In the materials sector, 2011 could not end soon enough for most U.S.-based public companies.
A look at 15 public firms with sizable plastic materials businesses shows only one — Celanese Corp. — that had a higher per-share stock price on Dec. 20 than it did on Jan. 1. And the gain at Celanese — whose Ticona unit ranks as the world's largest acetal maker — was only about 5 percent as of midday trading Dec. 20.
These drops stand out all the more, since a second-half rally had the Dow Jones Industrial Average up about 4.4 percent in that same comparison. Plastics and chemicals firms lagged behind because of weak global demand in many consumer and industrial markets. The North American automotive market bounced back in 2011, but the housing sector remained weak.
Shares of compounders PolyOne Corp. and A. Schulman Inc., polyethylene/PVC maker Westlake Chemical Corp. and plastics/chemicals giant DuPont Co. each were down 5-10 percent in that comparison, placing them among those whose stock prices suffered least this year.
Eastman Chemical Co., which generates about 17 percent of its sales from specialty plastics, saw its stock price slide about 8 percent.
Stock prices fell a bit more at materials makers Dow Chemical Co., Huntsman Corp., Kraton Performance Polymers Inc. and Georgia Gulf Corp., each of which tumbled 20-50 percent. For Kraton, it's the first substantial share-price drop since the firm went public in late 2009.
Specialty polymers maker Omnova Solutions Inc. also saw its share price drop about 46 percent in 2011. The Fairlawn, Ohio-based firm recently reduced its plastics presence by selling its North American PVC wall coverings business.
Things were a bit more grim at Ferro Corp. and Spartech Inc.
Ferro — which gets about 20 percent of its sales from plastic compounds — saw its share price tumble almost 70 percent, while Spartech suffered a drop of more than 50 percent.
And in spite of the buzz surrounding bioplastics and sustainability, investors in 2011 weren't kind to bioplastics makers Metabolix Inc. and Cereplast Corp.
Metabolix's share price plummeted more than 60 percent, while shares of Cereplast cratered with a drop of about 80 percent.
Based on recent research notes from market analyst Seth Jayson at multimedia financial-services firm The Motley Fool, PolyOne and Westlake might be candidates to reverse their share-price fortunes in 2012. Jayson said earnings at both firms have been “outstanding.”
He also praised the firms' cash conversion cycles — their abilities to turn outgoing cash into incoming cash. Westlake's CCC number of 70.7 days is almost a full day lower than its five-year average. PolyOne showed an even bigger improvement in that area, with a current CCC number of 33 — nine days lower than its five-year average.
Another positive reading came from Bank of America/Merrill Lynch, which has maintained its buy rating on DuPont. “Given our view of intrinsic value, we're inclined to add [DuPont shares] on the dip,” analyst Kevin McCarthy wrote in a recent research note.
Esposito is a senior reporter for Plastics News.