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Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<ul><li>We joined WTR’s Head of Business Development Tim Regan on this week’s Water Tower Hour Podcast to recap what happened in the chemicals and materials technology industries in 2023 and to provide an outlook for 2024.</li><li>Those interested can listen to the podcast on Apple Podcasts, Google Podcasts, Spotify, or on our website.</li><li>WTR-CMI in 2023. With the majority of stocks in our index finishing 2023 in positive territory, the WTR-CMI Index managed to keep pace with the Russell 2000, appreciating 15%.</li></ul>

We joined WTR’s Head of Business Development Tim Regan on this week’s Water Tower Hour Podcast to recap what happened in the chemicals and materials technology industries in 2023 and to provide an outlook for 2024.Those interested can listen to the podcast on Apple Podcasts, Google Podcasts, Spotify, or on our website.WTR-CMI in 2023. With the majority of stocks in our index finishing 2023 in positive territory, the WTR-CMI Index managed to keep pace with the Russell 2000, appreciating 15%.

Water Tower Hour Recap -  2023 Review and 2024 Outlook

<ul><li>Changes to WTR-CMI. Following the completion of Livent’s merger of equals with Allkem, the new company, with the new name Arcadium Lithium plc, is now trading under the symbols ALTM-NYSE and LTM-ASX, and has replaced LTHM in our index.</li><li>WTR-CMI last week. The S&amp;P 500 appreciated 1.2% last week, while the broader Russell 2000 managed to stay relatively flat, losing 0.3% of its value.</li><li>Our WTR-CMI Index declined 1.2%, dragged down by double-digit losses in lithium stocks and the continuing decline in the value of synthetic graphite maker EAF. </li></ul>

Changes to WTR-CMI. Following the completion of Livent’s merger of equals with Allkem, the new company, with the new name Arcadium Lithium plc, is now trading under the symbols ALTM-NYSE and LTM-ASX, and has replaced LTHM in our index.WTR-CMI last week. The S&amp;P 500 appreciated 1.2% last week, while the broader Russell 2000 managed to stay relatively flat, losing 0.3% of its value.Our WTR-CMI Index declined 1.2%, dragged down by double-digit losses in lithium stocks and the continuing decline in the value of synthetic graphite maker EAF. 

Mat-Chem Notes - For the Week Ended January 19, 2024

<ul><li>WTR-CMI in 2023. With the majority of stocks in our index finishing the year in positive territory, the WTR-CMI Index managed to keep pace with the Russell 2000, appreciating 15%.</li><li>However, both indexes fell well short of the 24% growth of the S&amp;P 500 in 2023, with the WTR- CMI Index dragged down by four companies that lost more than 50% in value during the year.</li><li>Weak demand and destocking. Looking back at 2023, several themes are emerging as we head into 2024, such as declining commodity prices and weakening end-market demand, with Y/Y volume comps affected by destocking across several end-markets since mid-year, as supply chain constraints, which characterized 2022, are resolved and companies go back to just-in-time inventory management.</li></ul>

WTR-CMI in 2023. With the majority of stocks in our index finishing the year in positive territory, the WTR-CMI Index managed to keep pace with the Russell 2000, appreciating 15%.However, both indexes fell well short of the 24% growth of the S&amp;P 500 in 2023, with the WTR- CMI Index dragged down by four companies that lost more than 50% in value during the year.Weak demand and destocking. Looking back at 2023, several themes are emerging as we head into 2024, such as declining commodity prices and weakening end-market demand, with Y/Y volume comps affected by destocking across several end-markets since mid-year, as supply chain constraints, which characterized 2022, are resolved and companies go back to just-in-time inventory management.

Industry Report - Chemicals & Materials Technology

<div><div><div><div><ul style="list-style-type: disc;"><li><p>WTR-CMI last week. Last week saw the market retrench, with the S&amp;P 500 losing 1.3%, while our WTR-CMI index of 30 chemicals and materials technology stocks managed to modestly outperform the broader Russell 2000 index (-3.6%) by declining 3.4%.</p></li><li><p>Only one stock in our index, SXT, managed a positive gain for the week, appreciating 3%. FMC was the worst performer in our index, losing 12.3% of its value on a short seller’s report that the company felt obliged to address.</p></li><li><p>Ag-tech portfolio shuffles continue. Privately held DLF, a global seed company, completed the acquisition of CTVA’s alfalfa seed breeding program, which was announced last month.</p></li></ul></div></div></div></div>

