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Gordon Voit//MEDILL

Titanium dioxide is a pigment commonly used in lip balm, sunscreens and paint.


Shares of chem giant Rockwood rise on unit-sale rumors

by Gordon Voit
Feb 19, 2013


Shares of Rockwood Holdings Inc. moved higher Tuesday, even though the specialty chemical maker’s fourth-quarter earnings landed a penny short of Wall Street expectations.

The upturn was spurred by reports the Princeton-based company is looking to sell its ceramics business, CeramTec. The German subsidiary is expected to fetch between $1 billion and $2 billion if Rockwood proceeds with a sale.

In the latest quarter, Rockwood posted net income of $21.2 million, or 26 cents per diluted share, compared to $62.9 million, or 79 cents a share in the year-ago quarter. Sales for the quarter rose 1.8 percent to $829 million from $814.4 million.

The latest quarter’s results were skewed by net charges of $16.8 million, or 21 cents per share, stemming primarily from restructuring and severance costs. The bottom-line hit would have been greater but the company also received $15.4 million in federal tax benefits..

Excluding such special items, earnings for the quarter were $38 million, or 47 cents per diluted share, just short of the 48 cents analysts polled by Yahoo Finance had been expecting. For the year-ago period the company reported adjusted income of $72.7 million, or 91 cents per share.

Shares of Rockwood closed up $3.40, or 5.9 percent, at $60.90 on the New York Stock Exchange.

Although the company did not offer specific guidance figures for the first quarter of 2013, officials said in Tuesday morning’s teleconference that they have set a minimum goal of 20 percent growth in earnings per share for the year.

Given the previous year’s mark of $3.89 per share, that suggests Rockwood will shoot for $4.67 per share. If realized, that figure would represent a 16.2 percent increase over its 2011 adjusted earnings per share of $4.02.

Morningstar Inc. analyst Jeffrey Stafford said in a recent report that he feels one of Rockwood’s keystone products is particularly well positioned for the future.

“We think a rise in the use of cell phones and laptops, especially in emerging markets, will fuel lithium demand in the medium term,” the report said.

At the company’s Titanium Dioxide Pigments branch, earnings before interest, taxes, depreciation and amortization for the quarter fell 90 percent for the, to $6.7 million.

“This is mainly due to lower prices due to industry trends and higher raw material cost,” CEO Seifi Ghasemi said on Tuesday. “We expect this business to have a weak performance in the coming quarter, with results gradually improving as we move forward toward the end of 2013.”

It was the company’s highest-grossing unit in the fourth quarter of 2011, when it pulled in $64.5 million in EBITDA.

Titanium dioxide, or “TiO2”, is a pigment commonly used to color paints and sunblocks.

Bank of America Corp. analyst Aleksey Yefremov said in a Tuesday research note that he was keeping Rockwood a buy because he felt the investing community’s concern over the TiO2 division was not indicative of the company’s overall health.

“Management assembled an attractive set of high-margin specialty chemicals assets, and continues to strengthen and streamline portfolio through M&A,” Yefremov said.

Company executives said during a conference call on Tuesday that Rockwood was discussing options for how to treat its TiO2 sector, including spinning it off to shareholders.

“I think what we are saying is that if somebody wants to make us an offer for Performance Additives or CeramTec or TiO2, we will entertain that,” Ghasemi said.

“But if somebody comes and gives us an offer, and no matter how high it is for Surface Treatment or Lithium, then they have to buy all of Rockwood.”

Net income for the year was $383.5 million, or $4.80 per diluted share, which was down from $411.3 million, or $5.15 per diluted share, from the previous year.

Rockwood’s net sales for the year decreased 4.4 percent to $3.51 billion from $3.67 billion the prior year.