(Reuters) - U.S. chemical maker Huntsman Corp (HUN.N) said it expected prices of white paint pigment to come out of a two-year slump by the end of next year as raw material prices stabilize and industrial demand improves.
Huntsman shares rose as much as 7 percent, touching their five-year high on the New York Stock Exchange.
The company’s global titanium paint pigment capacity will be second only to that of DuPont’s DD.N after Huntsman closes its purchase of Rockwood Holdings Inc’s ROC.N pigment business by the first half of 2014.
Huntsman said it expected the prices of ingredients used in making pigments to stabilize over the next two years.
The Rockwood deal will also make the company the largest processor of sulfate ores, a key raw material that is a cheaper alternative to chloride ores.
Demand for pigment, used to whiten everything from toothpastes to cars, is seen improving in the coming quarters, partly due to a recovery in automobile and housing industries in North America.
“I would certainly expect by the end of next year that the market should be tight enough that we would be able to get some price increases throughout the year,” Chief Executive Peter Huntsman said on a post-earnings conference call.
Huntsman is looking to benefit from the recovery in prices by spinning off about 20 percent of the pigment business within two years of the deal closing.
Weak pigment prices amid surplus capacity, however, weighed on the company’s third-quarter profit, which fell 45 percent.
Excluding one-time items, Huntsman earned 54 cents per share, in line with the average analyst estimate, according to Thomson Reuters I/B/E/S.
Revenue rose 4 percent to $2.84 billion, scraping past estimates of $2.82 billion, helped by demand for dyes and other chemicals used in consumer industries.
Huntsman plans to cut its capacity to produce liquid epoxy resin, used in windmill blades and other products, by about a third by the end of the year.
Demand for epoxy has tumbled due to excess capacity in China and the loss of subsidies for wind energy in Europe, prompting bigger rival Dow Chemical Co DOW.N to consider shedding the business.
Huntsman shares were up 4 percent at $22.60 in noon trading on Tuesday, after hitting a high of $23.20.
Editing by Kirti Pandey and Sriraj Kalluvila