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Letter to the Editor

This article originally appeared in the October 2004 Issue of INSIGHT

Treading Water

The Dow inched back up over the 10000 mark in September, but is still about two percent shy of its start of 2004 base of 10452. The economy just seems to be trudging along, treading economic waters.

Speaking of water, our thoughts are with our readers in Florida, where it seems this season that those hurricanes keep on coming. Insurers must be very thankful that Florida’s Hurricane Catastrophe Fund was in place this year.

So far, the insurer stocks that INSIGHT tracks are not showing any problems in stock value, and they all should finish out the year in the black.

Breaking news as I pen this column is that PPG Industries has announced price increases for all liquid and powder products in North America.

The increases take effect Oct. 1, as contracts permit. The increases will range from ten to 12 percent for powder products and approximately seven percent for general industrial liquid and adhesive products. Prices for PPG's coil and extrusion products were increased five percent in July.

J. Rich Alexander, PPG's vice president of industrial coatings, explained in a company press release that, despite the strict cost control measures that have been in place, costs for raw materials, including solvents, resins, pigments and containers, have risen dramatically, as have energy and transportation costs.

Akzo Nobel, based in the Netherlands, is anticipating a 24 percent increase in sales in China, which translates to more than $600 million in 2004. The largest coatings producer in the world wants to hit the $1 billion mark in China's rapidly industrializing economy by the end of the next five years.

While continuing the company's adherence to overall cost-cutting in the last few years, Akzo Nobel has actively sought out growth markets to make up for a sales slowdown in its pharmaceuticals business.

Both the publicly traded dealer consolidators in our stock chart, AutoNation and United Auto Group, are definitely hoping that consumers get so excited about the new car models that they drive them right off the showroom floor. UAG’s per share stock price is down one fourth since January. AutoNation is cruising along Wall Street down ten percent YTD.

Earl Scheib, Inc. announced the termination of its Letter of Intent with Elden Holding Group, LLC, but did report some small improvement in the company’s bottom line. Net sales for the first quarter of fiscal 2005 were down about four percent but same-shop retail sales did increase by about a half of one percent, and operating income was $772,000, as compared to $274,000 in the first quarter of fiscal 2004, due to overall reductions in operating expenses.

October will be an interesting month on the economic front, I think. The presidential election is just around the corner, and the campaign speeches that will be heating up this month will definitely mention the U.S. economy.

-Charles Baker-

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