Erste Group Bank pessimistic on naphtha-reliant Petkim and Unipetrol

28 August 2012 15:49  [Source: ICIS news]

LONDON (ICIS)--Erste Group Bank is maintaining its pessimistic outlook for petrochemical producers in central and eastern Europe and Turkey that use naphtha as their sole feedstock, it said on Tuesday.

The Czech Republic's Unipetrol and Turkey's Petkim have been named by the bank as two such producers that face further pressure on their profitability for the remainder of this year and into next year.

“This is a macro-driven view of our oil and gas [sector] coverage that has not changed much since last year, and the operational performance of the companies under our coverage since then suggests that we are on the right track,” Erste said.

“We believe that the [macroeconomic] environment will put pressure on pure downstream players, while the slowing economy may additionally hit demand for company products,” the bank said.

Given the economic pressure and the cost of naphtha – compared to cheaper feedstocks such as ethane used by competitors – Turkish petrochemical producer Petkim could only expect a sustainable recovery in margins from 2014, the bank noted.

Erste added that Petkim's second-quarter net loss – on climbing feedstock costs – fell below its expectations.

Unipetrol's second-quarter losses also undershot Erste's expectations.

“Based on our forecasts, we think that Unipetrol [shares are] traded at a premium compared to [shares of central and eastern European] peers, which we believe is unjustifiable given the company's low complexity and lack of a mid-term strategy,” the bank said.

By: Will Conroy
+44 20 8652 3214

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