QUOTE AND NEWS
Benzinga  Jul 15  Comment 
Below are the top chemicals-major diversified stocks on the NASDAQ in terms of earnings per share. The trailing-twelve-month earnings per share at Balchem (NASDAQ: BCPC) is $1.39. Balchem's ROE for the same period is 13.20%. The...
Benzinga  Jun 24  Comment 
Below are the top chemicals-major diversified stocks on the NASDAQ in terms of gross margin. The trailing-twelve-month gross margin at Balchem (NASDAQ: BCPC) is 28.50%. Balchem's EPS for the same period is $1.39. The trailing-twelve-month...
SeekingAlpha  May 5  Comment 
Balchem Corporation (BCPC) Q1 2014 Earnings Conference Call May 5, 2014 11:00 AM ET Executives Frank J. Fitzpatrick – Chief Financial Officer and Treasurer Dino A. Rossi – Chairman, President and Chief Executive Officer ...
Benzinga  Apr 3  Comment 
The following statement from Sensient Technologies Corporation (NYSE: SXT)(“Sensient”) is in response to an erroneous press release issued today by FrontFour Capital Group LLC (“FrontFour”) alleging that Sensient Director Dr. Elaine R....
TheStreet.com  Apr 1  Comment 
Update (4:05 p.m.): Updated with all-time high price and Thursday market close information. NEW YORK (TheStreet) -- Balchem  soared to an all-time high of $65.89 on Tuesday after the company, which provides ethylene oxide to medical device...
Benzinga  Apr 1  Comment 
Verint Systems (NASDAQ: VRNT) shares rose 3.88% to $48.75. The volume of Verint Systems shares traded was 881% higher than normal. Verint reported better-than-expected fourth-quarter results and issued a strong full-year forecast. Verint reported...
StreetInsider.com  Apr 1  Comment 
* Balchem Corporation (Nasdaq: BCPC) announced that it entered into a definitive agreement to acquire Performance Chemicals & Ingredients Company (d/b/a SensoryEffects), a privately held supplier of customized food and beverage ingredient...
Benzinga  Mar 31  Comment 
Balchem Corporation (Nasdaq: BCPC) today announced that it entered into a definitive agreement to acquire Performance Chemicals & Ingredients Company (d/b/a SensoryEffects), a privately held supplier of customized food and beverage ingredient...
SeekingAlpha  Feb 27  Comment 
Balchem Corp (BCPC) Q4 2013 Earnings Conference Call February 27, 2013 11:00 AM ET Executives Frank J. Fitzpatrick – Chief Financial Officer, Treasurer and Assistant Secretary Dino A. Rossi – President and Chief Executive...
SeekingAlpha  Dec 29  Comment 
By Markus Aarnio: In this article, I will feature one animal health stock that has seen intensive insider selling during the last 30 days. Intensive insider selling can be defined by the following three criteria: The stock was sold by three...




 
TOP CONTRIBUTORS


In our technology driven world Balchem Corporation (NYSE: BCPC) is responsible for making our foods last longer and be more nutritious. As one of the main innovators behind the technique of microencapsulation[1], which involves the wrapping of a nutrient or chemical in unique layers of fats or lipids that break down inside livestock to enable delivery, Balchem is responsible for creating food for livestock and consumers that can be chemically modified to maximize the delivery of specific nutrients. Additionally, Balchem is a supplier of raw chemicals to hospitals and other biotechnology firms who use them, among other things, to sterilize hospital equipment, respectively.

Since 2007, Balchem, along with other firms in the food industry have had to confront an increasing shift amongst consumers towards organic foods which do not have the additives that BCPC manufactures. One of the contributing factors driving this change are the increasing number of warnings issued by the FDA. So far in 2008, more than 200 separate warnings and recalls of food products have been issued and consumers are choosing to utilize local farmers rather than the large food manufacturers that make up a large proportion of Balchem's sales.[2] While organic food is more expensive than what is readily available on the store shelves, demand has remained steady even as the US economy has declined.

Business Divisions

Balchem is divided into three main divisions with one focused on the production and transport of chemicals and two divisions that specialize in the development of products that incorporate the microencapsulation technology. All three divisions have seen positive growth both in organic revenue and net income between 2005 and 2008. [3]

Specialty Products (Accounted for 15% of organic revenue in 2008Q1 and 35% of net income)

The Specialty products division is responsible for the manufacturing and global distribution of ethylene oxide, propylene oxide, and methyl chloride. Ethylene oxide is sold primarily to health care providers as a sterilant and fumigant while propylene oxide and methyl chloride are usually shipped to other manufacturers who use these chemicals as intermediate additives or solvents in order to create everything from foam to fertilizer.[4] Due to the relatively low level of research and development expenses present in this sector, it is one of Balchem's most profitable divisions bringing in more than 2.5 million dollars in net profits during the first quarter of 2008.

