Chemicals
The basic chemicals, plastics and synthetic fibers industry has flourished the past 4 years (2004-2007) after emerging from the worst and most extended period of lacklustre earnings. This up-cycle period, is expected to continue through 2008, but will be dampened by high energy prices.
Nonetheless, the arrival of significant new capacity scheduled to come on-stream in the “New Gulf Countries” add a new component to the strategic considerations of European producers. However, the new capacity coming on stream, combined with economic emotions of an expected downturn, cause market experts to forecast a downturn in during the course of 2009.
Within CEE and SEE the resurgence in the cycle has led to a number of significant consolidations within countries and Region, which is likely to continue. Furthermore, in the European context, the Region clearly offers the greatest growth potential (see charts below) and in terms of Russia, has the one country which can match the Middle East in terms of available natural resources. It is only a question of when Russian producers will translate their raw material advantage, similar as already is evident in oil and gas sector, to a series of acquisitions in the Region, and then Western Europe. These factors, combined with a number of upcoming privatizations, particularly in Poland, and continued labour-cost advantages, are the reason why analysts see this as one of the sector with the greatest potential for M&A activity.
Industrials
In terms of Industrials the industries principally covered include: the Automotive and Automotive Supply; Paper and Packaging, Wood based Products and Materials, Machine Tooling; and Engineering Services related to these industries.
The expected economic downturn and the resultant stagnation or decline in American and West European demand on the one hand, combined with the explosion in demand for the durable consumer products produced by these sectors the CEE/SEE and the related industrials components required for their production, will continue to drive acquisition investment throughout the Region. An example of this trend is the car industry where the low level of car density, the increase in consumer spending power, and sudden availability of auto financing, has led the Region to clearly be one of the only growth areas globally in the Sector outside of Asia. In fact a number of the countries (i.e. Russia and Ukraine) are no among the top 10 automotive within Europe. In Paper and Packaging, and Wood-based materials, sectors in which the major players are suffering a significant downturn in the cycle, the Region offers one of the few growth opportunities. Furthermore, the attraction of this growth potential is complemented by a ready supply of raw material, i.e. forest. Again in the case of Russia, this may lead to sudden rise in outward investment in the Region and western Europe.
Contact
Richard Golden, Director
Raiffeisen Investment AG
Krugerstraße 13
1015 Vienna
AUSTRIA
