Honeywell’s Cote prunes resins unit in quest for higher growth

DALLAS – Honeywell International Inc. plans to spin off its $1.3 billion resins-and-chemicals business by early next year, enabling the company to concentrate on faster-growing products.

The spun-off unit, which makes polymer resin used to engineer plastics, fibers and filaments, will be called AdvanSix Inc., Honeywell said in a statement Thursday. Shareholders will receive stock in the new business tax-free, and there is no affect on financial guidance, the company said.

The resins business “is favorably positioned to continue to achieve global growth as a standalone enterprise,” Honeywell CEO Dave Cote said in the statement. “Following the spinoff, Honeywell and AdvanSix will each have a more focused business.”

Cote has often tweaked Honeywell’s portfolio of businesses, selling about 60 units with $7 billion of sales since 2002 and acquiring another 90 companies with $14 billion in revenue over the same period.

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The spinoff of the resins business is “a prudent portfolio pruning,” said Robert McCarthy, an analyst with Stifel Nicolaus & Co. “This is not surprising in the continued evolution of Honeywell.”

In a presentation yesterday, Honeywell said the resins unit was expected to post 4 percent annual growth over the next five years, outpacing growth of 3 percent for the overall $8 billion market. Still, that’s much lower than growth of 11 percent for Honeywell’s refrigerants-and-foams products and a 9 percent expansion of refining products and services over the same period.

In April, Bloomberg reported that Morris Plains, N.J.-based Honeywell was considering exiting the business and that the unit generates an estimated $150 million to $200 million in profit. Honeywell has said it’s the lowest-cost producer of a resin called caprolactam, and in a May presentation said the resins market was going through “some tougher times” because of a “run-up in capacity and the pricing pressures.”

The move announced Thursday mirrors an earlier one by Royal DSM NV of the Netherlands amid heightened competition from Chinese manufacturers that have increased exports to the U.S. AdvanSix will use part of its caprolactam output to make Nylon 6, a polymer resin used in products for carpets, automotive and electronic components, and industrial packaging. As a byproduct, the unit makes ammonium sulfate that’s used as a fertilizer.

Erin Kane, who has lead the resins and chemicals unit for the last two years, was named president and CEO of AdvanSix, Honeywell said.

Honeywell has a plant in Smithfield and has said it will close its plant in Cranston.

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