Roll out the bullish forecasts

With the global industrial recovery starting to fire on all cylinders, chemical companies are coming out with increasingly bullish projections for both short and long-term gWall_Street_Bull.jpgrowth.

The comfort level is such that even five-year projections are back on the table – something unimaginable two years ago when the prognosticator’s crystal ball clouded over completely.

US-based specialty chemical companies Solutia and Rockwood both came out with robust profit projections for 2011-2015 at their respective investor days in New York.

Solutia expects to post 2011 earnings per share (EPS) of $2.00-2.25 (€1.46-1.65) per share – up from an estimated range of $1.40-1.50 per share in 2010. The guidance came in significantly higher than Wall Street consensus estimates of $1.70 per share for 2011.

And sales in 2011 are expected to rise to $2.1bn-2.2bn from around $1.9bn in 2010, while earnings before interest, tax, depreciation and amortization (EBITDA) are projected to jump to $560-600m from $480m-500m in 2010.

Shares in Solutia jumped by nearly 10% to $20.75 on the better-than-expected guidance.

And in the longer term, CEO Jeffry Quinn said the portfolio has the potential to produce $3.5bn in revenue by 2015, while raising EBITDA to over $1bn.

This translates into 13% annual revenue growth – and that’s excluding acquisitions. In addition, the company aims to raise its industry-leading 26% EBITDA margins to about 30% during the period.

The outlook is “very robust… but achievable”, said Quinn. Growth is expected to be driven by advanced interlayers made from polyvinyl butyral (PVB) and ethylene vinyl acetate (EVA) for solar and automotive applications, as well as polyethylene terephthalate (PET) performance films for electronics.

And Rockwood is targeting over 20%/year EPS growth from 2011-2015, according to CEO Seifi Ghasemi. The producer of specialty titanium dioxide, lithium compounds, ceramics and surface treatment chemicals also aims to boost its healthy EBITDA margins from almost 20% today to over 22% through the period.

Furthermore, sales growth of around 8% is expected at Rockwood in this period, with organic growth accounting for 5% and bolt-on acquisitions about 3%.

As companies gain confidence in the economic outlook as well as their ability to raise prices, expect more bullish projections in the weeks ahead.


Photo credit: www.trekexchange,com

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