American Pacific Corporation (APFC): Fly me to the moon

Although sometimes “it’s not rocket science,” with American Pacific Corp. (Nasdaq: APFC), a leading manufacturer of specialty and fine chemicals, it really is. 

AMPAC is the exclusive North American provider of Grade I ammonium perchlorate, the predominant oxidizing agent for solid-fuel rockets, booster motors and missiles used in space exploration, commercial satellite transportation and national defense programs.

Being a monopolist in the Grade I ammonium perchlorate (which accounts for 28% of revenue) niche provides an enviable economic mote, as does being an oligopolistic in other markets. AMPAC is one of two North American manufacturers of mono-propellant and bi-propellant propulsion systems and thrusters for satellites and launch vehicles, and is one of the world's major producers of bi-propellant thrusters for satellites.

AMPAC's other significant segment, the more comprehensible fine chemicals, isn't shielded from competition to the extent of specialty chemicals, but it still enjoys barriers to entry because of FDA standards and edicts. The segment manufactures active pharmaceutical ingredients used in drugs for indications in areas such as anti-viral, oncology, and central nervous system; registered intermediates; and HIV-related and influenza-combating drugs.

Not unlike a Russian/American space rendezvous, the segments complement each other: Specialty chemicals typically has higher operating margins than fine chemicals, 32% compared to 16%, but fine chemicals is the growth engine, having increased to 57% of the business in the first quarter of fiscal year 2008, ended Dec. 31, 2007, up from nothing in FY2005. Together they rocketed revenue up to $46.9 million in the first quarter, up 34% from $34.9 million one year ago. Net income in the first quarter soared 383% to $2.9 million, or $0.38 per diluted share, up from $0.6 million, or $0.09 per diluted share, in the year ago period.

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

Already a member? Please log in below