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Stock Strategist

Rockwood's Low-Cost Lithium Assets Set to Shine After Divestitures

We've upgraded Rockwood's moat rating to narrow.

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We've upgraded  Rockwood Holdings' (ROC) economic moat rating to narrow from none. Our narrow moat rating is based on the firm's low-cost position in lithium production, which will manifest more strongly following the sale of several less advantaged business lines. We believe that Rockwood and fellow narrow-moat Chilean producer  Sociedad Quimica Y Minera De Chile (SQM) are the world's lowest-cost producers of lithium carbonate. Additionally, Rockwood's surface treatment business contributes to its narrow moat rating.

During the last year, Rockwood's management has set a course to dramatically change the company's portfolio of chemical and material assets. In our opinion, Rockwood has secured solid prices for most of its divestitures, with titanium dioxide as the notable exception. By mid-2104, Rockwood will operate only two primary business lines, lithium and surface treatment. The firm has sold or plans to divest businesses that generated roughly 60% of 2012 net sales.

Jeffrey Stafford does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.