Evonik earnings estimates cut on weaker methionine and butadiene

16 July 2013 12:59  [Source: ICIS news]

LONDON (ICIS)--Credit Suisse has downgraded its earnings estimates for Evonik because of weakness in the animal feed supplement, methionine, much lower butadiene prices and the general demand downturn, it said on Tuesday.

Earnings estimates for the Germany-headquartered specialty chemicals maker have been cut by an average 12% from earlier assessments, the bank’s European chemicals analyst said.

“We reduce our target [share] price to €26.50/share from €31.50/share, and maintain our Neutral rating. We are forecasting a 15% EBITDA [earnings before interest, tax, depreciation and amortisation] decline (ex real estate) in 2013 vs company guidance for flat [EBITDA] (seemingly reliant on a significant 2H [second half] recovery – not implied within our forecasts),” he added.

Evonik appears to be more affected by the downturn than the broader chemicals sector in Europe because of its exposure to the animal feed additive methionine and to butadiene, Credit Suisse said.

Methionine prices and volumes are down 10-15% year on year, a fact that could lower group EBITDA by 6%, the bank added in a note to clients. Butadiene prices in the second quarter were down 20% quarter on quarter, which could produce a 4% negative group EBITDA effect, it suggested.

Evonik is also exposed to the broader economic downturn and particularly to the weak automobile and construction sectors.

Evonik’s shares were trading at €25.98 at 11:52 GMT on Tuesday, up by 1.27% from the previous close. The stock debuted in Frankfurt in April.

($1 = €0.77)

By: Nigel Davis
+44 20 8652 3214

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