Niche commodity margins boosting chems producers’ earnings - analyst

12 July 2011 17:33  [Source: ICIS news]

LONDON (ICIS)--High “niche” commodity margins are boosting the financial performances of chemical producers including BASF's chemicals and plastics divisions and Bayer MaterialScience beyond consensus expectations, analysts at Bernstein Research said on Tuesday.

“We believe 'niche' commodities - commodities with pricing power due to a highly concentrated supplier base such as MDI [methyl di-p-phenylene isocyanate] and TDI [toluene diisocyanate]– are increasingly interesting at this point in the chemicals cycle,” the research firm said.

Bernstein added it believes the consensus for the financial performances of the chemical producers were still too low for 2011 and 2012 given the niche commodity picture.

“For BASF Chemicals (~25% niche commodities) and Plastics, we are 14% and 6% respectively ahead of consensus for EBIT [earnings before interest and tax] (ex. specials) for 2011,” it said in an analysis.

“For Bayer MaterialScience, we are 5% and 4% above consensus for 2011 and 2012. Bayer have remained positive about Bayer MaterialScience and plan to invest €5bn (€7bn) over a period of three years in polycarbonate and isocyanates in Europe and the US,” Bernstein added.

In its report conclusion, Bernstein said: “We believe the oligopoly structure of niche commodities - commodities with a highly concentrated supplier base such as polycarbonate, MDI, TDI and nylon 6 [polyamide 6] - will maintain currently elevated margins for another 12-18 months."

($1 = €0.71)

For more on BASF and Bayer visit ICIS company intelligence

By: Will Conroy
+44 20 8652 3214

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