The promising turnaround of Rhodia

French chemical giant Rhodia SA is one of those companies that many investors might not feel much affinity with, based on the sectors it operates in. Its products are among others used in coatings, tyres, pharmaceuticals, cigarette filters and fragrances, but can simply be divided into three groups: 'application chemistry', 'specialty materials & services' and 'fine chemicals'. The first two groups are the main ones and together make up almost 90% of the company's sales value (2005) of Eur 4.5B. Total group turnover decreased for years and years and the share price fell from Eur 30 in 1998 to an absolute low of Eur 1.16 in 2004. But the turnaround is there, with positive earnings expected for this year The forward P/E in 2007 (17.0) is well below sector average (25.3) with impressive results booked in downsizing headcount and growth in sales & EBITDA. If Rhodia continues to perform well in 2007 and if estimates are met, a share price increase of 50% should be possible. 2006 Was also the year for Rhodia to restructure some of its BU's, where a new BU Energy Services has been created, focusing on the ever-hot item 'greenhouse gas emissions' and a more efficient structure has been built. At a current price of Eur 2.60 (NYSE:RHA - USD 3.39), the stock is close to being overbought in both day and weekchart, but with an expected EPS growth from 0.03 currently to anywhere in a range from 0.15 to 0.25 in 2007, Rhodia is destined to be among Europe's star performers in the chemical industry. Rhodia is listed in Paris (Eur 2.60) and at the NYSE (USD 3.39).