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Holly LaFon
Holly LaFon
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Bill Ackman Comments on Platform Specialty Products

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August 29, 2016 | About:

Platform (PAH)'s earnings declined in the second quarter as positive results in Performance Solutions, increased cost synergies, and strong growth in the International Ag Solutions were offset by a significant decline in the North American Ag Solutions business and increased corporate costs.

Platform's organic revenue increased 1% as Ag Solutions grew 5% and Performance Solutions revenue declined 2%. Ag Solutions achieved double-digit growth outside of North America (more than 80% of segment revenue), which was offset by a more than 40% decline in North America. The decline in North America resulted from the continued reduction in distributor channel inventories, decreased demand for pesticides due to lower pest pressures, and lower market share. The company stated that it has made changes to its sales force and product development initiatives and expects these efforts to improve business results over time. Performance Solutions' organic revenue declined primarily due to weakness in the electronics market in Asia, which the company noted should return to growth in the second half of the year.

Platform's organic EBITDA was down nearly 6%, as the growth in Performance Solutions and cost synergies were more than offset by the decline in Ag Solutions and higher corporate costs. In Performance Solutions, organic EBITDA increased 4%, as an improved sales mix of higher-margin products and cost synergies more than offset an increase in corporate expenses. In Ag Solutions, organic EBITDA declined 15%, as the higher sales mix of lower-margin products and the declines in the relatively higher-margin North American business more than offset increased cost synergies. Reported EBITDA declined 10% due to the negative headwinds from FX. As a result, EPS declined 36% due to the negative impact of financial leverage.

While Platform delivered mixed performance for the quarter, we are starting to see business progress under Platform's new CEO Rakesh Sachdev. We think highly of Rakesh and believe he possesses the necessary leadership qualities and experience to improve the performance of Platform.

From Bill Ackman (Trades, Portfolio)'s mid-year 2016 letter.

About the author:

Holly LaFon
I'm a financial journalist with a Master of Science in journalism from Medill at Northwestern University.

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