The company is taking the begging bowl to investors for the second time in two years with promises to return to profit this year for the first time since 2000 after shaking off the legacy of what investors say was mismanagement by previous executives.

But even as analysts dismiss the company's profit goals as "aggressive", they are more positive on its outlook as it becomes one of the first companies to win tradable credits for cutting greenhouse gas emissions.

"What causes us to change our view of the company is the news that ... the way is now clear to trade emission reduction certificates from 2007," SG analysts said in a research note. The analysts raised their rating on Rhodia's volatile stock to "buy" from "hold" last month while noting the rights issue will do little to transform the company's financial structure.

The United Nations Framework Convention on Climate Change (UNFCCC) secretariat in November approved Rhodia's plans to cut carbon emissions at its Onsan plant in South Korea and last month gave similar clearance for its Paulinia plant in Brazil.

In return for cutting greenhouse gases, Rhodia can earn certificates from the UNFCCC, and from 2007 can sell those to companies failing to meet pollution restrictions under the Kyoto Treaty on climate change.

Many analysts raised their ratings and outlooks on the stock as a result and Exane BNP Paribas analysts estimate the projects could yield revenues of about 344 million euros ($407 million) a year.

These credits should support Rhodia's restructuring, which over several years has included renegotiated credit lines, rights issues and asset sales worth 600 million euros to cut its 2.6 billion euro debt and return to profit.

NEW CHAPTER?

Chief executive since October 2003, Jean-Pierre Clamadieu has marked Rhodia's latest capital increase of 604 million euros as "a new chapter", as 150 million euros should go to growing its business instead of using every cent to tackle debt.

Using the bulk of the money raised for debt repayment led Moody's Investor Service to raise its outlook on all its ratings on Rhodia to stable from negative, while Standard & Poor's affirmed its long and short term "B" rating and stable outlook.

"Key challenges remain," S&P said, referring to Rhodia's restructuring costs and interest charges which will continue to weigh on Rhodia's free cash flow generation. "However, improving operating margins and the continued strong performance of the polyamide business are likely to lead to some improvement."

The company had liquidity - cash, marketable securities and unused syndicated credit lines - of about 550 million euros and short and long-term liabilities of 1.8 billion euros at the end of June.

Its market capitalisation was 2.1 billion euros on Dec. 30. Following the rights issue plan, Rhodia's volatile shares lost 8.5 percent from Nov. 22 to Nov. 25 but they have gained 39 percent since the Korean carbon credits announcement.

Clamadieu twinned the November announcement of the capital increase with new medium-term goals which some analysts called ambitious.

Earnings before interest, tax, depreciation and amortisation (EBITDA), should exceed 15 percent of sales by 2008 before the gains expected from trading in carbon credits, Rhodia said, from 13 percent it is aiming for next year.

"The new objectives are very aggressive and I find it hard to believe they will reach a 15 percent EBITDA margin (pre carbon trading) in 2008," said a Paris-based analyst who declined to be named. "The group has never achieved such a margin."

In 2005, Rhodia has been able to pass on higher raw material and energy prices to its customers, more than compensating for lower sales volumes. But some analysts wonder how long Rhodia can rely on price hikes in the cyclical sector and how it could weather a possible economic downturn.

"However, we have become more convinced about the underlying turnaround in profitability between 2006 and 2008," Morgan Stanley said in an earlier research note in which it raised its rating on Rhodia's stock to "overweight" from "underweight".

"Much of this turnaround is a result of the restructuring already undertaken ... We now strongly believe that carbon credits should be included in the valuation of Rhodia."