Mattr’s Modernization Push Targets 20% Profit Margins by 2030 With a $150M Facility Upgrade

This industrial transformation story offers compelling value as the company completes its pivot from pipeline coatings to higher-margin plastics and electrical products. With $265M in recent divestitures strengthening its balance sheet, Mattr is well-positioned to execute its growth strategy.

A $150m modernization plan includes two new operational U.S. facilities expected to add $100m to annual revenue while expanding profit margins from 16.9% to over 20% by 2030.

Combined with aggressive share buybacks and projected EPS growth from $0.93 to $1.44 next year, the stock trades reasonably at 8.9 times the company’s forward earnings forecast.

MATTR CORP. (Toronto symbol MATR; www.mattr.com) was formerly called Shawcor Ltd. (old symbol SCL), the company recently sold most of its pipeline coating business to Tenaris S.A. (New York symbol TS) for $241.2 million.

The remaining firm makes plastic tanks and industrial products such as electrical cables and sheaths.

The company recently sold its remaining pipeline coating business, Thermotite, which operates a plant in Serra, Brazil.

Mattr will receive $17.5 million U.S. (about $24 million Canadian) when it completes the sale in the next few months.

The cash will help fund Mattr’s plan to spend $150 million to modernize its facilities. These improvements will likely lift its projected earnings from $0.93 a share in 2024 to $1.44 in 2025. The stock trades at a low 8.9 times that 2025 forecast.

Meanwhile, Mattr has now completed building two new composite (plastic) production facilities in Texas and South Carolina as part of that plan. They should reach normalized production levels in 2026, which would add $100 million to the company’s annual revenue of $911 million.

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Mattr is also modernizing two plants that make wires, cables and related products. It expects to complete this project in mid-2025.

The company also recently agreed to acquire AmerCable Inc. Based in Arkansas, this firm makes a variety of power cables and wires for industrial customers.

The company will pay $280 million U.S. (or $390 million Canadian) when it completes the purchase by the end of 2024. The new operations should add $75 million to Mattr’s annual EBITDA (earnings before interest, taxes, depreciation and amortization charges).

Growth Stocks: Modernized plants will boost sales and profits at Mattr

The stock is down from its recent peak of $18 in July 2024 mainly due to concerns over its plan to spend $150 million to modernize its facilities. A potential economic slowdown has also weighed on the stock.

Overall, the plan should increase Mattr’s annual sales by over 10% a year through 2030 and lift its gross profit margins from 17% to more than 20% by 2030.

Mattr’s revenue in the three months ended September 30, 2024, rose 2.0%, to $226.2 million from $221.9 million a year earlier. Strong sales of wire and cable products offset lower shipments of plastic pipes due to the timing of certain orders. The latest revenue figure also missed the consensus forecast of $239.7 million.

If you exclude unusual items, Mattr earned $0.23 a share (or a total of $15.39 million) in the latest quarter, down 79.3% from $1.11 a share (or $77.05 million). That’s due to higher sales of less-profitable products, as well as the costs related to building new facilities. Even so, the latest earnings still topped the $0.21-a-share consensus estimate.

Mattr suspended its quarterly dividend of $0.15 a share in 2020 in response to the COVID-19 disruptions.

However, the company continues to reward investors with share buybacks. Stock repurchases reduce the number of shares outstanding. That boosts earnings per share since profit is divided among fewer shares. The higher per-share earnings then help spur market interest in the stock and so lift share prices.

Under its recent buyback program, Mattr bought 3.4 million shares for a total of $52.2 million.

The company has now received approval for its new plan to buy back up to 4.98 million of its shares (7.5% of the total outstanding) over the next year.

Recommendation in The Successful Investor: Mattr Corp. (formerly Shawcor Ltd.) is a buy.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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