Innophos (NASDAQ:IPHS)

CAPS Rating: 5 out of 5

The Company and its subsidiaries, is a specialty phosphates producer in North America.

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Player Avatar moreofthesame (< 20) Submitted: 3/8/2010 12:16:02 PM : Underperform Start Price: $22.39 IPHS Score: -88.21

Innophos is a great company by the numbers after reading the latest motley fool news letter on the most undervalued stocks. However they make phosphorous for detergents which works great to clean dishes and clothes, but it is bad for the environment. There is a major push to ban phosphorous from detergents in states around the country. Washington state already has a ban on detergents containing phosphorous. Walmart and Target which have been trying to be perceived as green will only sell highly concentrated detergents (although this is more for their transportation costs with an added bonus of consumer perception). They are also trying to sell "natural" detergents without harmful phosphorous. Although residents of eastern Washington shop in Idaho to get detergents that work containing phosphorous. Also in the food industry there is a major move to get rid of phosphates even though these bind water very well to make juicy sausage. I would stay away from this stock because regulations over the next few years will destroy their bottom line.

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Member Avatar SweetMircha (90.87) Submitted: 4/13/2010 12:29:45 PM
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It's Phosphates that they make. You got the wrong chemical listed in your pitch.

Member Avatar moreofthesame (< 20) Submitted: 4/19/2010 11:22:58 AM
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Phosphorous and phosphates are one in the same. Phosphate is phosphorous with oxygen (PO4) which helps it to bind water. Anyways regardless of semantics Congress should be debating a bill on food safety this week that is very likely to pass in regards to many of the Salmonella outbreaks that have occurred over the past two years. This bill will make the FDA a lot stronger to enforce recalls and to make policy. I haven't read the whole bill yet (like most it is pretty big), but it would not surprise me if a consumer advocate type politician might try to add this into the bill before it passes. If not the FDA may take this into consideration later on down the road and review the GRAS (Generally Recognized as Safe) status of phosphates. The EPA may also conduct their own investigation into the problems with phosphates in our watersheds. My pitch time frame is over 5 years as well, otherwise I am doing pretty bad with this pick so far.

Member Avatar TMFGebinr (97.08) Submitted: 4/26/2010 1:27:26 PM
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Phosphorous and phosphates are not one and the same. The have completely different chemical properties. Regardless, Innophos is moving away from the manufacture of this for use in detergents. From the recent 10-K, here is what the company has to say about it. Note that STPP use in laundry detergents has long been banned in the U.S. and most dishwashing detergent manufacturers are moving away from its use. The company is in the process of upgrading their Mexican plant to food grade acids and salts and away from STPP manufacturing.

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Technical Grade Sodium Tripolyphosphate (STPP) & Other Products

STPP is a specialty phosphate derived from reacting phosphoric acid with a sodium alkali. STPP is a key ingredient in cleaning products, including automatic dishwashing detergents, industrial and institutional cleaners and (outside the U.S.) consumer laundry detergents. In addition to its use in cleaning products, STPP is also used in water treatment, clay processing, and copper ore processing. Over 90% of the end use market for STPP is derived from consumer product applications.

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Over the past several decades, there have been efforts to reduce the use of STPP in consumer and institutional cleaners. In the 1980’s STPP use in consumer laundry applications was discontinued in the U.S. and Canada. Over the last several years momentum has gained in eliminating STPP use in consumer automatic dishwashing applications in the U.S. and Canada. It is expected that most detergent manufacturers will discontinue the use of STPP in automatic dishwashing detergent applications during 2010. The Industrial & Institutional market has also reformulated some of its products to reduce STPP content in an effort to market a lower cost and reduced phosphate content product line. In 2008, a global retailer began an initiative to materially reduce the use of STPP in consumer laundry detergent in Latin America by 2011. In January 2009, our largest customer, Quimir, a division of Mexichem, closed its largest STPP plant. Our Mexican operations have historically dedicated a significant portion of their capacity to the production of STPP directly and have sold purified acid to other producers of STPP. In anticipation of reduced detergent grade STPP related demand Innophos Mexico is investing in upgrading the food grade acid and salts capability of the Coatzacoalcos facility, and consequently substantially reducing the portion of capacity dedicated to detergent grade products.

Member Avatar moreofthesame (< 20) Submitted: 4/26/2010 3:37:51 PM
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Regardless of my diction and use of "phosphorous" to relate to "phosphates," phosphates still come from phosphorous. As far as food goes, which they are upgrading this capability to produce food grade acids and salts, it will be too little too late. When people in the US buy chicken and turkey at the grocery store they are looking to avoid the type with water added (even though this makes them juicier). In order to add water to these products they need sodium phosphate, however in the food consumer market people don't want phosphates added and are purchasing "natural" and "organic" meats. Also STPP may have been removed in the US market but there are still detergents that use other phosphates. The move now is to eliminate all phosphates from detergents. There was an ok movie a while back with Danny DeVito, Other People's Money, and he is known as Larry the Liquidator. He has a monologue near the end where he talks about great companies making buggy whips at the time when the automobile came out and how there was eventually no use for them anymore. In my opinion Innophos may as well manufacture buggy whips because in a few years they will be regulated out of the market.

However I could be very wrong about this because the rest of the world is starting to use cleaning products a lot more, and there are a lot less regulations in places like India, Brazil, and China. Even though DDT is banned in the US it is still used and manufactured in many parts of the world. So if they are not regulated out of the market, Cheers to Phosphates, Phosphorous, and DDT.

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