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Castaway Products, Corn Drive American Vanguard

Keeping bugs off high-tech crops is turning out to be good business for Newport Beach-based chemical maker American Vanguard Corp.

Genetically modified crops, which not long ago were thought to be resistant to pests, have become a growing part of American Vanguard’s business.

This year, American Vanguard is looking to better its projected $220 million in 2007 revenue with more growth from castaway brands from larger companies.

For 2008, Wall Street expects sales of about $240 million.

“We’re a small player, but a specialized player,” American Vanguard spokesman William Kuser said.

The 38-year-old company is publicly traded with a recent market value of about $400 million.

American Vanguard sells more than 30 insecticides, fungicides, herbicides and other products. The company buys chemicals from big companies that don’t want to focus on what they see as smaller product lines.

Since 2000, American Vanguard has bought 13 brands and seven licenses, mostly from larger companies that shed the products after buying other companies.

An example: In 2006, American Vanguard bought the Counter line of soil insecticides from BASF AG. Counter had yearly sales of $25 million when it was acquired and “contributed significantly” to American Vanguard’s sales and profits in the third quarter, according to the company.

Sales were up 11% from a year earlier, hitting $56 million in the third quarter. Profits were $5.4 million, up 28%.

American Vanguard’s fourth-quarter results are due soon. Analysts expect a 28% rise to $70.5 million in sales. Profits are seen growing 55% to $8 million.

That’s a change of pace from a couple years ago when a drought brought slower sales.

The company is seeing growth from genetically modified crops, according to Kuser.

Genetically modified crops were introduced in the 1990s. They’re altered to be more resistant to insects and rotting.

That was supposed to cut down on pesticide use. But studies show that farmers use fewer pesticides in the first few years of planting genetically modified crops and then start using more.

“Farmers still need our chemicals to protect them,” Kuser said.

American Vanguard also is riding a bull market for corn and cotton.

Since 2005, the crop price of corn,the company’s main market,has risen more than 100%. Ethanol, which is made from corn, is fueling some of the higher prices.

More expensive crops mean farmers do more to protect them against insects, Kuser said.

American Vanguard also sells SmartBox, a computerized system that allows farmers to spread chemicals without being exposed to them.

Crop protection is a $32 billion yearly industry worldwide, according to American Vanguard.

Rivals include FMC Corp. of Philadelphia and Monsato Co. of St. Louis.

American Vanguard has about 300 employees, with about 25 of them in Orange County.

Eric Wintemute, a Long Beach native and chemist by training, is American Vanguard’s chief executive. His father, Glenn Wintemute, is co-chairman and was president of the company from 1984 to 1994. Together, they own the biggest piece of American Vanguard at about 12%.

Herbert Kraft, the company’s co-chairman and former chief executive, owns the next biggest piece at nearly 12% of the company.

American Vanguard makes chemicals at three U.S. plants.

Its city of Commerce factory makes about 80 million pounds of chemicals a year.

The California plant has higher expenses for pollution control compared to most other places in the country. American Vanguard also has to deal with regulations designed to combat terrorism from the Department of Homeland Security.

Acquisitions are driving American Vanguard.

Late last year, the company bought a Missouri plant from BASF. The plant produces the Counter line, which American Vanguard bought from BASF a year earlier, as well as another insecticide.

In December, the company acquired a line of chemicals from Connecticut’s Chemtura Corp. to expand sales in Canada and Mexico.

In January, American Vanguard bought the Orthene insecticide line from Indiana’s Valent U.S.A., part of Japan’s Sumitomo Chemical Co.

The company has “potential for other acquisitions that have international consequences,” Chief Executive Wintemute said during a third-quarter conference call.

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