MONDAY, SEPTEMBER 14, 2009
SHARES OF Nalco Holding (ticker: NLC) were up 4.5% in midday trading after a Barron's story, "Nalco's Expanded Horizons," said the company offered a great opportunity for investors.
Nalco, which commands 17% of the $20 billion water-treatment and process-improvement chemicals, equipment and services market, has customers in aerospace, paper, chemical, pharmaceutical, petroleum, metals and mining concerns, plus hospitals, schools and hotels.
The company was saddled with debt when Chief Executive J. Erik Fyrwald took over in February 2008, wrote contributing editor Neil A. Martin. Since then, Fyrwald has paid down debt and drafted a three-year growth strategy designed to reduce costs, trim debt and reallocate capital and personnel to higher-growth areas. In May, the company completed a major refinancing, using the proceeds to pay down a substantial piece of its debt coming due within the next two years.
Fyrwald has stressed the need to reduce costs, boost cash flow and raise productivity, while targeting emerging markets including Russia, China and India, Martin writes.
More than 80% of Nalco's revenue is recurring, as customers must maintain the services to keep their systems running, even during economic downturn, Martin writes. The company's characteristics were apparently appealing to Warren Buffett, whose Berkshire Hathaway (BRKa) bought a big slug of stock in the final quarter of 2008 and the first three months of 2009.
This year, Nalco has added 80 people in China and India, and recently hired a well-known Chinese ex-diplomat to lead Nalco's thrust there, which should provide more opportunity for Nalco and its investors.
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