Solutia Sees Films Sales Tripling on IPad, Energy Conservation
Solutia Inc., the world’s largest maker of thermal window films, said it may triple sales of performance films amid increased demand for materials used to conserve energy and make electronics such as Apple Inc.’s iPad.
Revenue in the performance-films unit, formerly known as CPFilms, will double or triple in the next three to five years, Chief Executive Officer Jeffry Quinn said yesterday in an interview in New York. The unit is St. Louis-based Solutia’s smallest with sales last year of $185 million, 11 percent of the total.
Demand for insulating films such as EnerLogic is rising as governments adopt incentives and construction standards for energy efficiency, Quinn said. U.S. economic-stimulus funds are increasing window-film sales to real estate investment trusts and government buildings, he said.
“Stimulus dollars were a great illusion for a long, long time,” Quinn said. “We are actually seeing that flow through to orders now.”
U.S. lawmakers also are considering a $500 tax credit for homeowners who install energy-conserving window film, Quinn said. Such films are 10 percent of the cost of replacement windows and repay the investment through lower energy bills for commercial buildings in three years or less, he said.
Solutia, which had total revenue of $1.67 billion last year, has doubled sales of performance films used in electronics in a year to 15 percent of the unit’s revenue, Quinn said. The films are used to make some of the dozen or so layers in the touchscreens of Apple’s iPad tablet computer and Amazon.com Inc.’s Kindle e-reader, he said.
Profit Margins
Solutia’s adjusted earnings before interest taxes, depreciation and amortization as of June, on a pro forma basis, were 28 percent of sales, he said. Company plants are operating at 85 percent to 89 percent of capacity, with the performance- films unit running at lower rates than other businesses, Quinn said. That gives the company room to expand profit margins, he said.
“We don’t think that performance has peaked yet,” Quinn said. “Sustaining those margins would be a victory in and of itself because they are industry leading.”
About half of company sales are to automotive-industry end markets, with 18 percent to carmakers, including films for shatterproof windshields and insoluble sulfur for radial tires, he said. Demand from China and automakers is filling up order books in the second half, he said.
‘Good Visibility’
“We have pretty good visibility into the back half of the year, and we feel pretty good about what we see,” Quinn said.
Solutia, a Monsanto Co. spinoff that emerged from bankruptcy in 2008, plans to spend excess cash on plant expansions and “bolt-on” acquisitions, Quinn said. The prospect of initiating a share-repurchase program “is constantly on our mind” because the stock is undervalued, he said.
Solutia would consider an appropriate buyout offer even though “the company is not for sale,” the CEO said. He declined to say whether the board has rejected offers from any rivals.
“Our strategic industry competitors have begun to understand the significance of what we have created,” Quinn said.
To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.
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