W.R. Grace & Co. (GRA) is expected to come out of bankruptcy in Q4 or Q1, allowing this specialty chemicals and materials company more flexibility with its capital and potentially returning it to shareholders, says Ben Kallo, Senior Analyst at Robert W. Baird & Co.
“They have a very good balance sheet. There are three basic business segments, the most profitable one is our catalyst division, which sells catalysts for the refining process. They just instituted a price increase earlier in the year, a double-digit price increase, so they have some pricing power there. We’ll see that flow through into next year,” Kallo said.
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Kallo says GRA has improved operations and is also expected to benefit from a change in the economic atmosphere thanks to a rebound in construction. Moreover, he says the company could become an acquisition target once it leaves its bankruptcy status.
“They have construction-chemical business, which has been weak over the past few years as construction was weak — that is recovering. They did a lot of streamlining of the business in the downturn, so when we started seeing a pickup in that business, we got a lot of leverage there,” Kallo said.