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Westlake Closes Buyout of NAKAN, Boosts Compounding Business

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Westlake Chemical Corporation (WLK - Free Report) wrapped up the previously announced acquisition of the global compounding solutions business, NAKAN.

NAKAN’s product portfolio is used in a wide-array of applications in the building and construction, automotive as well as medical industries. Per the company, this combination is a strategic move that complements the existing compounding business. It will enable Westlake Chemical to expand the compounding business globally along with adding the vital specialty products and technology to the current portfolio.

Through this move, Westlake Chemical’s compounding business now has facilities in the United States, Italy, France, Germany, China, Mexico, Japan, Spain and Vietnam. The company also has a world-class research facility in France along with several application laboratories.

Westlake Chemical’s shares have lost 16.5% in the past three months compared with the industry’s decline of 27%.


 

Westlake Chemical, in third-quarter 2018 earnings call, stated that it is witnessing strong global demand for products across the Olefins and Vinyls segments. The company expects its investments to enable it to achieve earnings growth and cash flow.

Westlake Chemical is also well placed to benefit from the Axiall acquisition. The acquisition has diversified the company’s product portfolio and geographical operations, creating a North American leader in Olefins and Vinyls. The company has realized $275 million of cost reduction synergies and savings since the completion of the acquisition.

However, the company faces headwind from raw material cost inflation which may affect margins. Also, its operations are exposed to planned turnarounds and unplanned outages.

 

Zacks Rank & Stocks to Consider

Westlake Chemical currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the basic materials space are Verso Corporation (VRS - Free Report) , sporting a Zacks Rank #1 (Strong Buy); along with Ingevity Corporation (NGVT - Free Report) and Cameco Corporation (CCJ - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Verso has an expected earnings growth rate of 63.5% for 2019. The company’s shares have rallied 35.7% in the past year.

Ingevity has an expected earnings growth rate of 21.5% for 2019. The company’s shares have gained 15.4% in the past year.  

Cameco has an expected earnings growth rate of 20% for 2019. Its shares have moved up 16.4% in a year’s time.

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