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January 11, 1999 01:00 AM

HUSKY USHERING IN A NEW ERA

Bill Bregar
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    Robert Schad should be grinning as analysts compare his newly public Husky Injection Molding Systems Ltd. to high-flying Groupe Sidel, darling of the Paris Stock Exchange.

    Neither firm suffers from the comparison. Both make plastics machinery, often working together — pairing Husky's PET preform injection presses with Sidel's PET blow molding machines. Each dominates its market.

    Schad is a genuine plastics legend. Intense and global-thinking, he has called the shots at Husky since 1953, first making snowmobiles, then injection molding machines, molds and hot-runner systems. Husky racked up $762 million in sales last year.

    On Nov. 9 Husky entered a brand-new era through an initial public offering on the Toronto and Montreal stock exchanges.

    Rich Morrow, executive director of equity research at CIBC Wood Gundy in Toronto, ranks Husky a ``strong buy.'' Morrow thinks earnings per share should grow 20-25 percent a year — even higher if beer switches to PET.

    Morrow is one of three analysts who thinks the Husky/Sidel comparison is a fair one. Another packaging guru, Tim Burns in Chagrin Falls, Ohio, said: ``[Husky's] profitability is a touch less, but they're serving the same kind of markets. In theory, Husky should be able to trade at the same kind of price/earnings and cash-flow multiples as Sidel.''

    Margaret Cornish follows Husky for Toronto-based Scotia Capital Markets, underwriter of Husky's IPO. Investors considering Husky will study Sidel, she said, ``because Husky is 60 percent PET packaging and Sidel is about 85-90 percent PET packaging.''

    But Cornish also likes Husky's plan to diversify into standard machines and new markets

    ``You could make an argument that Husky actually has a greater potential because it's expanding its customer base and technology, where Sidel ... has tied itself more exclusively to PET packaging,'' she said.

    Sidel's story is dramatic. When Sidel went public in 1993, its market capitalization — measured by stock price multiplied by the number of shares — was 2.3 billion francs. Today it's six times higher, at 15 billion francs (about $2.7 billion), said Richard Le Vourch, manager of financial information at the Paris-based firm.

    Meanwhile, Husky continues its transformation. Schad has retained a significant share in Husky, but he plans to transfer shares to his charitable organizations, a company official said.

    You don't need an MBA to see that Husky is a solid investment. But watch closely. How will Husky management evolve past Schad running the show? That's the biggest challenge facing Husky, as Robert Schad lays out his legacy.

    Senior reporter Bill Bregar covers machinery for Plastics News.

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