Analysts back wider divestment strategy of Poland’s Ciech

18 October 2012 11:33  [Source: ICIS news]

LONDON (ICIS)--The decision of Poland’s Ciech to continue down the path of divesting its non-core business segments is encouraging, investment bank analysts said on Thursday.

“Greater focus on the company's core, higher margin soda ash business, coupled with a reduction in the debt burden should be perceived as a positive development, in our opinion,” said Piotr Drozd, an analyst at Prague-based WOOD & Company.

Ciech, having reached a deal with BASF which will end production at “the most troublesome asset”, the toluene di-isocyanate (TDI) business run by subsidiary Zachem, is now working on plans to divest its organic division — comprising epichlorohydrin (ECH), epoxy resins and plant protection products — as well as its agro segment, which produces phosphorus compounds, and its silica division, which makes glass products, Drozd added.

The divestment is aimed at cutting state-controlled Ciech's net debt-to-earnings before interest, tax, amortisation and depreciation (EBITDA) ratio, which currently stands at 3.5x, having reached as much as 5.0x in 2009, the analyst said.

During the past 12 months, the soda ash segment accounted for 43.9% of Ciech's consolidated sales revenues but 77.1% of its EBITDA, meaning Ciech had a 17% EBITDA margin in soda versus a 4.2% margin in the segments earmarked for divestment, WOOD & Company said.

Ciech's remaining subsidiaries up for sale, namely Organika Sarzyna, Alwernia, Vitrosilicon and Pianki, operate at positive EBITDA margins, ranging from 4% at Pianki to 15% at Vitrosilicon, Drozd said.

Thus, Ciech’s management had stated that it may refrain from selling where a proposed valuation is unsatisfactory, he added.

By: Will Conroy
+44 20 8652 3214

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