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Platform Specialty Products Corp (PAH): Here Is What Pershing Square Thinks About It

Platform Specialty Products Corp (NYSE:PAH) is a $3-billion market cap producer of high-technology specialty chemical products. The Florida-based company was founded in 2013 with financial support from Bill Ackman, the founder and manager of Pershing Square. In its Q3 investor letter, New York City-based Pershing Square discussed the performance of PAH. Let’s take a look at the hedge fund’s comments.

Platform’s earnings continued to grow this quarter as growth in the Performance Solutions business offset a decline in the Ag Solutions business. Platform’s organic revenue declined 1%, as Performance Solutions grew 4% and Ag Solutions declined 5%. The growth in the Performance Solutions segment continued to be driven by the positive results of the electronics business it recently acquired from Alent and strength in its industrial business. The decline in Ag Solutions resulted primarily from the ongoing drought in Brazil, which has caused buyers to delay their typical purchases in advance of the planting season. If the drought abates within the next few months, management believes it is likely it will recover these sales in future quarters.

Platform’s organic EBITDA increased 1%. Performance Solutions organic EBITDA grew 4% due to revenue growth and ongoing cost synergies from the acquisition of Alent, which was somewhat offset by a higher mix of sales from lower margin products. Ag Solutions organic EBITDA declined 3%, as the portion of sales from higher-margin products increased and the company continued to reduce structural costs.

Platform’s overall EBITDA grew 3% due to a 2% tailwind from foreign exchange. As a result of interest savings from the company’s recent debt refinancing and its leveraged capital structure, EPS grew roughly 18%.

At the end of August, Platform announced that it intends to separate its Ag and Performance Solutions businesses into two publicly traded companies in order to increase long-term value. Management expects the separation to occur by the middle of next year, and is likely be effectuated by an IPO of the Ag business.



For the third quarter ended September 30, Platform Specialty Products Corp (NYSE:PAH) reported a 2% year-over-year increase in sales to $904 million. It had net loss attributable to common stockholders was $69 million, or $0.24 loss per share, versus net income of $105 million, or $0.15 per share loss, for the third quarter of 2016. Adjusted EBITDA for the quarter was $197 million, up 3% compared to $190 million in 2016. On a constant currency basis, adjusted EBITDA rose 1%.

During the last 12-month period, shares of Platform Specialty Products have moved up nearly 8%, trading at around $10.56. However, the share price has tumbled more than 16% during the last six months. PAH received a consensus average recommendation of ‘Overweight’ and a consensus average target price of $14.36 from 12 analysts polled by FactSet.

Meanwhile, our database shows that Platform Specialty Products Corp (NYSE:PAH) is a popular stock among the hedge funds covered by Insider Monkey. There are 31 funds in our database with bullish positions in the chemicals producer. Among them is Pershing Square, which held 40.45 million shares of the company at the end of the third quarter.

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