Ciech – Improving Market Conditions Support Profits
Pricing in European soda ash contracts is expected to be 4% higher on average this year, and for Ciech after a 6% sales price rise we anticipate additional 2020 revenue of an estimated PLN 88m. Thanks to a simultaneous decrease of PLN 19m in energy costs (with lower prices of coking coal and natural gas mitigating higher expenses on thermal coal), despite continuing overheads generated by the dormant soda ash plant in Romania, this should result in a boost of about PLN 59m to the recurring annual EBITDA. According to ICIS, there are no plans for major capacity additions in the European soda ash industry in the near future, and the medium-term price outlook is good thanks to expected growth in demand from the glass industry as it increases production of sustainable packaging to replace plastic. After small upward revisions to our 2020 and 2021 earnings estimates to reflect expectations of lower gas costs and higher costs of thermal coal, we maintain a buy rating for Ciech, with the price target raised slightly from PLN 44.41 to PLN 47.46.
Ciech is engaged in the production, trade and distribution of chemicals as well as comprehensive service activities directed at the domestic and foreign market. The main products sold by Co. are soda ash, TDI, plastics, resins, chemical fertilizers, plant protection chemicals, glass blocks and glass packaging, salt and other chemicals.
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