Wacker’s margins to shrink on volatile polysilicon market – bank

12 June 2012 10:42  [Source: ICIS news]

LONDON (ICIS)--Germany’s Wacker Chemie may see its margins weaken in 2012 and 2013 because of continued volatility in the polysilicon market, investment bank JP Morgan Cazenove said on Tuesday.

JP Morgan Cazenove said that European solar subsidy cuts and a structural overcapacity in the overall polysilicon market cannot be offset by the growing demand in Asia coming from China and Japan. Polysilicon is used in the manufacture of solar panels.

“[Therefore] we think this should keep the global demand soft and pricing under continuing pressure,” it added.

However, JP Morgan Cazenove said that with poly pricing falling sharply, it has been noticed that solar wafer makers are migrating towards the higher quality polysilicon produced by companies such as Wacker.

“Therefore, we expect Wacker to be able to sell its additional capacity and compensate its volume loss from contract cancellations, offering new contracts with lower prices,” it said.

In the longer-term, JP Morgan Cazenove said that because Wacker is one of the lowest cost producers of high polysilicon grade it should benefit from a consolidated polysilicon market.

“However, for the polysilicon market to consolidate we need to see no more capacity additions, and a significant amount of the current capacity to be taken out, which does not seem likely for the moment (high quality polysilicon producers are adding capacity significantly in 2012 and 2013 and competition is still holding on),” it added.

“Concerning profitability, we do not believe that Wacker Polysilicon margins are likely to return to their historical average of around 48%,” said the bank.

JP Morgan Cazenove maintains its “underweight” rating for Wacker Chemie but lowers the company’s share price target to €46 ($58) from €47.

At 09:08 GMT, Wacker Chemie’s shares were trading on Germany’s Xetra stock exchange at €53.87, down by 0.07% from the previous close.

In May, Wacker announced that its first-quarter 2012 net profit slumped by 76.2% year on year to €40m, with sales falling 7.5%.

($1 = €0.80)

By: Leigh Stringer
+44 208 652 3214

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