Bank holds ‘Sell’ rating on PKN Orlen, notes good petchem margins

24 January 2013 13:38  [Source: ICIS news]

LONDON (ICIS)--WOOD & Company has maintained its 'Sell' rating on the stock of Polish group PKN Orlen despite noting that its petrochemical operations are achieving decent margins, the investment bank said on Wednesday.

“The current depressed level of Orlen's refinery margins may be related to seasonality, but petchems, on the other hand, may prove to be a more reliable earnings contributor [having achieved] flat and decent margins for three years now, albeit below management’s assumptions for 2013-17,” Robert Rethy, an analyst at WOOD & Company, said in a note to investors.

Explaining the 'Sell' rating, Rethy said the bank finds “some of Orlen's assumptions and EBITDA [earnings before interest, tax, depreciation and amortisation] targets for the next five years somewhat ambitious and some of its strategic problems unresolved”.

One of those strategic problems is how to restore profitability to its Czech subsidiary Unipetrol, which on Tuesday reported the latest in a long run of quarterly net losses, despite swinging to a profit on its petrochemical business.

In early December, Unipetrol said it had rescheduled the release of its delayed new five-year strategy to either the first quarter or the second quarter of 2013. It was originally to be published at the end of 2011.

Unipetrol is dogged by ageing production assets and a lack of specialty products in its petrochemical portfolio, as well as growing petrochemical competition from the Middle East where big producers are using cheap ethane feedstock, WOOD & Company said.


By: Will Conroy
+44 20 8652 3214



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