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Global Expansion Stokes Growth at Chemical Maker

Eric Wintemute chief executive American Vanguard Corp.

Agricultural-chemicals manufacturer Am-erican Vanguard Corp. has plowed fertile fields this year, marking double-digit growth in profit and revenue.

The Newport Beach-based company makes products used for crop protection and other uses. It operates through subsidiaries Amvac Chemical Corp. and other units globally, with offices in the U.K., Mexico and Costa Rica.

Profit grew by 63% to $25.6 million during the first nine months of this year, while revenue climbed 20% to $262.8 million.

Revenue growth has been even more dramatic when looking at a recent two-year span. American Vanguard had $330.4 million in sales for 12 months through June, representing a 53% increase from the same period two years earlier. That jump has placed American Vanguard on the roster of the fastest-growing public companies in Orange County, with the company ranked No. 30 on this week’s Business Journal list (see page 40).

“Our business model is highly profitable, and we think that our competitive position is sustainable,” company spokesperson William Kuser said.

Part of the growth comes from American Vanguard’s wide variety of products. It also got a boost when a restriction was lifted by the Environmental Protection Agency on one of the company’s fungicide products.

Restructuring

American Vanguard launched an operational restructuring to expand Amvac’s international business in July. It started a new Netherlands-based subsidiary and named agriculture industry veteran Ad de Jong as managing director of the unit.

Amvac’s current director of international sales, Alfredo Pelaez, is expected to retire in the first quarter of next year. The company said it has seen its global sales grow roughly tenfold during Pelaez’ tenure.

The company also projects a rise in demand for agriculture-related products next year.

Third-quarter sales included initial shipments of soil insecticides “in response to grower demand ahead of the 2013 planting season,” said chief executive Eric Wintemute.

• Headquarters: Newport Beach

• Business: Chemical manufacturer

• Founded: 1969

• Ticker symbol: AVD (NYSE)

• 2011 revenue: $304.4 million

• Recent earnings: $8.1 million for third quarter

• Market value: About $920 million

• Notable: Russell 2000 and Russell 3000 indexes, and the S&P Small Cap 600 index

“We see the continuing trend of profitability improvement,” Wintemute added.

American Vanguard is well-positioned to escape any aftershocks of the past summer’s drought in the Midwest, according to Kuser.

The worst-in-a-generation drought damaged crops, roiled the commodities market, and dampened business prospects for food retailers, equipment rental operations and other agribusiness companies. But American Vanguard’s products are used seasonally, mitigating any drought impact.

“Our corn products are used early in the season [during] spring planting,” Kuser said. “Our cotton products are used during the second half of the season—June through harvest—and in the Southeast Cotton Belt, the drought actually subsided such that our sales were not significantly affected.”

He added the shortfalls in corn harvest this year are likely “to prompt a strong 2013 catch-up planting to restore diminished corn inventory stocks worldwide.”

American Vanguard recently raised its semiannual cash dividend to 7 cents per share from 5 cents, bringing the year’s distribution to 12 cents, up 50% from last year.

The move, combined with other signs of growth, triggered broader analyst coverage of the stock and a round of ratings upgrades by analysts, some of whom also boosted their target share prices on the stock. New York-based institutional brokerage Gabelli & Co. initiated coverage on American Vanguard last month with a “buy” rating.

Topeka Capital Markets in New York began coverage in September, also with a buy rating on the stock, recently trading just above $33 with a market value of $920 million. Analysts at Minneapolis-based Piper Jaffray Cos. recently boosted their target share price on Vanguard to $39 from a previous $32.

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