Bank questions Poland’s Orlen petchem profitability forecast

03 December 2012 12:07  [Source: ICIS news]

LONDON (ICIS)--Polish oil and petrochemical group PKN Orlen has overestimated its likely petrochemical profitability for the next five years in its 2013-2017 strategy, an investment bank said on Monday.

Orlen assumes an [average] €812/tonne [$1,055/tonne] petchems [model] margin, whereas this margin has never averaged above €800/tonne since Orlen began publishing [its strategy] (2008-2012), not even on a quarterly basis,” WOOD & Company said in a note to investors.

The bank forecast an average €700/tonne margin for 2013-2017, but also cautioned that the reality could turn out to be worse if Orlen is hit by competitive petrochemical exports expected to flow to Europe from new capacities in the US and the Middle East.

“We see downside risk as the US develops [shale] gas-based steam crackers, the Middle East has its mega-plants and European demand is flat at best,” said Robert Rethy, an analyst at WOOD & Company.

The analyst also questioned Orlen’s forecast that it could achieve average annual petrochemical earnings before interest, tax, depreciation and amortisation (EBITDA) of zloty (Zl) 2.5bn ($791.1m, €609.8m) according to Last In, First Out accounting during the five-year strategy period, compared to Zl1.5bn during 2008-2012.

An average figure with a reduction of Zl300m-400m was more likely, Rethy said.

($1 = €0.77, $1 = Zl3.16, €1 = Zl4.10)


By: Will Conroy
+44 20 8652 3214



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