Food, Pharma, and Nutrition (16%, 21%)

The Food, Pharma, and Nutrition division is home to Balchem's consumer oriented microencapsulation products. As of 2008Q1, BCPC offers the following products: Bakeshure, Meatshure, Confecshure, Vitashure, Flavorshure, Chline, Betaine, and Pharmashure.[5] Each product line is geared towards maximizing the delivery of a nutrient, preserving the shelf life of an ingredient, and/or increasing production efficiency. For example, BCPC's Confecshure line of products include delayed release carbon dioxide capsules that can be flavored and are eventually used to make the popular Pop Rocks candy.[6] Additionally, the Meatshure line has microencapsulates that have increased the efficiency of sausage manufacturing by 40%. In the first quarter of 2008, this division brought in more than 40 million dollars in sales accounting for more than two-thirds of BCPC's total organic revenue.[7]

Animal Nutrition and Health (69%, 44%)

As the world's largest supplier of FDA approved choline, a vitamin B derived nutrient that is essential in the diet of livestock, BCPC's Animal Nutrition and Health division helps to deliver millions of pounds of microencapsulated dietary products to farmers in the meat industry each year.[8] None of Balchem's products can wholly substitute for grain but are all supplemental to the natural grain diet usually given to livestock. The four product lines in this division are: Reashure, Niashure, Nitroshure, and Chelated Minerals all of which are developed and manufactured by BCPC. Each product line is tailored towards the preservation of a specific nutrient until it reaches a specific stage in the digestive tract of a cow in order to maximize absorption. In 2007, BCPC also acquired two companies, both in the choline chloride industry, that have helped to expand its production capacity and distribution network: Akzo Nobel Chemicals and Chinook Global Limited. [9]

Nutrient ' Delivery Process
Reashure Choline Microencapsulates choline to prevent pre-mature digestion in the rumen (the first of the cow's stomachs)
Niashure Niacin Microencapsulates niacin for the same purpose as choline
Nitroshure Urea Allows for a gradual breakdown of urea into nitrogen that is kept in proportion with other nutrients digested by the cow.
Chelated Minerals Wide Range including Zinc, Copper, and Calcium Direct introduction of a discrete chemical compound that is comprised of a soluble salt with an amino acid that is meant to improve nutrion

Balchem collaborates directly with global feed manufacturers and not necessarily cattle or dairy farms. With the world population currently at 6.5 billion, demand for feed is at an all-time high, and government regulations regarding the safety and quality of food has gotten much more stringent in Europe and other developing countries.[10] With all of that combined, the demand for Balchem's microencapsulates, which are geared towards promoting healthy animals, hasbeen fairly robust. Farmer's can't just feed their dairy cows no nutritional supplements or else the milk that the cows make will not meet government standards.

Overall Business Financials

BCPC has seen its net earnings triple between 2003 and 2007 going from 5.6 million to 16.1 million.[11] These earnings, all else being equal, will only continue to rise over the next 20 years as the global demand for the food products that are treated with Balchem microencapsulates, such as meat and dairy, are expected to more than double by 2030. [12] Balchem, during the 2007 fiscal year, also began three research and development projects that are intended to expand the uses of choline to vitamins and probiotics; however the results of these projects will not be seen at least until 2010. [13]

Key Trends and Forces

Demand for organic foods will shift demand away from BCPC's products

The USDA deems all foods that are free from foreign additives such as fertilizer and, in this case, microencapsulates as organic.[14] In 2007, sales of organic foods reached nearly 20 billion dollars which represented a 25% growth from 2006.[15] With the revelation during the first half of 2008, that some of the food the United States received from our largest importer, China, was contaminated, consumers have begun not only to flock towards organic foods but to foods that are locally grown and distributed directly by local producers who usually can not afford the additives sold by Balchem.[16] This demand has persevered even as the US Economy has seen an economic slow down with demand increasing more than 7.7% between June 2007 to May 2008.[17] In 1990, Balchem benefited from the enactment of a nutrition labeling law in the US that forced food manufacturers to look toward nutrition additives as a way to enhance the nutritional value of their products without sacrificing shelf life.[18] In other words, food manufacturers wanted to maximize the amount of nutrition they could place on the labels by maximizing the nutrients in their foods in a cheap and cost effective way. Therefore, a move by consumers towards additive free foods, will only hurt BCPC's bottom line.

