Investment house Ilanot Batucha has downgraded chemicals company Makhteshim Agan from Buy to Neutral. Its results are great so far, says the analyst, but the long-term macro data is cause for worry.

Analyst Ori Hershkovitz says the company's results for the fourth quarter of 2000 were excellent. Makhteshim, a subsidiary of the

Koor Industries

(Nasdaq:KOR) group, beat analyst forecasts with revenues of $224 million and a net profit of $11.2 million. But he explains that the company's stock has outperformed the market by 58% in recent months, and the deterioration of the macro situation has yet to show up in its share price.

Ilanot Batucha notes that the agrochemicals market has calmed down after the stormy crisis of 1999. That and a wave of consolidations may help Makhteshim Agan stand strong against the pricing pressures imposed by competition, says Hershkovitz.

He also mentions that Makhteshim recently took advantage of the sorry market conditions to acquire product lines and to obtain subcontracts from big chemicals manufacturers, which are all boosting its growth.

Hershkovitz predicts that dropping energy prices and the stabilized euro will boost the bottom line. But Makhteshim's progress could be hampered by the slowing American economy and the devaluation of the Brazilian real. South America accounts for 40% of Makhteshim Agan's sales.

On the bright side for Makhteshim, Hershkovitz notes the intensifying public distaste for agrochemicals based on genetic engineering. The whole field of genetically engineered products has waned somewhat because of the fears and furor. But the analyst foresees another wave of engineered products, to protect wheat crops in this case, arriving in 2004 or 2005. Although their efficacy has yet to be demonstrated, he foresees that biotechnology could yet hinder Makhteshim's products of agrochemicals.

Another factor hurting Makhteshim is dropping prices of agricultural goods, an enormously important parameter for agrochemical companies in the long term. The analyst points at futures on soya and corn in Chicago, which have been more or less steadily dropping.