Bank cuts Poland’s Grupa Azoty to ‘hold’ on chem, ferts prospects

22 May 2013 10:19  [Source: ICIS news]

Petrochemical plantLONDON (ICIS)--Raiffeisen Centrobank (RCB) on Wednesday cut its recommendation on the stock of newly consolidated Polish chemical group Grupa Azoty from a ‘buy’ rating to ‘hold’, citing a lack of expected improvement in chemical and fertilizer markets.

"The company may focus on synergies execution and selected acquisitions, which should gradually improve its financial results, but we already find the current valuation fair,” said Dominik Niszcz, an analyst at RCB.

“The longer winter implies a shorter period to apply fertilizers and some farmers may trim application resulting in lower demand for fertilisers in Poland in 2013. Moreover, the global trends in fertilizers and food prices are not encouraging, especially in view of the new supply,” he added.

Grupa Azoty remains exposed mainly to the European market with Asia, Africa and Latin America, representing only 5%, 1% and 5% of revenues in the first quarter, respectively, while domestic revenues constituted 56% of revenues in the first quarter of this year, RCB said.

Looking ahead, Niszcz anticipated the situation on the plastics market might mean Grupa Azoty records a negative plastics business operating result in 2013.

“The improvement in the melamine market seen in the first half of 2013 was partly related to a breakdown at a German producer [BASF],” Niszcz added.

“Similarly, the caprolactam market is difficult given that local Chinese supply may grow, while demand remains sluggish,” he said, noting that China and Taiwan are important capro export markets for Grupa Azoty subsidiary Zaklady Azotowe Pulawy (ZAP).

Grupa Azoty expected stability in its fertilizer business this year, Niszcz said.

“However, there are some threats making the outlook uncertain related to an increased presence of Chinese urea on the global markets, still low DAP [diammonium phosphate] prices, a solid supply of grain in Ukraine this year and new capacities in nitrogen fertilizers,” he added.


By: Will Conroy
+44 20 8652 3214



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