Soda Ash Producer WE Plans to List in London: A Boost for the Under-Attack Market
WE Soda, a Turkish-based low-value bulk soda ash producer, is planning to list on the London market. This is good news for the London commodities industry that is currently losing major companies. A successful floatation could help support London’s core commodities franchise. The proposed valuation of $7.5 billion would make a difference to the London market and allow WE Soda to raise funds for expansion in the United States. Turkey, where WE Soda is based, has a competitive advantage for manufacturing due to its large reserves of trona ore which is half the energy required for synthetic production. WE Soda’s facilities produce soda ash at the bottom of the global manufacturing cost curve, supporting a premium share price.
WE Soda plans to double production by 2030 by adding capacity in the United States. A dividend yield of nearly 7% this year is another positive, but it’s important to note that WE Soda is not a fringe supplier capable of controlling the market. Growth potential and high margins help justify the proposed multiple of 7.5x.
Whether investors will buy into a business with a low-cost base for nonessential products such as soda ash, heavily exposed to energy prices and pent-up post-pandemic demand uncertain, remains to be seen. Central to WE Soda’s success is competition from China, whose soda ash futures are down by two-fifths from their early-year peak. Construction demand may weaken, and with Inner Mongolia adding to global supplies, investors need to be careful.
Summary
WE Soda, a Turkish-based producer of low-value bulk soda ash, plans to list its shares in the London market at a proposed valuation of $7.5 billion that could help London’s commodities industry that is currently losing major companies. The company has a competitive advantage for manufacturing due to its large reserves of trona ore, which is half the energy required for synthetic production, and facilities to produce soda ash at the bottom of the global manufacturing cost curve, supporting a premium share price. WE Soda plans to double production by 2030 and offer a dividend yield of nearly 7% this year. However, the industry is highly exposed to energy prices and pent-up post-pandemic demand, with Inner Mongolia adding to global supplies, making it vulnerable to competition from China, whose soda ash futures have fallen by two-fifths from their early-year peak.
Additional Piece
A soda ash is a low-value bulk product that’s used indiscriminately in glass processing and laundry detergents. Yet, soda ash remains essential to human industry and is expected to play an ever-increasing role in carbon capture and sequestration in a world where we are committed to attaining a net-zero carbon footprint by 2050.
As the world changes, new challenges arise. High energy costs, weakened construction demand, and competition from China are not new problems for soda ash producers. However, successful ones like WE Soda continue to outperform their peers, benefiting from their competitive advantage regarding energy usage and raw material access.
WE Soda provides an excellent example of how businesses can operate efficiently while still managing their environmental impact. Their approach is more important than ever, with carbon emissions considered one of the biggest obstacles for developed countries in reaching their 2050 net-zero targets. Today, companies looking to embrace a sustainable future need to consider the performance of low-cost base goods and how to achieve net-zero by reducing their carbon emissions.
WE Soda’s plan to double their production by 2030 is vital to attaining carbon neutrality, as no one has yet found a carbon-neutral replacement for soda ash, and it is expected to play a more significant role in global efforts to sequester carbon. Furthermore, their proposed valuation and planned IPO in London is not just good news for London’s commodities industry but also a boost to Turkey’s fledgling capital market.
However, it’s crucial to note that WE Soda is not the only company that offers low-cost bulk products such as soda ash. Belgian-based Solvay is one of the main competitors and is traded at a lower price than WE Soda. Investors must weigh the risk of fluctuating demand and energy prices against the company’s expected valuation. Despite the proposed dividend yield, it may not be a good idea to invest in WE Soda unless the competition is analyzed and weighed appropriately.
In conclusion, WE Soda’s IPO presents a unique opportunity for London’s commodities industry, Turkey’s capital market, and the world’s attempt to achieve net-zero carbon emissions by 2050. However, this investment poses many risks, and investors should analyze them with caution. We can hope that businesses like WE Soda will be a leading example of how we can achieve net-zero while still being profitable.
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Sodium carbonate is not as appealing as the architecture of microchips. But it has been central to human industry for much longer. Also, a bargain-hungry London market can’t afford to be picky.
WE Soda of Türkiye plans to list in London. This is good news for the market under attack. The float would support London’s core commodities franchise. A proposed valuation of $7.5 billion would be large enough to make a difference to a stock exchange that is losing major companies.
Soda ash is a low-value bulk product used extensively in glass processing and in products such as laundry detergents. Turkey, where WE is based, has competitive advantages for manufacturing. The country has large reserves of trona ore. Sodium carbonate can be made from this ore with half the energy required for synthetic production.
WE’s facilities are at the bottom of the global manufacturing cost curve, supporting a premium share price.
Turkish industrialist Turgay Ciner owns WE. He plans to sell a tenth of WE’s equity. His timing is right. Corporate earnings benefited from booming soda ash prices. This reflects rising energy prices and pent-up post-pandemic demand. Ebitda doubled last year to $838 million.
However, the wave may end. Construction demand is weakening and Inner Mongolia is adding to global supplies, according to Berenberg’s Sebastian Bray. Chinese soda ash futures are down two-fifths from their early-year peak.
Even assuming WE’s ebitda could hit $1 billion this year, the suggested multiple of 7.5x is still a substantial premium for peers. Belgium’s Solvay are traded to just under five times.
Growth potential and high margins help justify the gap. WE plans to double production by 2030 by adding capacity in the United States. A promised dividend yield of nearly 7% this year is another positive.
Investors should, however, dispute WE’s claims that it is a fringe supplier capable of controlling the market. It’s a point that will be worth emphasizing in price negotiations. A decent debut for the stock would earn credit for both sides and encourage more foreign firms to go public.
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