Bottom-line
missed expectations on sizeable loss at the operating level. Despite the TL30mn one-off gain from the sale of Yarimca Land
Margins
turned negative under resilient feedstock price. Demand weakness in the global petchem market continued to lead to
contraction in product prices during 4Q11 (i.e. LDPE, PP and Benzene prices
were down 16%, 15% and 21% QoQ). Feedstock naphtha price, on the other hand,
averaged ~10% lower QoQ. As a result, we estimate that the spreads in the
corresponding products plunged 22%, 20% and 72%, respectively. We were
expecting to see a negative EBITDA figure, but apparently the impact of the
inventory losses on the profitability was worse than feared as the company’s
TL63mn negative EBITDA figure was even larger than TL44mn negative EBITDA
recorded in 4Q08. This figure was also far below our relatively bearish -TL5mn
forecast and consensus average of +TL31mn.
Conclusion: Bottom-line weakness was already flagged by the
company’s tax-purpose financials released in mid-February. But looking at
consensus figures on Bloomberg, even the market’s curbed estimates remained
overly optimistic (2011E mean net earnings forecast declined from around
TL200mn at the beginning of the year to TL150mn levels following tax-purpose
financials). Hence, Petkim is likely to experience some negative reaction
today. This afternoon (at 2pm), the management will hold an analyst meeting,
where we hope to get a better color on the outlook of the company. Hence, we
opt to keep our neutral view unchanged with TL2.50/share target price for the
time being.
