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Kraton to Ramp Up Operational Capacity of Sylvatraxx TEA

Zacks

Kraton Corporation KRA unveiled plans to ramp up the operational capacity of Sylvatraxx tread enhancement additives (“TEA”) to address the growing demand of the tire industry. Per the company, the move — scheduled to complete by fourth-quarter 2018 — will expand production by 20% at the Niort plant in France.

The Niort facility has been a well-known supplier of a wide range of products, such as pure aromatic monomer resins and aromatically-modified terpene-based resins with a higher renewable content to the tire industry.

Sylvatraxx products have been geared to provide tire makes with an improved balance of wet grip performance and low rolling resistance. Also, it provides up to 100% bio-based content to tire manufacturers.

The increasing need for safety and fuel economy as well as sustainability considerations has led to rising TEA demand. In order to address this long-term demand growth, the company is exploring additional options for manufacturing expansion.

In the last six months, shares of the company have rallied 40.2%, significantly outperforming the industry’s 3.7% decline.


Kraton is benefiting from the acquisition of Arizona Chemical in the form of cost reduction and operational improvements. The company realized cost improvement and transaction synergies related to the Arizona Chemical acquisition of $65 million at the end of September 2017, well ahead of its initial year-end 2018 target.

Moreover, Kraton remains committed to steer organic growth in key markets through state-of-the-art innovation and infrastructure. The company, in May 2017, announced the opening of a hydrogenated styrenic block copolymer (“HSBC”) plant in Mailiao, Taiwan. The plant will boost the company’s innovation-grade business, especially low molecular weight HSBC products. It will also help Kraton to effectively serve the growing export and Asian markets through higher production capacity of varied grades of HSBC products.

Kraton should also gain from its efforts to reduce debt. The company cut its net debt by $87 million in the third quarter of 2017, leveraging improved cash generation.

Kraton Corporation Price and Consensus

Zacks Rank & Stocks to Consider

Kraton carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic material space are Methanex Corporation MEOH, LyondellBasell Industries NV LYB and Air Products and Chemicals Inc. APD.

Methanex has an expected long-term earnings growth rate of 15% and sports a Zacks Rank #1 (Strong Buy). Its shares have rallied 12.8% over a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

LyondellBasell has an expected long-term earnings growth rate of 9% and flaunts a Zacks Rank of 1. The company’s shares have gained 17.8% in a year.

Air Products has an expected long-term earnings growth rate of 14.1% and a Zacks Rank #2 (Buy). Its shares have moved up 12.4% over a year.

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