Chemical firm sets IPO

After the recent success of two initial public offerings (IPOs), another company now wants to test its luck at the stock market.

Taking the cue from the warm reception in the IPOs of technology firm SQL* Wizard Inc. and property developer Primex Corp. Federal Chemicals Inc. filed with the Securities and Exchange Commission an application for the public listing of its shares.

The company locally manufactures and markets several types of adhesives and sealants used by the hardware, construction and leathergoods industries. Among its products are FedSeal Elastometric Sealant, Surebond and Bondy contact cement brands.

It is also the exclusive Philippine distributor of products from Orgavyl Chemical Industries BHd., a leading publicly-listed company based in Malaysia, offering a wide array of industrial and household do-it-yourself adhesives and sealants.

Based on its IPO application, FedChem plans to offer 12.5 million of its common shares at a price range of P6.50 to P7.50 each, to raise as much as P93.75 million in fresh capital which it will use to finance the direct importation of its raw material requirements and for additional working funds.

Lead underwriter for the primary offering is RCBC Capital Corp. After the IPO, the company will have 37.5 million in outstanding shares. FedChem has an authorized capital stock of P100 million divided into 100 million shares with a par value of P1 each.

Established in 1993, FedChem is the newest entrant in the country’s sealant and adhesive industry but has already taken the number two spot in market dominance.

Last year, the company posted total sales of P98.6 million, from P70.6 million in 1999 while net income rose from P171,000 to P411,000. In the first seven months of 2001, sales reached P87.2 million while profit surged to P4.8 million.

FedChem said it expects its sales to increase by an average of 42 percent over the next three years with its comprehensive pricing and better credit terms. The company strategically prices its products at approximately 20 percent lower than that of the market leader, thus resulting in increased sales volume.

It added that with the IPO proceeds, it will be able to price its products even more competitively and further improve its profitability margins since it will be able to directly import its raw materials from foreign suppliers instead of relying on middlemen traders.

The company has 58 employees at its plant and office site in Balintawak, Quezon City and is jointly owned by the Kwa and Co families.

Represented by Wilfred and Benjamin Co, the Co family is the country’s biggest and only fully integrated manufacturer and marketer of polyvinyl products with several companies under its wings: Imperial Rubber and Synthetic Products Inc.; Kaingin Vinyl Corp., General Chemical & Resins Consortium, Chemi-group Industrial and Engelhardt Manufacturing.

The family is also active in the chemicals, hardware and construction material industries, particularly through the joint venture hardware store with the Gokongwei group, the Handyman chain.

With Charles and Edward Kwa, the Kwa family is one of the pioneers in the country’s paint and hardware trade and owns Mayon Industrial Corp., one of the oldest family-owned paint manufacturing company; Unimeral Trading Inc. and Macnell Trading. Co. – Conrado Diaz Jr.