Weak Q1 expected for Germany's Bayer MaterialScience – analysts

13 March 2012 11:30  [Source: ICIS news]

LONDON (ICIS)--German chemical major Bayer's material science segment could have a weak first quarter in 2012, as tight margins continued in January, global analysts Bernstein Research said on Tuesday.

“We expect a weak first quarter 2012 [for Bayer MaterialScience] as the margin squeeze continued in January on key products such as polycarbonate [PC] – especially in Europe, where the increase in naphtha price and weakening euro has put pressure on producers,” said Bernstein.

Bernstein said because of this it was lowering its earnings before interest, tax, depreciation and amortisation (EBITDA) forecast for the segment by around 2% for 2012.

“However, price increases for polycarbonates in February in the US (with further price increases announced for March) and higher prices in Asia due to expectations for higher demand after the Chinese New Year, keeps us more positive for the back half of the year,” it added.

“For toluene di-isocyanate (TDI), we believe the new supply in the market from Bayer's new TDI plant [at Caojing in Shanghai, China] will continue to keep margins lower than 2011,” it added.

In February, Bayer said its material science segment performed below expectations in the fourth quarter and in the whole of 2011.

Looking to Bayer CropScience, Bernstein said it expects price increases of 2% in 2012.

“We remain cautious due to the degree of competition in what appears to be an oligopoly. Our pricing indicators show some positive pricing momentum – producer price indices for crop protection chemicals prices were up in the US in January 3.0% year on year and 0.8% in Europe,” said Bernstein.

“After slightly better than expected full-year 2011 results, our crop science EBITDA forecasts increase by 2%,” it added.

Bernstein has maintained a “market-perform” rating for Bayer, and has a share price target of €60 ($79), up from €54.

($1 = €0.76)


By: Leigh Stringer
+44 208 652 3214



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