WTR-CMI last week. Last week saw the market retrench, with the S&amp;P 500 losing 1.3%, while our WTR-CMI index of 30 chemicals and materials technology stocks managed to modestly outperform the broader Russell 2000 index (-3.6%) by declining 3.4%.Only one stock in our index, SXT, managed a positive gain for the week, appreciating 3%. FMC was the worst performer in our index, losing 12.3% of its value on a short seller’s report that the company felt obliged to address.Ag-tech portfolio shuffles continue. Privately held DLF, a global seed company, completed the acquisition of CTVA’s alfalfa seed breeding program, which was announced last month.

Mat-Chem Notes For the Week Ended September 8, 2023

<div><div><div><ul style="list-style-type: disc;"><li><p>WTR-CMI year to date. As we enter the final month of the third quarter, our index of 30 chemicals and materials technology stocks has underperformed the S&amp;P 500 and the Russell 2000 on both a YTD and Y/Y basis.</p></li><li><p>With most of the margin improvement benefit having played out over the course of 2022 and into 1Q23, stock performance of companies in our sector has been largely driven by market- and industry-specific dynamics and their effects on respective companies.</p></li><li><p>Thus, weaker pricing and customer inventory drawdowns affected the performance of FMC and AVD, which are both down more than 30% YTD. </p></li></ul></div></div></div>

WTR-CMI year to date. As we enter the final month of the third quarter, our index of 30 chemicals and materials technology stocks has underperformed the S&amp;P 500 and the Russell 2000 on both a YTD and Y/Y basis.With most of the margin improvement benefit having played out over the course of 2022 and into 1Q23, stock performance of companies in our sector has been largely driven by market- and industry-specific dynamics and their effects on respective companies.Thus, weaker pricing and customer inventory drawdowns affected the performance of FMC and AVD, which are both down more than 30% YTD. 

Mat-Chem Notes - For the Week Ended September 1, 2023

United States

Westlake Chemical Corporation manufactures and markets basic chemicals, vinyls, polymers, and fabricated products.  The Company serves a range of consumer and industrial markets, including flexible and rigid packaging, automotive products, coatings, and residential and commercial construction.

LyondellBasell Industries NV manufactures plastic, chemical, and fuel products. The Company offers products for the manufacturing of personal care products, fresh food packaging, lightweight plastics, construction materials, automotive components, durable textiles, medical applications, and biofuels. LyondellBasell Industries conducts its business worldwide.

Air Products and Chemicals, Inc. produces industrial atmospheric and specialty gases, and performance materials and equipment. The Company's products include oxygen, nitrogen, argon, helium, specialty surfactants and amines, polyurethane, epoxy curatives and resins. Air Products and Chemicals, Inc. products are used in the beverage, health and semiconductors fields.

Albemarle Corporation produces specialty and fine chemicals.  The Company's chemicals are additives to or intermediates for plastics, polymers and elastomers, cleaning products, agricultural compounds, pharmaceuticals, photographic chemicals, drilling compounds, and biocides.  Albemarle produces the majority of its products in the United States.

CF Industries Holdings, Inc. manufactures and distributes nitrogen and phosphate fertilizer products globally. The Company's principal products in the nitrogen segment are ammonia, urea, urea ammonium nitrate solution, ammonium nitrate, diesel exhaust fluid and aqua ammonia. The principal products in the phosphate segment are diammonium phosphate and  monoammonium phosphate.

PPG Industries, Inc. supplies products for the manufacturing, construction, automotive, chemical processing, and other industries worldwide.  The Company makes protective and decorative coatings, flat glass, fabricated glass products, continuous-strand fiber glass products, and industrial and specialty chemicals.

DuPont de Nemours, Inc. operates as a chemical company. The Company offers elastomeric photopolymer printing plates, structural and elastic adhesives, fluids, reinforcing composites, foams, coatings, rubber and elastomers, topical ingredients, food ingredients, animal nutrition, biomaterials, water purification technologies, and fibers.

RPM International, Inc. manufactures, markets, and sells various specialty chemical product lines. The Company's product lines include specialty paints, protective coatings and roofing systems, sealants and adhesives, focusing on the maintenance needs of both the industrial and consumer markets.

