Investing.com -- Shares of Swiss specialty chemicals maker Clariant fell nearly 2% after Deutsche Bank cut its rating on the stock to "hold" from "buy", saying the balance of risk and reward had become more even.
Deutsche Bank also cut its price target on Clariant to CHF 10.90 from CHF 12.60, a reduction of about 14%, because it now assumes a higher cost from legal claims, has cut earnings forecasts by an average of 2% for 2028 and 2029 and uses more cautious longer-term assumptions. It raised its estimate of litigation cost to CHF 175 million from CHF 50 million.
The broker upgraded the stock on Aug. 3 after the first ethylene case, involving Shell and Repsol, was dismissed on July 29. The shares have risen about 16% since.
Shell and Repsol appealed against that ruling on Oct. 30, which the broker said shows litigation risk remains, although Clariant is confident.
The remaining claims, of about €10 billion, span several jurisdictions including Germany, where courts may approach the matter differently.
The broker still sees material upside if more cases are cleared, but also a chance of meaningful downside from settlements or payouts.
Analysts' forecasts already assume a recovery in the Catalysts business, so earnings risks lean to the downside.
Consensus for 2027 adjusted EBITDA, a measure of core earnings, is CHF 733 million, while the broker forecasts CHF 710 million, 3% below consensus.
The broker expects Catalysts EBITDA of CHF 155 million in 2027, up from CHF 131 million in 2026.
The analysts raised its fourth-quarter adjusted EBITDA forecast 5% to CHF 190 million, about 5% above the CHF 181 million Bloomberg consensus at the time of results. Management told a conference call it expects better margins in the quarter, helped by a strong order book.
The broker said that implies a 17% rise from the third quarter, excluding one-off effects of CHF 10 million, against a normal seasonal rise of 11% in its estimate, and sees risk skewing to the downside because chemical demand remains relatively soft.
Clariant has been linked in the press to Ashland, which is reportedly exploring a sale after pressure from activist Ancora.
The broker said such a deal could make sense over the longer term but could bring short-term volatility for shareholders. Management was guarded on the call, saying, "We have a quality ambition, not a size ambition."
Clariant's market value is CHF 3.50 billion against Ashland's CHF 2.70 billion, so a deal would likely need some creativity, the broker said.
Original Article
Clariant shares fall as Deutsche Bank flags rising litigation risks
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