FINANCE Decade of Growth Industry expansion is reflected in postwar growth in value of many chemical industry stocks A HE POSTWAR DECADE has done well
by investors in chemical stocks, at least those with t h e patience and perseverance to have held on t o their investment. H o w well is indicated by t h e chart on the right which shows the value at the end of last m o n t h of $1000 investments made i n 1 3 typical chemical companies as 1946 began. T h e figures assume that all stock dividends during t h e intervening years were retained, but t h a t cash dividends were not reinvested; n o allowance has been m a d e for brokerage commissions. In early 1946 stock prices were rising in a bull market that was to reach its peak in May of that year a n d be followed b y a sharp break in early September. Prices, therefore, were relatively high when c o m p a r e d with t h e preceding wartime years a n d the years to follow until the current great hull market got its start in mid-1949. Thus it was not a n optimum time for longterm investment. Nevertheless the 10-year gains for most of the issues a r e impressive, even when weighed against the strong gains m a d e in recent years b y industrial stocks as a whole. T h e most familiar market averages now stand somewhat higher than twice their 1946 level—the DowJones average of 3 0 industrials, for instance, has advanced from close to 200 in early 1946 t o over 500 today. In the same period, eight of t h e 13 chemicals h a v e more than doubled in value, and, if dividends are included, 10 of the investments show gains of 100% or more. T h e 13 stocks, however, are scattered across a wide range of relative performance, with the best investment n o w w o r t h five times as m u c h as t h e lowest on the list. Moreover, shares of t h e larger companies have fared hest over the past decade; the six largest companies listed are ranked among t h e t o p seven performers. There is considerably less discrepancy between total cash dividends paid by the firms over the 10-year period. In general, however, those companies ranked high o n t h e list paid out less 2058
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2 3, 1956
in 1946 b u t have boosted their cash payments more since then. Compare Dow and Allied Chemical, both of which have done relatively well as investments. In 1946, a $1000 investment in D o w common paid a cash dividend income of only $18.50, while an investor putting the same amount into Allied stock would have received $42.50. Last year t h e same Dowholdings (assuming the investor h a d held onto stock dividends paid during the period) paid dividends of $86 a n d the Allied stock purchased in 1945 drew payments of $64. Though much of t h e groïvlh i n chemical stock values has resulted from
investor confidence during recent years in t h e industry's continued prosperity and growth, i t is also a reflection of postwar expansion. Look at D u Pont's record, for instance. Since 1946, t h e company has expanded its capacity b y expenditures of $1.2 billion, w h i c h includes cost of 14 n e w plants (four more are now building). As a result, operating investment has increased 137% with a n annual growth rate of 10%. Except for $150 million from n e w preferred a n d common stock, t h e funds needed came from such internal sources a s retained earnings a n d d e preciation reserves. I n the same period, D u Pont's sales
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World's largest manufacturer of glass-lined steel products
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2 3,
1956
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FINANCE rose 1 9 4 % to $1.9 billion, a n a n n u a l growth rate of 13%. Sales last y e a r of those products made in 1946 w h i c h D u Pont is still manufacturing amounted t o about $1.4 billion, m o r e than t w i c e 1946 sales. I n addition, about 2 7 % of 1955 sales came from additions t o t h e company's product lines i n t h e postwar period. î^îet income from operations—$292 million last year—was u p 2 4 8 % since 1 9 4 6 . Return on operating investment h a s averaged 1 1 . 4 % , excluding those years w h e n t h e excess profits tax p u t a heavy b i t e o n earnings. Though t h e industry's largest corporation, D u Pont is n o t alone i n i t s growth record. Union Carbide, w h i c h h a s p u t over $1.0 trillion in n e w construction since the w a r , saw sales nearly triple to $1.2 billion during t h e s a m e period and net climb from $57.2 million t o $140.8 million last year. I n 1955 a b o u t one third of total sales and almost half of net income c a m e from products not available 15 years a g o . And a similar story can b e found a m o n g some of the smaller firms. Diam o n d Alkali has s p e n t $106.6 million since World War I I t o increase a n d improve capacity, including $65.6 million since 1951. Sales during this period h a v e gone u p a b o u t 2 5 0 % , n e t over 2 0 0 % . Will t h e past r e c o r d of chemical stocks b e repeated? Individual firms undoubtedly will reflect t h e shifting fortunes of business success. B u t for t h e industry, it's a. good b e t t h a t t h e decade ahead holds continued g r o w t h .
amounted t o about $ 2 5 million. Although t h e 22-year-old company h a s only b e e n i n the chemical business since Shulton offers common stock 1950, its chemical sales last year to provide new capital for reached $ 2 . 5 million. At Shulton today, emphasis on c h e m further growth icals is becoming increasingly m o r e pronounced. Eventually, t h e c o m S H U L T O N , a leading producer of toilet- pany's chemical operations m a y even ries under such trade n a m e s a s O l d b e more important than its production Spice, Friendship's G a r d e n , Desert of toiletries. T o carry forward this Flower, a n d Escapade, is for t h e first program, the company plans t o double time offering stock to t h e public. Also its research staff t o about 7 5 people. a manufacturer of fine aromatic chemiSays one company spokesman: cals and pharmaceutical intermediates, "Shulton's decision to offer comon stock Shulton is selling a total of 220,000 to. t h e public was an entirely logical shares of common stock. Of this move. Obviously, t h e company w a s amount, 20,000 shares will b e made just getting too b i g to take care of i t s available to key employees of t h e important n e w ideas out of working capital alone." company. Principal underwriters of t h e stock, b e i n g sold a t $17.50 p e r share, a r e Kidder, Peabody & Co. a n d L e e Higginson Corp., both of N e w York. This • G l i d d e n ' s profit for t h e first half of issue represents 18% of t h e company's its fiscal year ending F e b . 2 9 totaled total stock, while t h e remaining 8 2 % $3.6 million ($1.58 a s h a r e ) . Comis being retained b y t h e Schultz a n d pany expects that per-share earnings Stanley families. this year will a t least equal last year's. This latest move will provide Shulton Glidden plans spending $15 million for w i t h new capital for continued growth capital additions this year (compared through acquisition a n d expansion. with $8.1 milHon in 1955) which will Shulton, which last y e a r purchased A. b e financed for t h e present, at least, Maschmeijer Jr., Inc., of Newark, N. J., by increased debt instead of equity obviously has its eye on further acquisi- financing. tions in t h e chemical field. With its principal manufacturing • American Cyan a m id s t o c k h o l d e r s plant in Clifton, N . J., Shulton also has c o n v e r t e d 54,846 shares of preferred branches in Canada, t h e Netherlands, stock into 120,441 shares of common in March. Shares now outstanding: 343,Mexico, a n d other- Latin American countries. Its total sales last year 000 preferred, 9.3 million common.
including the Public In
INDEX OF STOCK MARKET PRICES Jan. ' 5 4 Opening Prices = 1 0 0
RUBBER
PETROLEUM 3 0 0
2 5 0
2 0 0
150
150
100 3rd Qtr.(l9S5)
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4th Qtr.
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1st Qtr. ( 1 9 5 6 )
2 3. 1956
2 n d .Qtr.
3 r d Qtr. ( 1 9 5 5 )
4th Qtr.
1st Qtr. ( 1 9 5 6 )
2 n d Qtr.
