WOOD Flash – Sisecam: large US investment strengthens company’s global footprint and cost competitiveness
We see the announcement on expanding its operations in the US soda ash market as very positive for Sisecam for several reasons. First, it creates upside potential for our revenues and profit forecasts for the company in the long term. Second, it increases the hard currency contribution to Sisecam’s top line, making its business more resilient to the TRY depreciation risk, strengthening its global footprint further. Third, it improves Sisecam’s profitability profile structurally (the natural soda ash production in Wyoming should generate an EBITDA margin of 50%, according to the company, vs. the 20-25% margin it has reported in recent years), making it the most profitable listed chemical holding worldwide. Fourth, it should improve the company’s ESG profile (according to Ciner, the natural soda ash production process, which is based on trona, generates c.0.4t of CO2/1 tonne of soda ash vs. 1.1t for the Solvay method, which is used currently by Sisecam). Finally, we like the company’s comment on the possible synergies with its glass business in the US. This event is not included in our latest financial forecasts and valuation of the company, and we see upside risk for our current outlook, if the transaction is executed smoothly. We remain BUYers of Sisecam.Turkiye Sise ve Cam Fabrikalari is a holding company. Through its subsidiaries, Co. operates predominantly in the manufacture of glass and chemicals. Co.'s activities encompass all the areas of glass-making (flat glass, glassware, glass packaging and glass fiber) and soda ash and chromium chemicals. Co. consists of five operational divisions: flat glass, glass-ware, glass packaging, chemicals (soda ash products, chromium chemicals, glass fiber and unsaturated polyesters, industrial raw materials, electricity, steam, vitamin K3 derivatives and sodium metabisulfite), and export-import and insurance services.
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