US Rockwood optimistic about Q4 despite seasonal slowdown

26 October 2009 21:57  [Source: ICIS news]

HOUSTON (ICIS news)--US specialty chemicals maker Rockwood Holdings anticipates better margins over the next two quarters, but said on Monday that the accuracy of that outlook will depend on December demand from two key end markets: automobiles and construction.

“Right now, we expect a good fourth quarter,” CEO Seifi Ghasemi said during an earnings call, “but with the caveat of December”, when production in many markets typically experiences a seasonal slowdown or goes off line.

Although the company reported general improvement in its varied end markets, demand from housing and car manufacturing is particularly difficult to predict, Ghasemi said.

Still, the company anticipates adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margins of 18-19% in the fourth quarter, and eventually even higher margins.

“We are seeing gradual improvement in all of our key businesses,” Ghasemi said. “If our sales come back to normal, we feel comfortable that we can eventually deliver 20% margins.”

Rockwood’s third-quarter net income was up by $10.2m (€6.8m) on fewer special charges during the period, but year-over-year net sales were down by 14-24% across most of the company’s business segments.

Net sales of TiO2 during the quarter increased by 26.2%, but that upward movement was due to the impact of Rockwood’s joint venture with Kemira in September 2008, which has been a boon for Rockwood, Ghasemi said. In that market, margins increased slightly quarter over quarter.

Ghasemi said that although sales of lithium for car and hand-tool batteries and other applications were down, margins in those markets were better than the year-ago period due to cost controls.

He was also optimistic that Rockwood would be able to retain its lithium customer base despite 20% discounts offered early in October by one of its competitors in the lithium market.

($1 = €0.67)

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By: Larry Terry
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