Quaker Chemical Corp. (NYSE:KWR)
Conshohocken, Pa.
http://www.quakerchem.com

52-week low / high: $15.27 / $32.23
Shares Outstanding: 10.2 million
Market Capitalization: $316 million

Quaker Chemical Corp. (NYSE:KWR) is a maker of specialty chemical products for various heavy industrial and manufacturing applications. Its core customers are in the steel, auto and metalworking sectors. The company, which is quick to point out that it has nothing in common with other companies with “quaker” in their name, has been growing consistently worldwide and is expected to continue on an upward trajectory.

In 2007 sales exceeded half a billion dollars for the first time since the firm’s founding in 1930. Revenues for the year ended Dec. 31, 2007, rose 18.5% to $545.6 million, from $460.5 million in 2006. Profit jumped 32.5% to $15.5 million, or $1.53 per share, compared with earnings of $11.7 million, or $1.18 per share, in 2006.

In response, the company decided to raise its quarterly dividend to $0.23 per share from $0.215 per share previously. Dividends have been handed out for 35 consecutive years.

Quaker currently has operations in the United States, Canada and South Africa, as well as across Europe, Asia, South America and the Middle East. It is aggressively pushing into large developing markets, such as Brazil, Russia, India and China. The company’s China revenues tripled between 2004 and 2007.

Its footprint in India, where it has a joint venture with a producer in Calcutta, has also been expanding. Quaker stated in its 2007 annual report that it is the dominant supplier to the steel industry and has established relationships with metalworking manufacturers.

Part of the company’s success can be attributed to its business model, which includes more than just the sale of chemical products. It has a program that places company associates in its clients’ manufacturing facilities to oversee operations. Quaker’s involvement ranges from inventory management and industrial waste reduction to partnering with the client for data analysis and process optimization purposes.

Basically, the company’s representatives can be in charge of all the chemicals used in the customer’s operation. The model allows Quaker to gain a better understanding of the customer’s needs, giving it an advantage in keeping and winning business.

The company currently has more than 300 of its employees spread out among more than 70 locations and has been expanding its network. In 2007, it began a program in Mexico while building its presence in China and Brazil and adding more sites in the United States.

Investors should keep in mind that Quaker is vulnerable to the rising cost of crude oil, derivatives of which are some of its largest raw material inputs. However, Wall Street does not expect that to be a significant drag on the company’s future performance.

Analysts project earnings to jump 21.6% to $1.86 per share in 2008 before rising another 13.4% to $2.11 per share in 2009. Furthermore, Quaker appears to have plenty of cash on hand to keep growing at a healthy clip. Its working capital at the end of 2007 was $107.2 million, a rise of 11.6% from $96.1 million in 2006.

Note: Quaker Chemical Corp. (NYSE:KWR) is on the "Watch List" of Growth Report, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, Quaker displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Growth Report portfolio at a later date.

For access to the full article, you must be a registered member - it's FREE.