptionally strong year-on-year improvements observed in 2010 to be repeated in 2011,” the ratings agency said.

Fitch also expected in 2011 an increase in merger and acquisition activity in the chemical sector, but forecast deals would be of small-to-medium size - €100-500m ($135-$676m) - rather than large-scale transformational deals.

In addition, new low-cost capacity from the Middle East was expected to ramp up in late 2011, which could pose a significant threat for western European petrochemical producers, particularly as naphtha-based feedstock was losing competitive ground against cheap natural gas in North America, Fitch said.

($1 = €0.74)

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



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