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Platform Specialty Products/Element Solutions Idea Proposal (PAH/ESI)

Platform Specialty Products/Element Solutions Idea Proposal (PAH/ESI)
 

Will Platform Specialty Products/Element Solutions outpace growth expectations in 2019?

Report Available: February 20, 2019

 

Blueshift’s initial research found PAH trying to reinvent itself with the sale of a new division, a new top management team, and a new name. Executives have warned that Q4 results will be disappointing and offered a tepid view for 2019 growth. But with reduced debt and a renewed focus on end markets like electronics and cars, the company is trying to boost its competitive position.

 

Observations

  1. Specialty chemical maker PAH is a company in transition. It completed the $4.2 billion cash sale of its farm chemicals division, Arysta LifeSciences, on January 31. The company plans to use the proceeds to pay down debt and focus on its performance solutions division, which includes chemicals for the electronics, automotive, and graphics industries. Along with the sale of Arysta, PAH is re-tooling its top management team with a new CEO and COO. It is also changing its name to Element Solutions Inc. and will begin trading under the ticker ESI.
  2. Executives said preliminary Q4 results show a 2% decline in net sales, year-over-year, including a 4% drop in its electronics unit, which comprises about 60% of the company’s revenues. Executives blamed soft demand in Asia and in certain key end markets, such as high-end mobile phones, for the late-year dropoff. For the full year, revenues were up 4% to $1.96 billion, led by a 6% increase in net sales in its specialty and industrial segment.
  3. For 2019, the company forecast modest sales growth of between 1% and 3%. Its incoming CEO said he expects weakness in the Asian economy, especially in China, to persist, along with continued deceleration in the global electronics and automotive markets. Sales of new cars and light trucks, for example, are expected to decline in the U.S. in 2019, while major consumer electronics makers such as AAPL and Samsung have warned of slowdowns in mobile phones and memory chips.
  4. PAH/ESI has been working to beef up its core electronics business. In May, it acquired HiTech Korea Co. to get into the non-conductive adhesives market and created its new MacDermid Alpha brand, a unified electronics-focused business which executives claim offers a wider range of solutions than competitors, who include Atotech Inc., DWDP, AHKSY, Tamura Corp. (TYO:6768), and Flint Group.

 

Can PAH/ESI exceed the growth rates of its key end markets, like smartphones and cars? Will the company benefit from increasing electronic content in cars and mobile devices? What will margins look like? Does PAH/ESI have any supply chain risks such as raw material pricing? What is the outlook for its energy and graphics businesses? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Electronics manufacturers, Competitors, Supply chain executives, and Industry specialists.

 

Companies: Platform Specialty Products/Element Solutions (PAH/ESI), Asahi Kasei Corp. (AHKSY), DowDuPont Inc. (DWDP), Tamura Corp. (TYO:6768)

 

 

Research Begins: February 4, 2019

 

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