|Figures in millions||Revenue||% Of Total||EBIT||% Of Total|
|Driveline and Industrial|| 3,884.30|| 72%|| 971.2||81%|
|Noveon Consumer Specialities*||448.90|
|Performance Coatings*|| 1,533.50|| 28%|| 227.5||19%|
| Total|| $5,417.80 ||$1,198.70|
|*Competitors of Dow Chemical|
The lubricant additives industry consists primarily of 4 companies taking 90% of the industry revenues. Lubrizol being the largest is trailed by Infineum (an ExxonMobil subsidiary), Chevron Oronite Company (subsidiary of Chevron) and Afton Chemical Corporation (subsidiary of NewMarket). This tight knit industry lends itself to the benefits of pricing power and limits to excess production. These are the specific characteristics Buffett looks for in an investment.
|2010 Revenue||Change from 2009|
The market for lubricant additives is fairly saturated and US growth should be minimal. The Asia-Pacific region is expected to account for much of the growth in lubricants market.
In the above chart I indicated two lines of business that compete with Dow Chemical. Dow Chemical was a company Berkshire had taken a large stake in 3 years ago. Buffett, at the time, invested $3 billion in the company in the form of preferred shares earning 8.5%. Like the Goldman transaction, this deal came at a time when Dow was particularly in need of capital and so Buffett was able to get a fairly good yield on the preferred.
The Advanced Materials segment that Lubrizol competes with Dow is much more competitive than the Additives industry. Lubrizol counts up to 10 competitors in each one of the lines of business in the Advanced Materials. Though the business accounts for a small part Lubrizol’s overall revenues and are highly competitive, Berkshire may be forced to liquidate its Dow holdings if antitrust agencies find a conflict of interest in their holding of two competing businesses.
Lubrizol purchased Noveon in 2004 to tap into a growing market. The Additives market will not see nearly as much growth at 1%-2% as the Advanced Materials, but it does appear to have a more secure footing in the market.