The company commented that revenue development year-to-date has met the company’s expectations and the 1H revenue growth is even above the FY guidance of at least 5% growth on positive price and volume trends.
However, furtherraw materials price inflation in 2Q11 with raw materials prices now up around 20% year on year, will impact profitability. Combined with some prolonged maintenance stops within Specialty Chemicals (and continued softness of demand in mature markets which is nothing new in our opinion), this will lead to a 2Q11 EBITDA of around € 550m, which is roughly 10% below last year’s 2Q level of € 614m and about 15% below our and consensus forecasts (of € 647m and € 649m, respectively).
now hinted at a full year EBITDA at least in line with the prior year, assuming no further deterioration in economic conditions. Previous guidance called for at least 5% EBITDA growth in 2011. We were forecasting 13% growth to € 2,212m and consensus was forecasting 10% growth to € 2,159m.
The company will host a conference call at 10.00 CET.
Our View:
The profit warning is very disappointing news. We had the impression that pricing was evolving positively, especially at the Deco Paints side with price increases commented to be successfully implemented in the DIY chain at the start of the painting season in Europe.
We will lower our FY11 EBITDA forecast by roughly 10% to get in line with new company guidance, and this will reduce our EPS forecast by almost 15%.
Conclusion:
The profit warning suggests that is having a tougher time now as in the previous rawmat inflationary period (2008), when after a couple of quarters pricing started to accelerate. We lower our rating from BUY to Accumulate while setting our target price at € 55 (from € 60). Despite the disappointment on the numbers, we still believe has a solid position in the global coatings market, being the largest player with also a well-balanced geo-mix (roughly 40% of revenue from emerging markets).