Chemical Week

UNITED STATES/AMERICASOctel’s Largest CustomerCancels TEL ShipmentsOctel says its largest customer has cancelledtetraethyl lead (TEL) purchaseorders for May, adding that it “believesthat this customer has accelerated its phaseoutof the use of leaded gasoline for motor vehicles,possibly to as early as this year.” Net salesto the customer were $63.6 million in 2004,roughly 26% of its overall TEL sales. “If thiscustomer takes no further shipments, it willsignificantly impact the predicted revenuesfor the company’s TEL business,” Octel says.The customer was not identified, but is mostlikely an Asian country, sources say.The loss of the customer could also affectNewMarket, formerly Ethyl. NewMarketreceives 32% of the net proceeds from thesale of TEL by Octel in all regions of theworld except North America under a marketingagreement. “At this time we are unableto predict the impact of these events on thenet proceeds we receive under the marketingagreements,” NewMarket says.Octel announced in regulatory filings inearly May that there was a possibility of akey customer exiting the TEL market earlierthan had been expected. It says that seniormanagement has visited the country “to betterunderstand and discuss the position,” andbusiness & finance newsthat it continues to work with the customer.Octel says the loss of the customer mayrequire it to review its anticipated TELgoodwill impairment charges, restructuringcosts, and manufacturing capacity plans, aswell as terms of its senior credit facility. “Thecompany has initiated this process and willprovide a further update in its [second-quarter]10-Q” filing with SEC.“TEL has always been a very difficultand uncertain market,” says Paul Jennings,Octel’s acting CEO. Octel will continue to“manage the decline in the TEL business,while improving performance and growingthe performance specialties and performancechemicals businesses, together with theappropriate alignment of corporate costs tothe needs of the business,” Jennings says.The loss of the customer will reduce Octel’s2005 earnings by roughly 28%, according toone analyst. “Our estimate of the effect on our2005 earnings per share (EPS) estimate due toa loss of the customer for the entire year net ofadditional business gained is a reduction of 85cts/share, to $2.20/share excluding goodwillimpairment charges,” says Jeffrey Zekauskas,analyst with J.P. Morgan.—ROBERT WESTERVELTShaw to Buy OverlaysPlant from DyneaShaw Industries Group (Dalton, GA) hassigned a letter of intent to buy Dynea’s decorativepaper overlays plant at Welcome,NC for an undisclosed sum, Dynea says.The companies will negotiate a deal forthe supply of melamine-formaldehyde andurea-formaldehyde-impregnating resinsfrom Dynea to Shaw as part of the sale,Dynea says. The transaction is expected toclose in June.The acquisition supports Shaw’sstrategy to back integrate into the “fastgrowingmarket” for laminate flooring, thecompany says. The facility supplies paperoverlays to laminate flooring and decorativemelamine laminating industries, andwill become part of Shaw’s Hard Surfacesgroup, the company says. Dynea saysthe Welcome facility generated sales of€30 million ($37 million) in 2004, about3% of the company’s total.Dynea says Shaw is the main customerof paper overlays production from theWelcome plant. Dynea says it will continueto produce paper overlays at itsother plants around the world. the companyhas paper overlay plants at Hayward,WS; Portland, OR; Tacoma, WA; CuitibamBrazil; Kitee, Finland; Medan, Indonesia;and Guangdong, China. The paper overlaysbusiness accounts for about 15% ofDynea’s total sales, the company says.—PECK HWEE SIMwww.chemweek.com Chemical Week, June 8, 2005 17