US, Europe chemicals makers to pursue M&A deals and grow - Moody's

25 May 2011 15:26  [Source: ICIS news]

LONDON (ICIS)--US and European chemicals producers will continue to pursue mergers and acquisitions (M&A) this year and in 2012, while strong demand from Asia and Latin America will bolster their growth over the next 12–18 months, Moody’s Investors Service said on Wednesday.

A report from the credit ratings agency said US and European chemicals companies will be able to carry out medium-sized acquisitions and increase investments without such actions “materially affecting their credit quality”.

The report also stated that the US and European chemicals industry will continue to grow through the end of 2012, although more slowly than in 2010.

“Strong demand from Asia – especially China and Latin America will sustain the industry’s positive momentum, while chemical producers will also enjoy a high oil-price environment,” said Elena Nadtotchi, vice president-senior credit officer with Moody’s.

North American producers of petrochemicals will maintain their natural-gas cost advantage, while European producers face greater risks from slower growth at home and increased competition,” Nadtotchi added.

Companies with significant sales in emerging markets – such as BASF, Dow Chemical, AkzoNobel, Celanese and Syngenta “will reap the greatest benefits as long as the growth of Chinese demand remains strong,” Nadtotchi noted.

Moody’s also said that companies such as LyondellBasell, Chevron Phillips, INEOS, Westlake, NOVA and Georgia Gulf “will benefit from the sustainable feedstock cost advantage in the US and a strong  pricing momentum for olefins and aromatics, along with such diversified majors as Dow Chemical”.

The agency warned that a sharp rise in oil prices would risk triggering inflation in emerging markets, which would damage US and European consumer sentiment.

Any increase in dividends or share buybacks would hamper the chemicals sector’s positive credit, Moody's added.

For more on BASF, Dow Chemical and other producers, visit ICIS company intelligence
Read Paul Hodges’ Chemicals and the Economy blog

By: Tanzeel Akhtar
+44 208 652 3214

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