We decided to lower our earnings forecasts for (38,03 EUR, 1,09%) Nobel given our increased prudence on the impact from weak(ening) end markets, downtrading in Decorative Paints and the time lag to catch up with risen raw materials prices.
We lowered our Deco Paints FY11 EBITDA before incidentals forecast from € 479m to € 455m while lowering the Others line from € -140m to € -150m leading to a reductionof our FY11 EBITDA before incidentals forecast from € 1,854m to € 1,820m (vs Bloomberg EBITDA consensus of € 1,830m). This means we forecast a decline in EBITDA before incidentals of 14% y/y in 4Q11 (to € 325m).
Weak volumes and risen raw materials prices (especially on titanium dioxide) will still impact 2012 performance as well, in our opinion. We see little hope for major improvement in trading conditions in the short run and we decided to lower our FY12 EBITDA forecast from € 1,936m to around € 1,859m(Bloomberg consensus currently € 1,871m).
The tougher trading environment resulting in downtrading and weakening volumes are complementing raw materials prices as key negatives for short term earnings momentum. The share price has done fairly well in recent weeks and we are only 6% off vs our € 40 target price. That diminished upside potential and the lack of triggers prompt us to revise our rating from Accumulate to Hold.