Arch Chemicals Looks To Boost Growth

By Eric Fox | November 26, 2010 AAA

Arch Chemicals (NYSE:ARJ) is attempting to transform itself over the next few years into a faster growing and more profitable company focused exclusively on the biocides industry. This strategy and other facts about the company were disclosed at a recent analyst meeting held in November 2010.

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Biocides
The biocides industry involves products that eradicate and control the growth of harmful microbes. The company has set a goal to divest itself of any businesses that are not in this area and become 100% focused on biocides. Arch Chemicals will also pursue selective acquisitions to meet this goal.

Sales Growth
Arch Chemicals also hopes to kick start sales growth and hopes to accomplish this through investment in research and development with the intention of generating a pipeline of new products. The company's goal is to have 25% of sales from new products and services. Arch Chemicals is also looking to emerging markets to accelerate sales growth and is focusing on China, Brazil, India and Southeast Asia.

HTH Water Products
Arch Chemicals reported $550 million in sales in 2009 in the HTH Water Products segment. This business sells products to sanitize pool water, along with maintenance and accessory products. The company is seeking to expand sales here by targeting non-recreational water applications including industrial, beverage and municipal water supplies. Arch Chemicals goal is to get sales here to $700 million by 2013.

Personal Care and Industrial Biocides
The personal care and industrial segment reported sales of $295 million in 2009. Products supplied here include those used in anti dandruff shampoos, cosmetics, food protection, health care and household cleaning products. On the industrial side, Arch Chemical's products are used to protect wallboard, ceiling tile, insulation and roofing materials. The company's goal is $400 million in sales here by 2013.

Wood Protection
Arch Chemicals reported sales of $230 million in the wood protection segment in 2009. This includes products to protect the wood from mold or rot, or to provide fire retardant protection. The company is looking to get sales to $300 million by 2013.

Divestitures
Arch Chemicals is in the process of divesting businesses that it considers non-core. In March 2010, the company closed on the sale of its industrial coatings business to Sherwin Williams (NYSE:SHW). The company received $54 million for the business. Arch Chemicals is still attempting to sell its performance urethanes and hydrazine businesses.

Margins & Competitors
Arch Chemicals hopes that the sales growth and divestitures of non-core businesses will help lead to higher margins. The company is looking to increase operating margins by a minimum of 350 basis points by 2013, from the 2009 level of 6.7%. (For related reading, please see Analyzing Operating Margins.)

Competitors of Arch Chemicals include Albemarle (NYSE:ALB), which makes flame retardant chemicals, and Hawkins (Nasdaq:HWKN), which operates in the water protection area.

The Bottom Line
Arch Chemicals is in the midst of a executing a strategy over the next few years that may change the company into a more profitable and faster growing company operating exclusively in the biocides area.

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