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On Monday, Jefferies reaffirmed its Underperform rating on Solvay SA (EBR:SOLB:BB) (OTC: SOBS), with a steady price target of EUR26.00. The stock, currently trading at $27, sits closer to its 52-week high of $32.70 than its low of $22.90. InvestingPro data reveals several concerning trends, with the stock showing significant price declines across multiple timeframes. The reiteration follows the recent acquisition by WeSoda, a private competitor, of Genesis USA’s Soda Ash business for an implied enterprise value of approximately $1.4 billion, equating to around $350 per tonne. WeSoda also disclosed its full-year 2024 results, showcasing an Adjusted EBITDA per tonne at the higher end of previous estimates. Furthermore, the company has projected up to a $10 per tonne improvement in EBITDA for fiscal year 2025, primarily due to anticipated lower gas costs.
WeSoda’s guidance for fiscal year 2025 includes a continuation of netback pricing, which is generally aligned with current market predictions for Solvay and European contract prices. The Soda Ash market is expected to remain stable through the first half of 2025 and may see a slight tightening in the second half of the year. According to InvestingPro’s analysis, Solvay maintains a "FAIR" overall financial health score, though it faces challenges with weak gross profit margins. When applying the transaction value per tonne from WeSoda’s recent acquisition to Solvay’s U.S. Soda Ash business, it suggests an Enterprise Value contribution of approximately €8-9 per share for this segment of Solvay’s operations.
The potential for increased production in the U.S. by WeSoda poses a medium-term concern for Solvay. WeSoda has the capability to boost its output by 1 to 1.5 million tonnes, which represents about 2% of the global capacity. This expansion could be achieved at a relatively low cost per tonne, providing WeSoda with increased flexibility for its longer-term growth plans.
Solvay is scheduled to report its fourth-quarter earnings on Thursday, with investors and analysts likely to scrutinize the results in the context of the current market dynamics and the recent developments involving its industry peers. Despite market challenges, the company maintains a notable dividend yield of 6.37%, with a dividend per share of $1.72. For deeper insights into Solvay’s financial metrics and additional analysis, investors can access more than 30 key indicators through InvestingPro.
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