UBS upgrades Germany’s LANXESS to ‘neutral’ from ‘sell’

06 September 2011 12:10  [Source: ICIS news]

High-performance tyres drive LANXESS upgradeLONDON (ICIS)--UBS has upgraded its share rating for Germany-based chemicals group LANXESS to “neutral” from “sell”, based on expectations that demand for high-performance tyres will grow, the investment bank said on Tuesday.

“We believe high-performance-efficiency tyre take-up will gather momentum from next year, driven by EU labelling,” Switzerland-based UBS said.

“Global adoption is set to follow the lead of the EU, resulting in potential above-market growth of performance butadiene-rubber tyre materials. LANXESS is seen by tyre producers as being a critical partner in the delivery of much of the required innovation to meet the efficiency improvement aspirations of government bodies,” it added.

In August LANXESS said that it expects the US, China and Brazil to introduce regulations on tyre labelling within the next two to three years that will boost the earnings of high-performance synthetic-rubber producers.

UBS said that the price of butadiene, which strongly correlates to the earnings before interest, tax, depreciation and amortisation (EBITDA) of LANXESS’ Performance Polymers division, is likely to remain high because of tight supply driven by low levels of additional naphtha capacity.

The investment bank raised LANXESS’ 2011 EBITDA estimates by 9%. However, the group’s EBITDA estimates for 2012 and 2013 were lowered by 4% and 1%, respectively, based on a slowing economy.

In January 2010, UBS downgraded LANXESS stock to “sell” from “neutral”, after analysts said that the stock had advanced “too far too fast” on valuation grounds.

LANXESS shares were trading at €37.10 ($52.25) on Germany’s Xetra stock exchange at 10:20 GMT, up by 1.70% on the last close.

($1 = €0.71)

For more on LANXESS visit ICIS company intelligence

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

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