1.) There is a large TiO2 plant coming on line in China soon. This was brought up by a caller. The fear seems to be that the Chinese will do the same thing to TiO2 manufactures that they have done to steel makers.
2.) They admitted that there are ongoing talks about spinning off the TiO2 business. They already have a joint venture with Cronos in Louisiana. Talk is cheap. Other manufacturers are already too highly leveraged to do a deal. There would be serious anti-trust problem given the small number of TiO2 companies in the business now. HUN has talked about a spin off for years.
3.) Buying Rockwood at the top of the TiO2 cycle and selling or spinning it off at the bottom is/was a stupid idea and there is no way they can spin it as being smart no matter how hard they try.
4.) They claim the Rockwood Euro operations are making money and it is now the US legacy TiO2 business that is dragging down earnings.
5.) Full year earnings should be flat at about $2 per share. Why does no one want to own HUN at 4 times earnings and 6% yield? I think there is a fear that the company will do a bad deal on the TiO2 spin off just to get rid of it. They sound sort of desperate on the CC.
Just my take on things.
They actually earned only 2 cents this quarter. The rest is non cash nonsense. I'll have to listen to conference call to see what they say but I think TiO2 prices are killing them. The Rockwood acquisition was a bone head move.
El Nino has brought above average rainfall to Brazil this year. The months of Dec. to Apr. are the rainy seasons. Years of drought has reduced the cheap hydro power that CIG depends on for profitability. The recent strength in CIG is probably due to this.
Buy CIG for long term income and capital gains. But have a LONG term outlook, several years at least. The company is currently selling about 1x potential PE.
About $38 million in convertible notes matures and MUST be paid off. If the company can do that without breaching covenants on its other debt then it would be very positive. If the company's leverage goes over the RIC limit of 200% that triggers all sorts of penalties. That actually happened to some BDCs in the last recession, ACAS and ALD for instance.
After March 15 KCAP could be another busted BDC and probably sub $1 pink sheet stock. If KCAP can make it through this crisis it is probably worth $5+.
The companies announcement that it would waive fee in order to cover the next quarter's dividends tell you all you need to know. Bad earnings and possible energy related write offs next quarter.
Wait for single digits to buy. Single digits coming sooner than you might think.