03 August 1998 00:00 [Source: ICB Americas]By Joseph Chang
Specialty chemical earnings remain mixed as more second quarter results are reported. Great Lakes Chemical, W.R. Grace and Engelhard enjoyed profit growth. MortonÕs results were disappointing, but it is restructuring to return to high growth.
Great Lakes Chemical Corporation recorded a 15 percent rise in second quarter earnings from continuing operations to $38 million. Sales improved 13 percent to $402 million, driven by strong volume growthÑa rarity in the current market.
President and CEO Mark P. Bulriss says polymer additives, water treatment, fluorine derivatives and the OSCA energy services subsidiaryÑwhich account for about 80 percent of revenuesÑÒall posted volume gains exceeding 10 percent.Ó
Flame retardant sales jumped 21 percent to $89 million thanks to the Anzon acquisition and 6 percent volume growth in the core product line. Polymer stabilizers revenues rose 5 percent to $64 million on 14 percent higher volumes, and water treatment sales of $134 million were higher by 14 percent.
ÒThe initiatives well underway should fuel our progress in the months ahead,Ó says Mr. Bulriss. ÒWe anticipate further improvements from combining our flame retardants and polymer stabilizers into an integrated, world-scale polymer additives business.Ó He also expects internal synergies from the creation of the performance chemicals unit.
Morton InternationalÕs fiscal fourth quarter earnings fell 16 percent to $45.2 million, excluding an after-tax restructuring charge of $9.6 million. Sales declined 2 percent to $603 million.
ÒI am certainly disappointed by the results of the fourth quarter, particularly in specialty chemicals,Ó says chairman and CEO S. Jay Stewart. He says growth opportunities and restructuring actions Òshould help us return to our record of strong operating results.Ó
Specialty chemical sales contracted 3 percent to $448 million while operating earnings fell 20 percent to $62 million. During the quarter, Morton closed three facilities, divested several product lines, and reorganized its industrial coatings business and the adhesives and chemical specialties group. Salt sales were flat at $156 million, and earnings declined 4 percent to $19 million.
Salomon Smith Barney analyst Timothy Gerdeman says MortonÕs current valuation makes it vulnerable to a takeover. He speculates a ÒfairÓ takeout price in the range of $34 to $41 per share versus its current share price of around $24.
W.R. Grace & Co. posted a 27 percent jump in second quarter net income to $25.5 million despite 2 percent lower sales of $370 million stemming from the stronger US dollar. Comparable operating income rose 5 percent to $53 million.
ÒGrace DavisonÕs global catalyst businesses and Grace Construction ProductsÕ North American operations in particular generated strong growth during the quarter,Ó says chairman, president and CEO Albert J. Costello. Operating margins improved in both segments despite challenging international markets.
CS First Boston analyst David Begleiter is raising his 1998 EPS estimate by 4 cents to $1.05 on the better-than-expected results. He has a five-year compound earnings growth rate of 12 to 14 percent for Grace.
The Grace Davison division saw 3 percent higher sales of $180 million and a 7 percent improvement in operating income to $28 million on strength in fluid cracking and polyolefin catalysts.
Construction products sales were flat at $128 million, though earnings surged 16 percent to $19 million despite a 26 percent decline in sales to the Asia-Pacific region. Sales at Darex Container Products dropped 9 percent to $62 million while earnings fell 25 percent to $6 million.
Engelhard Corporation posted record second quarter earnings of $50.9 million on record sales of $1.1 billion. Earnings and sales were higher by 15 percent and 20 percent, respectively.
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