Investment banks look for positive US chemical earnings season

18 April 2012 17:37  [Source: ICIS news]

HOUSTON (ICIS)--Tight supplies and low feedstock ethane costs should boost first-quarter earnings for US chemical producers, two US investment banks said on Wednesday.

“We expect US chemical companies with significant petrochemical exposure to report strong [first quarter] results due to tight ethylene supply/demand,” Deutsche Bank said in a research note. “Ethylene profitability surged in [the first quarter] to near-record levels due to a collapse in feedstock ethane prices and capacity constraints amid a heavy plant turnaround schedule.”

Jefferies said favourable weather, low US energy prices and better volumes helped to offset weakness in Asia and modest restocking.

“We expect outlooks to be cautiously optimistic despite the lack of visibility near-term and concerns about the resilience of the US consumer, [European Union] budget pressures and emerging market deceleration,” Jefferies said in its earnings season outlook.

However, Jefferies warned that second-quarter margins could deteriorate “due to feedstock costs, particularly in petrochemicals and midstream chemicals with looser supply/demand balances”.

Deutsche Bank said US chemical companies will likely maintain conservative earnings per share (EPS) guidance “due to a lack of near-term visibility, continued macro uncertainty, modestly higher raw material costs, and the possibility that mild weather pulled demand into Q1”.

By: Bobbie Clark
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