Borsodchem Q2 net plunges on weak forint

Borsodchem Nyrt, the biggest maker of PVC plastic in eastern Europe, said Q2 profit plummeted 96% because of losses on foreign currency loans. Net income fell to Ft 143 million ($683,296) from Ft 3.2 billion a year earlier, the company said in a stock exchange statement today. Sales rose 41% to Ft 63 billion. Profit was expected at Ft 1.4 billion, according to the median estimate of five analysts polled by Bloomberg. Borsodchem, which last month said it may receive a buyout offer from UK-based Permira Advisors LLP, has been losing money on loans denominated in foreign currencies as the forint weakened against the euro. Profit was also hurt by higher oil prices, which pushed raw material costs higher. „Financial losses on foreign exchange debt exceeded expectations by a wide margin,” András Zékány, an analyst at ING Wholesale Banking in Budapest, wrote in an e-mailed note. „We expect the potential public bid from Permira to set the course of the share price.” The Hungarian forint has declined 6.5% this year against the euro and was little changed at 269.165 versus the euro at 8:26 a.m. in Budapest.
Raw material prices also rose in the period. PVC resin prices increased to € 939 a ton from € 892 a ton in the Q1 while ethylene, which is used in PVC production, climbed to € 865 a ton from € 785, decreasing Borsodchem's profit by € 33 on each ton of PVC it made. The company's operating profit, which excludes losses on foreign exchange loans, increased 85% to Ft 6.6 billion in the Q2, Borsodchem said. Permira said July 13 it may publish a public offer for all Borsodchem shares in September. The buyout company, which holds an option to buy a combined 52% of Borsodchem from two investors, said it would offer Ft 3,000 for each share, valuing Borsodchem at Ft 228.5 billion ($1.1 billion). Borsodchem has spent € 300 million ($358 million) expanding production the past three years and plans to invest a further € 500 million ($644.3 million) to boost production of foams used in the building and automotive industries, Borsodchem CEO Kay Gugler said in April. (Bloomberg)