A week after a press report that Crompton Corp. has placed Davis-Standard Corp. on a list of businesses to be fixed or sold, the chemical company's top executive, Robert Wood, bluntly told analysts the machinery business ``doesn't fit long-term'' with Crompton.
Wood made his comments July 23, at the very end of a conference call to release Crompton's second-quarter results. A financial analyst said he had seen that Davis-Standard is on the ``fix-it-or-ship-it'' list, and asked if it was to Crompton's advantage to sell both processing machinery and raw materials. Wood called that a ``theory'' that does not seem to translate into reality.
``That business frankly just doesn't fit long-term with us based on the dynamics in that industry and the cyclical nature of the business,'' Wood said of Davis-Standard. Financial results have been improving at the maker of extruders, film equipment and blow molding machines, he noted. But he said: ``I would be very surprised if we had this business for another 18 or 24 months.''
After the conference call, Mary Ann Dunnell, a Crompton spokeswoman, said ``Davis-Standard is not for sale at this time.''
Davis-Standard President Robert Ackley was not available for comment. In a written statement, David Antoniuk, vice president of finance said: ``It is Crompton's prerogative to either retain or sell any of the companies in its portfolio in order to maximize return to its shareholders. This comment by Mr. Wood in no way impacts Davis-Standard's ability, now or in the future, to service its customers. Moreover, Davis-Standard is one of the most financially secure companies in its industry.''
Chemical Week reported July 14 that Davis-Standard was placed in a category of businesses to be fixed or divested, along with rubber chemicals and the glycerine and fatty acid operations.
Wood is a new face at Crompton. In January, the specialty chemical company in Middlebury, Conn., named Wood - a veteran of Dow Chemical Co. - to be its president and chief executive officer. He added the title of chairman in April. He replaced Vincent Calarco, who retired.
Crompton on July 23 also announced a restructuring to save at least $50 million in 2005. Wood did not provide many details in the July 23 conference call, except to say the company plans to reduce its workforce by at least 10 percent. Wood did not say whether Davis-Standard will be part of the restructuring.
Davis-Standard, like other plastics machinery makers, has suffered during the last few years, although there are signs of a comeback. Davis-Standard lost $15.6 million in 2001 and lost another $13.8 million in 2002, before moving back into the black in 2003 with a $5.2 million operating profit.
In the second quarter of 2004, Davis-Standard earned $1.5 million on quarterly sales of $45.9 million, as sales increased 13 percent from the second quarter of last year. Crompton credited an increase in unit volume and favorable foreign currency translation for the second-quarter sales, but said machinery pricing was ``unfavorable.''
Through the first six months of 2004, Davis-Standard has lost $256,000.
Backlog at the end of June was $82 million, up $20 million from year-end 2003.