International Flavors & Fragrances Inc. creates, manufactures, and supplies flavors and fragrances for the food, beverage, personal care and household products industries. The Company's flavors and fragrances are individual ingredients or compounds of a large number of ingredients that are blended, mixed or reacted together to produce proprietary formulas.

Celanese Corporation is a global integrated producer of chemicals and advanced materials. The Company's products include acetyl, acetate, vinyl emulsion, and engineered polymers. Celanese Corp's operations are primarily located in North America, Europe and Asia.

PT Chandra Asri Petrochemical Tbk (CAP) is an integrated petrochemical producer. The Company produces ethylene, propylene, mixed C4, pyrolysis gasoline, polyethylene, polypropylene, and styrene monomer.  CAP serves both the domestic downstream industries and regional export markets in Indonesia.

LG Chem Ltd. is a chemical manufacturer.  The Company's products include petrochemicals, plastic resins, and engineering plastics.  LG Chem also produces industrial and electronic materials.

NITTO DENKO CORPORATION manufactures and markets a wide range of chemical products which are used as materials for industrial and electronic components. The Company's products include materials for sealants, semiconductors, and wrappings.  Nitto Denko has a network of sales/manufacturing subsidiaries worldwide.

Solar Industries India Limited manufactures and supplies explosives and explosives accessories. The company's products include bulk, cartridge, detonators, detonating cords Pentaerythritol Tetranitrate ("PETN"), and cast boosters.

Shin-Etsu Chemical Co., Ltd. produces and distributes synthetic resins and other chemical products such as fertilizers. The Company also manufactures electronic materials such as semiconductor silicon, synthetic, and rare earth quartz. Shin-Etsu Chemical operates in Japan and overseas.

Wanhua Chemical Group Co., Ltd. develops, manufactures, and markets pure isocyanate, polymeric isocyanate, polyurethane, and other related chemical products.

Qinghai Salt Lake Industry Co.,Ltd manufactures and markets fertilizer products. The Company produces potash fertilizers, potassium chloride, and other products. Qinghai Salt Lake Industry also produces salts, chemicals, and other products.

Asian Paints Limited manufactures a wide range of decorative paints, varnishes, enamels, and black & synthetic resins. The Company, through its subsidiaries, also manufactures specialty industrial chemicals and vinyl pyridine latex products which are used in the manufacture of rubber tires.

NIPPON PAINT HOLDINGS CO., LTD. produces paints for automobiles, ships, and other industrial paints.  The Company also manufactures fine chemicals such as finishing agents and adhesives.

Nan Ya Plastics Corporation manufactures and markets plastic and chemical fiber products.  The Company's products include polyester filament yarns, flexible PVC (Polyvinyl Chloride) film products, plastic leather products, and rigid film products.  Nan Ya also manufactures printed circuit boards.

Ecolab Inc. is a global provider of water, hygiene, and energy technologies and services for customers in foodservice, food processing, hospitality, healthcare, industrial, and oil and gas markets. The Company's services include water treatments, cleaning and sanitizing solutions, pest elimination, and kitchen repair and maintenance services.

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Ecolab Inc (ECL US)

Water Tower Hour Recap - 2023 Review and 2024 Outlook

WTR-CMI in 2023. With the majority of stocks in our index finishing 2023 in positive territory, the WTR-CMI Index managed to keep pace with the...

Water Tower Research

Mat-Chem Notes - For the Week Ended January 19, 2024

WTR-CMI last week. The S&P 500 appreciated 1.2% last week, while the broader Russell 2000 managed to stay relatively flat, losing 0.3% of its value.

Water Tower Research

Industry Report - Chemicals & Materials Technology

WTR-CMI in 2023. With the majority of stocks in our index finishing the year in positive territory, the WTR-CMI Index managed to keep pace with the...

Water Tower Research

Mat-Chem Notes For the Week Ended September 8, 2023

Ag-tech portfolio shuffles continue. Privately held DLF, a global seed company, completed the acquisition of CTVA’s alfalfa seed breeding program,...

Water Tower Research

Mat-Chem Notes - For the Week Ended September 1, 2023

As we enter the final month of the third quarter, our index of 30 chemicals and materials technology stocks has underperformed the S&P 500 and the...

Water Tower Research

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