Merrill Lynch today downgraded Makhteshim Agan Industries Ltd. (TASE: MAIN) to "Underperform/high risk" from "Neutral" and set its price target to NIS 12 on the grounds that the agrochemicals maker is "skating on thin ice from a cash flow perspective".
Makhteshim Agan's share fell 4.6% to NIS 12.80 by midday on the TASE today.
Merrill Lynch analyst Haim Israel says that Makhteshim Agan is "handicapped by a buyers' market". He notes that the company's working capital investments took up half its cash and hiked net debt by 50% in just one quarter. "Market dynamics are changing for the worse and we are concerned about Makhteshim Agan’s performance, as it approaches 2009 ‘inventory rich’ rather than cash rich."
Haim Israel adds, "With the market slowdown and less demand for crop protection expected until the end of the year and in 2009, we do not think Makhteshim Agan will be able to offload the accumulated." He is also worried by the credit crunch in Brazil, a major market for the company, which could affect the company's cash flow.
Haim Israel says, "We continue to believe that the current market slowdown puts Makhteshim Agan between a rock and a hard place, as it enters a ‘buyer’s market’ as a standalone generic player with no relative advantages or pricing power."
Merrill Lynch predicts that Makhteshim Agan will report a net profit of $250 million on $2.58 billion revenue in 2008 and a net profit of $231 million on $2.7 billion (4.8% growth) in 2009.
Published by Globes [online], Israel business news - www.globes-online.com - on November 11, 2008
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