Quaker Chemical Reels In United Lubricants

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Declaring its intention to survive steel industry consolidation, Quaker Chemical Corp. on Thursday announced that it is buying United Lubricants Corp., of Middletown, Ohio.

A manufacturer and marketer of specialty lubricants and chemical management services, United caters primarily to the U.S. steel industry, which in recent years has fallen on well-publicized hard times. Quaker, which makes specialty chemical products mostly for the steel and automotive industries, has experienced a downturn in its own business. On Thursday it announced a 55 percent drop in earnings for 2001.

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Still, Quaker officials insisted that they had no qualms about expanding in the steel market at this time.

We believe there will continue to be a steel industry in the U.S., Vice President and Chief Financial Officer Michael F. Barry told Lube Report in a telephone interview. At the end of the day, there are going to be fewer steel producers and fewer companies serving them but we intend to be one of those companies.

Barry said United was an attractive acquisition because Quaker wanted to strengthen its market share as a supplier to the U.S. steel industry. He added that United has accounts with two of the largest U.S. steelmakers – accounts which Quaker considers safe.

Quaker, based in Conshohocken, Pa., did not disclose terms of the acquisition, which is expected to close by the end of this month. United employs 71 people and has annual revenues of approximately $13 million. The transaction includes Uniteds commercial and manufacturing facilities in Middletown.

Barry said Quaker felt confident of its ability to finance the acquisition, in part because of a strong balance sheet. The company had sales of $251 million in 2001 and has $22 million in long-term debt, for a debt-to-capital ratio of 22 percent.

It had recorded five consecutive years of increasing profits until last year, when earnings dropped from $17.2 million to $7.7 million, or 84 cents per share. The decline was partly due to lower sales – revenues fell 6 percent in 2001 – but also to special one-time charges related to a downsizing initiative, including $5.3 million for facility rationalization and severance pay.

Quaker also declared a $2 million one-time charge as a provision against doubtful accounts in the steel industry. One customer, LTV Corp., announced in December that it is going out of business and others are also in poor financial condition. Quaker took a $1.7 million charge for similar provisions in 2000.

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