BUSINESS INSIGHTS
Company Of The Year
LUBRIZOL’S RESULTS, unusual for a chemical company in 2009, need to be acknowledged ALEXANDER H. TULLO, C&EN NORTHEAST NEWS BUREAU
polycrystalline silicon joint venture, Lubrizol headquarters, ing a company of the year. One is to do as the company is at the epicenter of the Wickliffe, Ohio Time magazine does for its person of the boom in photovoltaic power. It earned year and select the firm that was in the $367 million through the first nine thick of the action. The other is to emulate months of 2009, down 39% versus the the way Motor Trend chooses its car of the previous year but still strong. year and select, as objectively as possible, Likewise, FMC, which makes specialthe best among a range of contenders. ty inorganic chemicals such as lithium If C&EN had taken the Time approach compounds, saw sales and profits deto picking its company of the year, the cline but managed to maintain its relaobvious choice would have been Dow tively high profit margins through the Chemical. Its acquisition of Rohm and first three quarters of the year. Haas was a soap opera that riveted the The most impressive performance chemical industry. among chemical companies last year History will decide whether or not the deal made sense. It certainwas Lubrizol’s. Looking at the firm’s results, one would hardly know ly can be criticized. Dow’s $78-per-share offer represented a handa recession was going on. Its earnings for the first three quarters some premium—25 times Rohm and Haas’s prior-year earnings and increased 67%, to $385 million, on sales of $3.4 billion. Executives 25% above its highest stock price over the previous five years. The expect earnings to increase 78% for the full year and hit a company repurchase also came on the eve of the worst banking crisis since the cord. James L. Hambrick, Lubrizol’s CEO, credits his employees. “It’s 1930s. Dow Chief Executive Officer Andrew N. Liveris, who sits on not an exaggeration for me to tell you that every single person in our Citigroup’s board of directors, should have known better. company did more with less this year,” he told analysts in October. In making the $18.8 billion offer, Dow was spending promised money. Amid a collapsing economy, Liveris had to foresee the posTHE COMPANY has had a particularly strong performance from sibility that his deal to raise $9.5 billion by folding Dow’s commodthe business that provides both its name and 70% of its revenues: ity chemical businesses into a joint venture with Petrochemical lubricant additives for transportation and industrial applications. Industries Co. of Kuwait would fall apart. It did, at the end of 2008. Lubrizol’s personal care additives business also fared well during Facing an ironclad agreement with Rohm and Haas, Dow had to the year. Businesses that are more sensitive to the bad economy— finance the deal with a $13 billion short-term loan meant only as an such as thermoplastic polyurethanes and chlorinated polyvinyl emergency measure. Dow was forced to sell multiple businesses to chloride resins—faced more challenges. raise cash. The company also upended one of the longest dividend The company cut costs during the year, notably R&D spendhistories in the corporate world when it reduced its payout for the ing, which declined by 8%, to $153 million, through the first nine first time since before World War I. months. And it implemented a restructuring early in the year that Liveris told reporters recently that few would remember any reduced employment by 170 positions. However, that figure repof this in five years. Rohm and Haas, he said, is the linchpin of resents just 2.5% of Lubrizol’s total employment, mild compared Dow’s transformation from a commodity chemical company to a with the bloodletting at other large chemical firms. science-focused specialty materials maker. Furthermore, largely Lubrizol even made an acquisition during the depths of the through more than 3,000 layoffs, Dow is well on its way to achievfinancial crisis, buying Dow’s thermoplastic urethane business, ing $1.3 billion in annual cost savings. which has about $85 million in annual sales. The company says Liveris has lofty goals for the combined company. He says he it may use its cash to make more acquisitions costing between can increase revenues by 10% annually. He also believes that he can $100 million and $500 million. increase earnings from the $1.25 per share that he expects for 2009 Overall, stock analysts are positive about Lubrizol’s performance, to $4.50 by 2012 and $10 at some point. If Dow does achieve these although they worry about the company’s ability to sustain its goals, then certainly it will be a future company of the year. profits. Debt analysts are more enthusiastic. Standard & Poor’s put But the recession has turned out to be a far bigger event than Lubrizol on “credit watch positive” last month. “Given the strengththe actions of any one company. Instead of selecting ened financial profile, recent debt reduction, and our a company that has been grabbing headlines, better expectations for prudent financial policies, we believe to write about one that has been quietly defying ecothe company could sustain its financial profile,” credit Looking at nomic circumstances. analyst Liley Mehta told clients. That’s the kind of asLubrizol’s results, sessment we don’t often hear nowadays. C&EN considered several companies of achieveone would hardly ment this year, all of them much smaller than Dow. know a recession Views expressed on this page are those of the author One is Dow Corning, a joint venture between Dow and Corning. Through its Hemlock Semiconductor and not necessarily those of ACS. was going on. LUBRIZOL
THERE ARE TWO approaches to pick-
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