Rockwood Expects Pigments Unit to Earn More in Second Half
U.S. chemical maker Rockwood Holdings hopes to turn around the paint pigments business it has been trying to sell for a year as it expects raw material costs to halve.
Weak prices due to oversupply and rising costs of titanium ore, the key ingredient used for making pigments, have hit margins at the business.
"... The business is going to come back and there is no reason to be in a great rush to do anything," Chief Executive Seifi Ghasemi said, but added that the company was committed to selling the business.
Weak earnings at the unit have weighed on Rockwood's profits in recent quarters. Other chemical makers such as DuPont, Huntsman and Tronox are also considering options for their pigments business.
Rockwood expects the unit to have adjusted earnings of $50 million-$60 million before interest, taxes, depreciation and amortization in the second half of the year. The company lost $900,000 in the first half, based on the same measure.
"We do believe that we are seeing a turnaround in our titanium dioxide cycle, and we expect the performance of this business to improve further in 2014," Ghasemi said on a call with analysts.
Princeton, New Jersey-based Rockwood, is narrowing its focus to lithium production as demand for rechargeable batteries in laptops, mobile phones and automobiles grows, in keeping with an industry-wide shift away from businesses exposed to swings in commodity prices.
The company, which describes its lithium and surface treatment chemicals businesses as its core, recently agreed to sell its industrial ceramics unit for $1.99 billion and clay-based additives business for $635 million.
Dow Chemical, the largest U.S. chemical maker by sales, said last month that it was considering selling its paint, construction and chlorine businesses.
DuPont, similarly, is planning to exit the paint pigment business to focus on its agriculture unit.
Huntsman, on the other hand, has said it could either sell its existing titanium business or add to it. It is a prospective buyer of Rockwood's titanium pigments business, Reuters reported in July, citing sources.
Rockwood had earlier bundled the pigments business with its performance additives for a sale, but failed to attract the kind of offers it was hoping for.
The business continued to weigh on Rockwood's second-quarter results.
Excluding charges related to the sale of non-core assets, Rockwood earned 73 cents per share in the second quarter, missing the average analyst estimate of 76 cents.
Revenue rose about 7 percent to $972.3 million. Analysts had expected revenue of $955.9 million, according to Thomson Reuters I/B/E/S.
