Erste downgrades Turkish ferts firms, sees falling margins

25 April 2013 12:23  [Source: ICIS news]

LONDON (ICIS)--Erste Group Bank has downgraded its recommendations on Turkish fertilizer producers, citing declining margins and limited mid-term growth prospects, the bank said on Thursday.

“Although the global outlook is positive, we maintain our cautious view for local players given the companies’ heavy risk-bearing production structures and low margin outlook due to higher raw material prices,” Austria-based Erste said in an analysis.

It added: “We cut our 2013 [Turkish fertilizer sector] volume growth forecast to 2% contraction from 2% growth and expect consumption to decline to 5.2m tonnes on front-loaded demand in Q4 of 2012. We set our mid-term consumption estimate at 5.5m tonnes.”

The sector could expect slight margin improvements in 2013 and in coming years thanks to new investments, but margins in the near future would remain below the 2010-11 figures, Erste said.

Erste cut Gubre Fabrikalari to “accumulate” from “buy” on weaker operating performance projections for its domestic operations, and downgraded Bagfas to “hold” from “accumulate” on declining margins in 2012 due to lower acid-based fertilizer sales and diammonium phosphate (DAP) prices and higher raw material costs and a low margin outlook.

The bank ceased its coverage of Ege Gubre due to the low trading liquidity of shares in the company.


By: Will Conroy
+44 20 8652 3214



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