Analyst lowers chem earnings estimates amid falling margins

Author: Al Greenwood


HOUSTON (ICIS)--A stock analyst lowered on Monday its 2020 and 2021 estimates for the earnings of several chemical companies because of lower margins, prices and industrial activity.

The following table shows the earnings estimates of Alembic Global Advisors.

Source: Alembic

For this year, Alembic lowered its earnings/share estimates for Air Liquide, Air Products and Linde because industrial production was lower than expected, said Hassan Ahmed, analyst. He made his comments in a research note.

Alembic lowered its 2020 earnings estimate for Huntsman because of lower-than-expected margins for methylene diphenyl diisocycanate (MDI).

Alembic lowered Braskem, Dow and LyondellBasell because prices for polyethylene (PE) were lower than expected.

Methanex was lowered because of methanol prices. Tronox was lowered because of zircon prices and Celanese was because of declines in automobile production and lower acetyl margins.

For 2021, Alembic lowered its earnings estimates for Olin and Westlake because of lower-than expected caustic-soda prices.

It raised its 2021 estimate for Braskem because the Brazilian currency, the real, was weaker than expected. Alembic raised Celanese because of higher than expected automobile sales.

Alembic lowered its earnings estimates as most chemical prices fell in the second quarter from the same time in 2019.

Ahmed attributed this to new ethylene plants starting up, lower oil prices and worries about weak demand caused by the coronavirus.

Chemical prices fell faster than feedstock costs, compressing margins, he said. At the same time, sales volumes also fell, as indicated by chemical-railcar loadings.

Based on this data, second-quarter chemical volumes fell by 12.9% year-on-year and 13.1% quarter-on-quarter, Ahmed said.

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