Improvements in Textile Dye Processes

The post “Dyes of the Beholder” on April 26^th introduced a new series on textile dyes, an industry fraught with environmental abuses and energy inefficiency.  The series continues with a look at investment opportunities at new technologies that improves the textile dyeing process.  The last post “Innovations for Textile Dyeing” on April 30^th looked at two newcomers to the field, but here we look at the incumbents, the experienced chemicals suppliers.

Dow Chemical (DOW:  NYSE) is not to be left out. Dow has launched its ECOFAST Pure as a sustainable textile treatment for saving water, energy and chemicals in the cotton dying process.  The company claims as much as 50% less water is required and 40% less energy.  However, ECOFAST Pure may make its most significant difference by reducing the required process chemicals by as much as 90%.

All of those savings probably impress customers well enough.  However, Dow is also passing along bragging rights to its certification from the Zero Discharge of Hazardous Chemicals Foundation. Dow also conforms to the the ZDHC Manufacturing Restricted Substances List (MRSL), assuring customers can be assured that Dow is not using banned chemical substances.

As a long-standing public company, Dow provides interest investors a seasoned stock to participant in the move to more sustainable chemicals.  Dow shares trade at 26.4 times trailing earnings and the stock offers a 4.11% dividend yield at the current stock price.  The multiple may be a good value.  In the most recently reported twelve months, the company earned 14.6% on equity, suggesting Dow is finding investments that drive strong shareholder value. 

Another well-established chemicals producer, Huntsman Corporation (HUN:  NYSE) is also in the race to clean up its textile chemicals product line. Huntsman offers its AVITERA SE line of dyes for the coloring of cottons and cotton blends.  These dyes are free of para-chloro-aniline (PCA) compound.  PCA is an organochlorine compound that is widely recognized as toxic and possible carcinogenic.

Huntsman is doing well enough with its textile effects division, of which the AVITERA SE line is a part, to disclose the performance of the segment.  In the twelve months ending March 2021, Huntsman claimed $610 million in revenue providing $47 million in cash earnings.

Over all in the trailing twelve months Huntsman earnings of $1.86 per share on $6.3 billion in total sales. Earnings delivered a 12.9% return on equity.  The stock is currently trading at 16.17 times trailing earnings, which is near historic low valuation levels.  As icing on the cake the stock current offers a dividend yield of 2.49%.  

Of course, a position in either DOW or HUN gives an investor much more than a stake in facing textile dyes and chemicals.  Shareholders have to take the more or less toxic legacy chemical portfolio along with it and hope the two companies continue with these initial steps to clean up.  

 

The next and final post in the textile dye series focuses on newcomers with ideas well outside the dye vat.

 

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.