14 April 2011 17:54 [Source: ICIS news]
PRAGUE (ICIS)--Poland's Synthos is building up a substantial cash pile for a likely expansion in high-performance rubbers thanks to a sustained market boom, Erste bank said on Thursday.
“My forecast is that by the end of 2011 the company will have zlotych (Zl) 1bn ($365m, €253m) in cash and I think that all of this could be spent on synthetic rubber investments,” said Erste analyst Tomasz Kasowicz.
“In my view, entering into the production of synthetic rubbers used to produce high-performance tyres will be the target. In mid-2011, new high performance neodymium-polybutadiene rubber (Nd-PBR) capacity of 80,000 tonnes/year will be introduced, but I think that will be just the beginning,” he added.
Synthos, based in Oswiecim, southern Poland, said that last year’s commissioning of a new butadiene plant at Kralupy nad Vltavou, in the Czech Republic, had given it the backward integration it needed to capitalise on tyre manufacturers' demand for Nd-PBR rubber, but it was not ready to provide details of more selected investment initiatives at this stage.
Construction of a mid-size synthetic rubber plant with capacity of approximately 100,000 tonnes/year would cost Synthos around Zl 500m, although if the investment was made on a greenfield site it would cost much more than that and the company would have to incur new debt or issue equity to raise the capital, noted Kasowicz.
The company’s current debt amounted to around Zl 600-700m, but Synthos was under no pressure to pay it down before it reached maturity some time ahead, he added.
In early April, Erste said Synthos was enjoying “unbelievably high” company profits driven by market opportunities that had opened up because of several instances of bad weather conditions and floods that had undermined the operations of natural rubber producers in east Asia.
Likely demand for synthetic rubber products meant that Synthos - the second-biggest synthetic rubber producer in Europe - should enjoy robust profits for at least several years ahead, added Kasowicz.
($1 = Zl 2.74, €1 = Zl 3.96)
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