UBS has downgraded its rating on Makhteshim Agan Industries Ltd. (TASE: MAIN) to "Neutral" from "Buy", and cut its price target to NIS 15 from NIS 18.
UBS analyst Roni Biron said that after the cancellation of Makhteshim's planned acquisition of US firm Albaugh, "we remain concerned about MA's hefty cost structure and its ability to achieve decent profitability in an increasingly commoditized market."
Biron also believes that in light of the current pricing environment, the company will have to cut its high cost production in Israel and rationalize its operation in Brazil.
The analyst listed three areas of concern: Makhteshim's glyphosate relationship with Monsanto in Brazil "could be tested" following its attempt to become a competitor; Makhteshim's infrastructure in Brazil may prove excessive based on current pricing levels and lead to a higher than expected second half loss; and some discomfort with the significant part of receivables in Latin America that is due for payment in the third quarter.
Published by Globes [online], Israel business news - www.globes-online.com - on September 13, 2010
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