Balchem Corp.: A clever concoction

Investors who stumble across Balchem Corp. (Nasdaq: BCPC) might think it’s a specialty chemical maker. But Balchem, based in the Catskills region of New York state, is much, much more — and much, much less.

Depending on the whim of the service or analyst doing the grouping, one could find Balchem competing in the meat products sector, chemical manufacturing, industrial manufacturing, or specialty chemicals.

Confusing, isn’t it? They’d all be correct, to a certain degree, but also wrong, which could be why Balchem has only really started attracting some substantial interest from institutional investors during this decade, as sales have climbed steadily past $50 million, and topped $100 million during 2006.

Balchem is a 40-year-old New Hampton, N.Y.-based company with three business segments: specialty products, encapsulated/nutritional products and unencapsulated products operating as ARC Specialty Products, Balchem Encapsulates and BCP Ingredients, respectively. Through ARC, it’s the dominant supplier of ethylene oxide, a gas mostly used to make other substances, but also as a fumigant in making spices and cosmetics, and to sterilize medical devices including pacemakers.

The past few years, Balchem has made some strategic acquisitions that fit into its product mix. Balchem enhanced its global presence last year by buying the choline chloride and methylamines businesses from Akzo Nobel Chemicals S.p.A. in Italy. That boosted its production of choline, an amino acid that’s a building block of life. Choline chloride is used in poultry and swine production, but more choline is being consumed by humans as a nutritional supplement.

The proprietary microencapsulation technology developed by Balchem is used in many ways in the food, nutrition, pharmaceutical and specialty animal health markets. For example, in ruminant animals such as cows, vitamins and supplements that need protection from the four stages of the stomach to reach the digestive track can take advantage of microencapsulation to reduce the amount administered — and cutting costs. Aquaculture uses the Balchem encapsulates to get needed substances into fish without dilution by the water.

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