05 February 2013 16:56 [Source: ICIS news]
LONDON (ICIS)--Major synthetic rubber producer Synthos is facing a prolonged deterioration of prices on weak European markets, Erste Group Bank said on Tuesday.
Recommending that investors stay 'Underweight' in shares of the Polish producer, the bank said: “The continued weakening of styrene butadiene rubber (SBR) spreads and lower butadiene [BD] prices, which undermine the company’s competitiveness, will, in our view, eventually start undermining the share price performance.”
“In our opinion, the stock price is currently being held up by a high expected dividend (yield 9%), but it is however unsustainable in the medium term,” Erste added.
A source at Synthos said there was a continuing effort to compensate for weaker sales in recession-hit Europe by improving sales in Asia, where SBR demand, for instance, remained stable.
The decline in obtained European prices was particularly driven by weak tyre demand, he added.
Part of the company strategy is to anchor its long-term profitability by creating state-of-the-art synthetic tyre rubbers that help meet new environmental objectives in the EU transport sector such as lower fuel consumption and noise parameters.
To this end, last November it opened the research and development centre for new technologies in the southern Polish town of Oswiecim, near Krakow.
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