Deutsche cuts EPS forecasts across chems sector

07 October 2008 11:26  [Source: ICIS news]

LONDON (ICIS news)--Deutsche Bank on Tuesday cut its 2009 earnings forecasts for several European chemicals producers due to increasing pressures from the global economic crisis, warning profits could be slashed by over 40% for some companies if the situation got dramatically worse.

“We now assume global GDP [growth] of 2% in 2009, which, combined with supply-driven petrochemical downturn, means that many chemical names will struggle to deliver volume growth,” analyst Tim Jones said in a note to investors.

Deutsche Bank said it had downgraded its 2009 earnings per share (EPS) outlook by over 10% for Lanxess, Arkema, Rhodia, Clariant, Akzo Nobel and Yara, with material downgrades for several others.

 

“We see our volume scenario for 2009 as realistic but note that this is not ‘worst case’ with a recession in all major regions potentially costing many names at least 40% of current EPS,” Jones said.

 

The bank also cut its target shares prices for all companies covered in its European chemicals portfolio.

 

Financial risk in the European chemicals sector was relatively low, with most names having limited risk due to aggressive re-financing before the credit crisis, the bank said.

 

An early warning of the financial crisis’ impact on the chemicals sector came on 29 September, when Netherlands-based AkzoNobel said it would cut 3,500 jobs by 2011 and defer its share buyback programme in light of the volatility in the global financial markets.

 

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Author: Mark Watts
+44 20 8652 3214

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