Inability to maintain proprietary ownership of processes through patents will reduce sales

All of the techniques and processes used by Balchem to manufacture its microencapuslated products are protected by 17 patents that, as of 2008Q1, are valued at close to $2 million or more than 12% of their total net earnings during fiscal 2007.[19] However, with more than 107 active patents in the US that have been issued regarding this process, Balchem is under constant pressure to ensure that their competitive advantage is not eroded by the technical achievements of their competitors.[20] This is especially true as Balchem seeks to use their patents to create pharmaceutical products, while patent expiry can cause sales to drop by more than 80%.[21] This severe reduction in sales is caused by the flood of generic drugs onto the market, which are usually priced at a much lower level but have the same chemical ingredients as the original.

Rising prices of raw materials will affect profitability of products

All three of the substances sold under the Specialty Products division are shipped in double walled, recyclable stainless steel drums.[22] Steel prices have increased almost 50% since the beginning of 2008.[23] With nearly all of the major steel suppliers predicting higher prices for the second half of 2008, Balchem, like other companies dependent on steel (automotive, construction), will be forced to either pass on higher prices to consumers or reduce production.[24] These rising expenses have already started to take a toll on the profitability of the Specialty Products division which saw a 10% drop in year to year earnings during the 2008Q1 that was coupled with a 5% increase in sales during the same period.[25]

Competitive Analysis

The consumer goods sector contains more than 1000 publicly traded companies but BCPC's main competitors, like itself, are firms that have a consumer oriented approach to biotechnology and who offer scientifically advanced products that have an everyday applicability.

  • Biodelivery Sciences is a biopharmaceutical company that competes with BCPC through its encapsulated drug delivery system for humans and animals.
  • Praxair mainly competes with BCPC by supplying a wide variety of industrial gases derived from carbon, nitrogen, helium and hydrogen.
  • Monsanto is a direct competitor through its agricultural productivity department which, like BCPC, develops nutrients for cattle that are meant to increase milk productivity and overall health of the animal.
2007 Gross Revenue 2007 Net Profit Number of US Patents Market Cap[26]
Balchem (BCPC) 176M 16.7M 15[27] 461.98M
BioDelivery Sciences International (BDSI) 1.778M [28] (2.826M) [28] 2 [29] 45.91M
Praxair (PX) 9.89B [30] 1.22B[30] 942[31] 28.56B
Monsanto Company (MON)[32] 11.04B 1.91B 4213[33] 61.51B





References

  1. Southwest Research Institute: "The Art and Science of Microencapsulation"
  2. FDA 2008 Food Recall List
  3. Balchem 2007 Annual Report Page 17
  4. Jobwerx Press Release 9/27/2006: "Hydrogen peroxide propylene oxide JV for polyurethane business"
  5. Balchem Food, Pharma, and Nutrition Products
  6. Prepared Foods Magazine 9/2001: "A pop-rock mix-in or topping"
  7. Balchem 2008Q1 8-K Page 14
  8. Prepared Foods 7/2003: "Balchem"
  9. Balchem 2008Q1 8-K Page 10
  10. Mongabay 5/2005: "World Population Rate Continues to Plummet"
  11. Balchem 2007 Annual Report Page 3
  12. Food and Agriculture Organization of the United Nations Report 2003: "Diet, Nutrition, and the Prevention of Chronic Diseases"
  13. Balchem 2007 Annual Report Page 6
  14. United States Department of Agriculture Organic Food Labeling Guide
  15. The Gourmet Retailer 7/8/2008: "Health & Wellness Sales Topped $102 Billion in '07"
  16. The Motley Fool 7/2/2008: "Love Thy Neighbor, The Farmer"
  17. Reuters 6/24/2008: "Latest Research Shows Strong Consumer Demand for Organic Foods"
  18. Answers.com Business and Finance: Balchem Company History
  19. Balchem 2008Q1 8-K Page 12
  20. US Patent Office Microencapsulation Patents 2008
  21. Brandweek 7/16/2001: "When Patents Expire"
  22. Balchem 2008Q1 8-K Page 19
  23. Navalier & Associates 6/5/08: "Rising Steel Prices Show Few Signs of Abating"
  24. ABC News 7/7/08: "Steel Prices Add to Building Costs"
  25. Balchem 2008Q1 8-K Page 21
  26. Yahoo Finance: BCPC Competitors
  27. Patents Held by Balchem
  28. 28.0 28.1 BioDelivery Sciences 2007 10K Page 84
  29. US Patent Office: BioDelivery Sciences
  30. 30.0 30.1 Yahoo Finance: Praxair Financial Information
  31. US Patent Office: Praxair
  32. Yahoo Finance: Monsanto Key Statistics
  33. US Patent Office: Patents Assigned to Monsanto
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