Albemarle Corporation (ALB): Stay Away From This Specialty Chemicals Company

Page 1 of 2

Albemarle Corporation (ALB)Albemarle Corporation (NYSE:ALB), a specialty chemicals manufacturing company, released its quarterly earnings last month and the results were terrible. The company recorded a dip in its margin and missed analysts’ estimates, which is a trend that has been continuing for a long while.

Let’s take a look at the factors which damaged Albemarle Corporation (NYSE:ALB)’s top and bottom-line performance.

The problems

Albemarle Corporation (NYSE:ALB) has chalked out a rigid business strategy over the years by focusing on a few core areas, such as bromine products and petroleum catalysts. It enjoys sturdy competitive advantages in these areas and has a very small number of competitors, but results have been very bad over the past few quarters.

Sales in the company’s catalyst segment dipped 14% to $229.1 million. As this segment contributes almost one-third of Albemarle Corporation (NYSE:ALB)’s revenue, its overall revenue fell 8% to $634 million, missing analysts’ estimates of $741 million. The company’s departure from the phosphorous-flame-retardants business also affected the top line.

Albemarle posted net income of $82 million, or $0.97 per share, in its second quarter, falling way behind analysts’ estimates of $1.23 per share. This was a result of the drop in sales of company’s fire-safety solutions and antioxidants, which are used in numerous industries.

Three-fifths of Albemarle’s sales come from outside of the U.S. and the sluggishness in emerging economies, particularly China, impacted demand for products. Demand in Europe remained well below the prior periods. Thus, a decline in the company’s margin doesn’t come as a surprise, but will Albemarle Corporation (NYSE:ALB) bounce back in the future? Let’s find out

Making some moves

The company has been trying out various strategies to improve revenue and earnings in the future, such as price increases and entering into joint ventures. In June, Albemarle announced that it would be raising prices of dibromomethane (DBM) and bromochloromethane (PCM) by 25%. The price-hike went into effect when it was announced and might help the company rescue its dropping revenue.

It also hiked the price of Ethanox to the tune of $0.95 per kilogram in April, and I would have expected these measures to improve its revenue. But it looks like these moves are not working, as Albemarle Corporation (NYSE:ALB)’s revenue is going downhill.

The company’s Saudi Organometallic Chemicals joint venture started production at the tri-ethyl aluminum (TEA) facility in Saudi Arabia in July. The plant is expected to yield 6,000 metric tons of TEA per year. But weak economic conditions in Europe have impacted the company’s business and I’m not sure how these moves will play out.

But the company was aggressive in its share-buyback program in the second quarter, with aggregate repurchases to the tune of roughly 10% of shares outstanding. This, along with the previously announced 20% increase in the dividend, speaks of Albemarle’s commitment to returning capital to shareholders even though it is taking a hit of late.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!