BASF and Bayer to see margin drops in Q4 2011 – Bernstein

03 February 2012 10:52  [Source: ICIS news]

LONDON (ICIS)--Bernstein Research expects to see margin declines in the fourth quarter of 2011 for BASF Plastics and Bayer MaterialScience (BMS) as petrochemical margins fall, the global analyst said on Friday.

“Niche commodities such as toluene di-isocyanate (TDI) and polycarbonate, have struggled to improve margins, as capacity coming on line and slower demand has meant the producers could not put through price increases. This trend is particularly detrimental for [BMS],” said Bernstein.

The analyst added that, in addition to margin declines for the divisions of the two German chemical majors, it expects the first quarter of 2012 to remain weak.

“Margins for the ‘niche commodities’ most relevant for BASF Plastics and… BMS experienced mixed results in the fourth quarter of 2011… while the start of the first quarter 2012 has been slightly negative for nearly all,” said Bernstein.

However, Bernstein said niche commodities, methyl di-p-phenylene isocyanate (MDI), expandable polystyrene (EPS) and Nylon 6 (or polyamide 6) had held margins, as the pricing power of the oligopolies in the US and Europe meant that prices fell less than costs.

“We view the stability of these margins as a positive for BASF and [BMS] in the long run,” it said.

“As margins for basic petrochemicals, the raw materials for niche commodities, have declined recently, we expect margins for the niche commodities to remain relatively stable as long as volumes do not sharply decline (greater than -5%),” it added.

Bernstein rates BASF and Bayer shares at market-perform with target prices of €58 ($76) and €54, respectively.  

($1 = €0.76)

For more on BASF and Bayer visit ICIS company intelligence

By: Leigh Stringer
+44 208 652 3214

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