The Wall Street Transcript Publishes Specialty Chemicals Stocks Report
NEW YORK, Feb. 3 /PRNewswire/ -- Allan Cohen, Managing Director at First Analysis Securities Corporation, and Tracy Marshbanks, Research Analyst at First Analysis Securities Corporation, examine the outlook for Specialty Chemicals Stocks in this timely and deeply informative 7,700-word interview from The Wall Street Transcript (212-952-7433) or twst.com.
In a vital review of this evolving sector for investors and industry professionals, this Specialty Chemicals Stocks Report features an in-depth analysis of the Specialty Chemicals sector by leading experts Allan Cohen, Managing Director at First Analysis Securities Corporation, and Tracy Marshbanks, Research Analyst at First Analysis Securities Corporation.
Specialty Chemicals companies are at a crucial juncture, with investors focused on evaluating and trying to differentiate which business models will succeed.
Cohen and Marshbanks discuss the outlook for the Specialty Chemicals Stocks sector and offer their current stock recommendations.
According to Cohen, there are many issues affecting the specialty chemicals sector including: ``the maturity of many US and European industrial markets, customers' supply chain management and interest in having fewer global suppliers, and the reduction of the time taken for value-added products to become more commodity-like. This is leading to a focus on higher-growth niches, globalization, consolidation, continuous cost reduction, and increasing the proportion of sales from newly introduced products.'
According to Cohen, ``consolidation of the specialty chemicals industry continues at a rapid pace, with no evidence of slowdown.'
Cohen continues, ``Probably the most significant merger of the year was Rohm & Haas (NYSE: ROH - news) and Morton International (NYSE: MII - news), which was also the most positive merger of the year.' Cohen encouraged investors to look at buying Rohm & Haas on the announcement.
``As the investment community is looking out over the next few years or decades,' Cohen says, ``investors are trying to decide today who are the likely winners and losers.'
Cohen adds, ``There have been some newly public companies such as Chemdex Corp. (Nasdaq: CMDX - news) and SciQuest.com Inc. (Nasdaq: SQST - news), whose stock prices are up 5 to 10 times after their IPOs and who initially had a depressive effect on Sigma-Aldrich (Nasdaq: SIAL - news), which is an order-line bricks-and- mortar company. More recently, Sigma made an announcement of a hook-up with Ariba (Nasdaq: ARBA - news) and stated that in the December (fourth) quarter, 5% of Sigma's sales were through the Web, and in two days Chemdex' s stock was down 15% to 20%.'
Among ``companies that are strong in every discipline, are running at the head of the pack in their own areas, and are then better able to leverage that capability through acquisitions,' Cohen cites ``Spartech (NYSE: SEH - news) that has accomplished in plastic processing, in contrast to M.A. Hanna Co. (NYSE: MAH - news) over the past few years.' Cohen continues, ``Both pursued essentially similar strategies involving internal growth and synergistic acquisitions in plastic intermediary businesses. Hanna was not able to integrate its acquisitions well, and in fact appears to have severely diminished value in that process. While not an integration, Witco a few years ago had a substantial restructuring, but it never got there in terms of business practices. It did not work out too well, so it was acquired by Crompton and Knowles to form CK Witco Corp. (NYSE: CNW - news).'
Cohen states, ``the restructuring phase in the group is probably going to have more of a continuing nature, as opposed to the massive restructuring of the recent past. Interestingly, Hercules (NYSE: HPC - news) is pretty strong in continuous cost improvement. It has been taking its manufacturing cost down about 5% a year for the past few years, and they plan to continue that for quite a while.'
Marshbanks continues, ``The interesting tone of the better restructurings is that companies, besides just getting their cost structure and operating efficiency in line, are focusing on the top line as part of the whole repositioning.'
``Fuller (Nasdaq: FULL - news) coordinated the entire restructuring not only to take out costs but also to serve as a platform for improved future revenue growth. Fuller's internal volume is starting to show some improvement as the company switches into the revenue enhancement phase of its restructuring process,' Marshbanks adds.
On new products issues, Cohen states, ``Minerals Technologies (NYSE: MTX - news) is in the process of commercial trials for a synthetic version of a natural material currently used in the glass-making process. Minerals Technologies is trying to prove the synthetic's benefits on a commercial scale right now as it is more expensive than the natural material.'
``OM Group (NYSE: OMG - news) has expanded its cobalt processing capability, and on Jan. 1, 2000 entered a major market segment in which they were not previously involved: cobalt material for high-performance alloys used in turbines, such as jet engines. High-performance alloys constitute about 40% of the worldwide cobalt market, so that's a major opportunity,' Cohen continues.
Marshbanks also cites ``Material Sciences (NYSE: MSC - news) and its Quiet Steel product, which is a rubber-like material sandwiched between two layers of steel. The product has acoustic properties that deaden sound.'
``Summa Industries (Nasdaq: SUMX - news) has a whole slate of new products that it is going to be introducing in the market,' Marshbanks adds. ``The company calls these step-out opportunities. Summa has a very low valuation; it's safe to say its new products are not factored into the price at this point.'
Cohen continues, ``Intertape Polymer (NYSE: ITP - news) has introduced new products most years, and has acquired quite a few. But a focus for 2000 and 2001 is bringing everything together in a basket of products approach. The basket of products allows Intertape's customers access to products in all its lines through a single order delivered on a full truck. The program addresses a wide variety of packaging materials sold through packaging material distributors, such as tapes, shrink wrap, and stretch wrap. Intertape has the product range and has its ERP system in place. Its first distribution center, located next to its plant in Nevada, is up and running. The company will be putting in a few more distribution centers later this year.
Among companies that used to command a great deal of attention, Cohen mentions ``Great Lakes (NYSE: GLK - news) which was run in a unique way under Emerson Kampen, with a lot of reports to him and no computer systems. He got ill, and management went through a transition. Great Lakes has a strong balance sheet, and clearly, acquisitions to build franchise businesses are going to be key to its future. It has done some acquisitions, but not enough to really matter. So Great Lakes is still a story in the making.'
Cohen also cites ``A. Schulman (Nasdaq: SHLM - news), as a growth company for many years, with strong cachet in the investment community. It benefited from being the premier plastic compounder and from the growth in plastics, which was generally in excess of 2 times GDP. The growth in plastics is still above GDP, but not the same multiple. Schulman's growth rate has materially declined along with the rest of the group, but probably more so than most. It's lost its cachet and carries a fairly low valuation and at today's stock price, it is probably viable to take it private.'
To obtain a copy of this insightful 7,700 word report call 212-952-7433, or see twst.com. This report is included in the NATURAL RESOURCES Sector of TWST Online at twst.com
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SOURCE: The Wall Street Transcript |
