When it snows, it's not poor

The little Morton salt girl is looking for a new home.

Rohm & Haas Co. chief executive officer Raj Gupta said all options were on the table: keeping the snow-dependent Morton salt division, selling it, or spinning it off in an initial public offering, or IPO. By the end of the year, he recently told analysts, the Philadelphia company should "have a path forward."

The nation's largest and the most recognized brand of table salt, with the cute girl and her umbrella, the Morton division is "performing fantastically," he said. But "we believe we see other ways for us to grow."

Gupta's long-awaited move with the salt business is part of a corporate strategy to focus attention on paint additives and electronics materials, and boost returns to shareholders through a repurchase of $2 billion in shares.

Michael J. Sison, equity analyst with KeyBanc Capital Markets, of Cleveland, who put an aggressive buy" rating on the stock Tuesday, said Rohm & Haas had been diversifying out of bulk lower-cost commodity products. So shaking the salt division makes sense. But, he added, "if they can't get the right price, I don't think it makes sense to sell."

An issue for any buyer - recent warmer winters.

Road salt to melt ice in the winter months accounts for 37 percent of industry salt sales in the United States, according to figures from the Salt Institute, a trade group. Table salt represents about 15 percent, and water conditioning makes up 25 percent. The remaining sales go to food processors, manufacturers and agriculture.

With a mild snow season, earnings from continuing operations in the Morton salt division sank 30 percent to $40 million in 2006 from $57 million in 2005, company regulatory filings show.

"The de-icing-salt business is a lot like farming. You're very dependent on the weather," said Gunther Buerman, chairman of American Rock Salt Co. L.L.C. in the Rochester, N.Y., area.

Mild weather in late 2006 and early this year led American Rock Salt to lay off workers in January. Then salt sales boomed late in the winter, allowing the company to call back the workers.

"When it snows, it's a very good business," Buerman said, adding: "It's a low-priced commodity. It's more expensive to ship it than it is to mine it."

Walter Becky, president of Chicago-based Morton salt, said Monday the mild winters appeared to be more of a short-term weather pattern than a long-term trend related to global warming. The weather can swing Morton's profit 20 percent one way or the other. But, he said, the core salt franchise "remains very solid."

Rohm & Haas was primarily interested in other Morton International Inc. businesses when it bought the Chicago company in the late 1990s. Morton salt reported $930 million in sales in 1999. Rohm & Haas unloaded Morton's European salt business after the acquisition and tightened efficiency and safety in its plants and mines.

The Morton salt division has 20 operations in the United States, Canada and the Bahamas. The nearest facility to Philadelphia is a Perth Amboy, N.J., salt-processing and transfer station for bulk shipments from the Bahamas, said spokesman George Bochanski.

The division employs 2,700 and accounted for about 10 percent of Rohm & Haas' revenue last year: $829 million of $8.2 billion. The Philadelphia chemical company carries $1.6 billion in mines, land, heavy equipment and other salt-division assets on its books, representing 17 percent of all Rohm & Haas assets. Products are sold under the Morton brand in the United States and Windsor in Canada.

The division is looking to add Morton-branded de-icing products for homeowners and has developed pool salt for swimming pools at colleges and institutions, Becky said. Sea salt and coarse-grained kosher salt are gaining favor with cooks, he said.

Industry experts say there are no obvious buyers. The salt industry is dominated by a handful of players - Morton, commodities giant Cargill Inc. and Compass Minerals International Inc. A sale to another big salt company would invite keen antitrust scrutiny, they say.

The Justice Department served the Morton salt business with a grand jury subpoena in January 2006 in connection with an investigation into price-fixing in its industrial-salt business, the company has reported in its regulatory filings. Rohm & Haas said it was cooperating with the investigation.

Now might be a good time to sell the division because of the fevered deal-making by private-equity investors, Rohm & Haas officials note.

American Rock Salt, with a mine in the Rochester area and road-salt sales in Pennsylvania, would consider buying the Rohm & Haas division. Morton is "really the only salt business with a brand name," Buerman said. The price likely would be too high, he admitted.

Since the Morton business is well-run, what would a private-equity buyer do to make it more profitable and boost its value? Buerman asked.

One possible new home for the Morton salt girl, Buerman suggested - a gravel company. The company could sell gravel in the summer and salt in the winter.