PENX (MM)

Specialty chemicals company Rockwood Holdings Inc. (ROC) has agreed to buy Kemira Oyj’s 39% stake in their titanium dioxide (TiO2) joint venture “Sachtleben” for €97.5 million ($130 million). The transaction, which will provide Rockwood full ownership of Sachtleben, is expected to complete by Feb 19, 2013.

Sachtleben, a leading producer of high-quality TiO2, was formed in Sep 2008 through the union of Rockwood’s TiO2 pigments and functional additives business and Finland-based specialty chemicals maker Kemira’s TiO2 business. Its major products include TiO2 in anatase grade, TiO2 in rutile grade and titanium specialties.

Sachtleben caters to a bevy of industries including synthetic fibers, plastics, paints, packaging inks, coatings, cosmetics and pharmaceuticals. The entity, in July 2012, purchased specific assets of German TiO2 producer crenox GmbH, bringing its total capacity to roughly 340,000 metric tons.

The weak TiO2 market conditions appear to have triggered Kemira’s decision to divest its interest in the joint venture. Weak performance of Sachtleben led to a decline in its operating profit in fourth-quarter 2012.

Rockwood is also contending with a deteriorating TiO2 market. Its third-quarter 2012 profit (from continuing operation) fell roughly 19% year over year to $61.6 million or 77 cents per share on lower sales. Revenues slipped roughly 8% year over year to $862.8 million, hurt by negative currency translation and weak demand in the TiO2 business.

While the company recorded higher sales from its lithium business, it saw declines across surface treatment, performance additives, TiO2 pigments and advanced ceramics businesses.

Rockwood expects demand for TiO2 to remain soft in the fourth quarter. However, it sees continued strength in its lithium franchise.

Rockwood currently retains a short-term (1 to 3 months) Zacks Rank #3 (Hold).

Other companies in the specialty chemicals space with favorable Zacks Rank are American Pacific Corporation (APFC), Novozymes A/S (NVZMY) and Penford Corporation (PENX). All of them hold a Zacks Rank #1 (Strong Buy).

 
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