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| High interest in BorsodChem |
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The [BorsodChem] transaction will be concluded by the end of September – and reportedly there is significant interest in the company’s secondary offering. The company held roadshow presentations in London and Edinburgh last week, and in Budapest on Monday. The vision of the future described by BorsodChem has been favourably received.
There is significant interest in BorsodChem’s secondary offering, which is led and organised by London based HSBC and CA-IB. As part of the transaction, which targets international and domestic institutions the management of the company met potential investors in London and Edinburgh last week, and in Budapest on Monday, and the roadshow continues in the US next week.
Because the company has been known for its good management and excellent fundaments in the past years too, and because its main risk factor has been the ownership structure, it is understandable that attendees have asked numerous questions regarding VCP’s role as an owner. It was the fund managers’ suspicion that the sale [of the company] to financial investors was the only possible way [for VCP to exit from the company] because there had been no appropriate strategic applicants. CEO László F. Kovács said he was glad that BC would not become a [production] site of a large company, which was important not only for BorsodChem but for Hungary and the Hungarian stock market. In the past three and a half years VCP has always respected the management’s needs [for BC] to pursue its own independent strategy. In addition, it would not do too much good for the reputation of VCP, which is considering further investments in the region if, in the hope of a quick return, it sold the acquired companies to anyone as soon as possible paying no attention to the company’s interests.
When presenting [the overview of] the company, the CEO pointed out that that BC had significant cost advantages in comparison with its western competitors. The reason for this lies in the lower labour costs, and as a vertically integrated company it produces part of its raw materials (aniline, vinyl-chloride) in house. It is a further advantage that the company has a tax holiday until 2011. It is a technological benefit that chlorine that emerges as a by-product of MDI and TDI production can be recycled in PVC production.
BC, which was formerly exposed to the price volatility of the PVC cycle, has remarkably increased isocyanates (MDI, TDI) production since 2001, so these products now represent more weight in the [product] portfolio than PVC, as a result, the company is less exposed to market cyclicality than its less diversified competitors.
According to market forecasts, the demand for [BorsodChem’s] main products will increase faster in CEE than the Western European average, while to the best of the management’s knowledge no competitors are planning expansion in the region. In addition BC would like to strengthen its positions and increase its share in the Western European markets, which will be possible because of the company’s cost competitiveness. According to analysts, demand for TDI is increasing by an annual 4.2% in CEE and 2.9% in Western Europe between 2003 and 2008. BorsodChem’s TDI production accounts for nearly 15% in Europe, its market share is 12%, and 23% in Central Europe.
According to the forecasts, the MDI market in Central Europe may grow 5.8% annually; this pace is somewhat lower, 3.4% per annum in the west. BC’s share in Europe is about 5%. The management of the company think that [the company] does not need to fear the appearance of new competitors because the costs of the rather complex technology are rather high.
Increasing the production of isocyanates and PVC is a major pillar of BC’s strategy. In addition to organic growth, the company is planning acquisitions, and it is mulling over four targets in the neighbouring countries. One of these is Romanian Oltchim, a significant competitor in PVC production.
Reportedly, investors received the company’s presentation favourably, however, what it means on the level of figures (within the HUF 1775 – HUF 2075 price range) will turn out at pricing, which is due to take place at the end of September.
According to the latest issue of European Chemical News MDI producers will increase their prices in September-October. According to the major producers, demand is strong, while, due to BASF’s production problems among other things, capacities are narrow.
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Source: Napi Gazdaság |
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© VCP AG 2010
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