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Dog days are good for materials firms' stocks

By: Frank Esposito

August 23, 2013

As the stock market moves through the dog days of August, executives with most publicly held plastic materials makers have to be happy with how their firms' per-share stock prices have done in 2013.

Through Aug. 13, 15 of 17 public materials firms tracked by Plastics News had a higher per-share price than they did on Jan. 1. Per-share prices at Omnova Solutions, Huntsman Corp., Eastman Chemical Co., Dow Chemical Co., LyondellBasell Industries and Cytec Industries each were up 13-24 percent. These rises roughly matched year-to-date gains for the Dow Jones Industrial Average (up 18 percent), Nasdaq (up almost 22 percent) and the S&P 500 (up almost 19 percent).

Bigger winners through Aug. 15 included PolyOne Corp., DuPont Co., Westlake Chemicals Corp. and Hexcel Corp., each up 31-43 percent. PolyOne's deeper move into specialty products appears to be paying off for the company, while Westlake was riding North America's feedstock advantage via abundant natural gas to an eye-popping per-share price of almost $104.

Axiall Corp. (the newly named merger of Georgia Gulf with the specialty chemicals unit of PPG) posted a more modest per-share gain of almost 7 percent through Aug. 13, as did Rogers Corp., which was up just over 8 percent. The per-share price of bioplastics maker Metabolix Inc. was up a little less than 1 percent, placing its per-share price around $1.40.

The big percentage winner among the group was Ferro Corp., which had seen its per-share price surge 80 percent to $7.50 through Aug. 13. Ferro's climb was all the more unlikely as the firm battled with discontented shareholders and warded off a takeover bid from A. Schulman Inc. in the first eight months of the year.

And although Cereplast Corp.'s per-share price of 2.9 cents might not raise eyebrows, it was 28 percent higher Aug. 13 than where it was at the start of the year.

The only PN-tracked materials firms that might be counting the days until 2013 are Schulman and Kraton Performance Polymers Inc. Schulman, with most of its sales coming from the low-growth European market, had seen its per-share price slip more than 4 percent through Aug. 13. Kraton's per-share price had tumbled 20 percent, due in part

to missing earnings estimates for three straight quarters.

These stock gains have come even as U.S. gross domestic product has shown meager growth of 1.1 percent in the first quarter of 2013 and 1.7 percent in the second. Materials firms have been able to weather a 16 percent rise in crude oil prices that has pushed per-barrel prices close to $107 so far in 2013. By comparison, U.S. natural gas prices were near $4.50 per million British thermal units earlier this year, but had receded to under $3.50 as of Aug. 13.

A declining U.S. unemployment rate also may have helped materials makers a bit. July's 7.4 percent unemployment rate was the lowest seen in the U.S. since early 2009.

North American chemicals makers have benefited from abundant supply and low prices for natural gas-based ethane, a feedstock used to make ethylene, according to analysts Taylor Muckerman and Joel South at the motleyfool.com financial website.

"As ethane demand slowly begins to increase, it is very likely that the price will tick up with it, which should be a good thing for all involved," they wrote in a recent research note. "Local producers have more than enough supply to accommodate these [recently announced] capital projects, so it's doubtful that the chemical companies will lose the entire margin advantage any time soon."

Esposito is an Akron-based Plastics News senior reporter.