Fine Chemistry Services (FCS), a segment of specialty chemical company Albemarle Corporation (ALB), has commenced the expansion of its custom manufacturing facility in Tyrone, Penn. This is the second expansion at this site following the previous expansion, which started operation in Nov 2012.

The costs of the current Tyrone expansion have been estimated at $30 million. The expansion is set improve the infrastructural base at the site and will enable incremental and low-cost expansions in the future. It will also fuel further growth at FCS’s custom manufacturing business.

The incremental capacity is expected to be operational in first-quarter 2014. Eventually, the company will benefit from the estimated 40% increase in reactor capacity.

Albemarle is a leading maker of specialty chemicals for consumer electronics, petroleum refining, utilities, packaging, construction, automotive/transportation, pharmaceuticals, crop protection, food-safety and custom chemistry services.

Albemarle came out with its fourth-quarter 2012 results last month. The company reported adjusted earnings (excluding special items) of $1.17 a share in the quarter compared with $1.13 a share earned in the year-ago quarter. The results surpassed the Zacks Consensus Estimate of 99 cents, reflecting a positive surprise of around 18%

Profit, as reported, was $37.7 million or 42 cents per share. This represents a roughly 17% decline from $45.5 million or 51 cents per share posted in the prior-year quarter.

Revenues decreased 4% to $687.6 million in the quarter from $707.4 million in the year-ago quarter, beating the Zacks Consensus Estimate of $646 million. The results were impacted by lower metal surcharges in the Catalysts segment, more than offsetting volume growth.

Unfavorable raw material pricing impact coupled with lower demand for the products resulted in lower operating rates at the production units in 2012. However, exit from the phosphorus business, lack of pension obligations, strong balance sheet and investments for future growth are expected to benefit the company going forward.

Albemarle retains a short-term (1 to 3 months) Zacks Rank #3 (Hold).

Other companies in the chemical industry worth considering are Arkema S.A. (ARKAY), PetroLogistics LP (PDH) and Air Products and Chemicals Inc. (APD). While Arkema retains a Zacks Rank #1 (Strong Buy), both Air Products and PetroLogistics hold Zacks Rank #2 (Buy).

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