Rockwood Holdings falls after rival chops prices

Rockwood Holdings falls after Chilean rival chops lithium prices; analyst downgrades

• On 11:57 am EDT, Thursday October 1, 2009

NEW YORK (AP) -- Shares of specialty chemicals and materials producer Rockwood Holdings Inc. plunged Thursday after a rival cut lithium prices, leading an analyst to downgrade Rockwood to "Neutral" from "Outperform."

In midday trading, shares fell $3.58, or 17.4 percent, to $16.99. The stock has ranged from $3.36 to $25.66 over the past year.

Credit Suisse analyst John P. McNulty said Rockwood rival Soc. Quimica y Minera of Chile, also known as SQM, is reducing prices by 20 percent in an apparent bid to gain market share.

McNulty said SQM's price cut only affects about 25 percent of Rockwood's current lithium business.

However, many investors in Princeton, N.J.-based Rockwood "expected that portion of the business to be the largest growth driver for Rockwood over the long term with robust volume and price increases, (so) there is now downside risk to those expectations."

Even though he does not expect Rockwood to take a "big hit" to earnings this year or next year, investors should consider alternatives.

"There may be better places to put new money to work until the market digests this (SQM price cutting) news," he wrote in a client note.