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From the Survey: Rogers Corporation
Rogers Corporation (ROG), founded in 1832, is one of the oldest publicly traded U.S. companies in continuous operation. Initially, it manufactured specialty paperboard for use in early electrical applications. Today, the company predominantly supplies a wide range of specialty materials and components for the portable communications, communications infrastructure, consumer electronics, mass transit, automotive, defense, and clean technology markets. More specifically, it specializes in the production of printed circuit materials, polymer materials and components, high-performance foams, and electroluminescent lamps.
Currently, Rogers’ focus is on worldwide markets that have an increasing percentage of materials used to support growing high-technology applications, such as cellular base stations and antennas, handheld wireless devices, satellite television receivers, wind and solar energy applications, and electric-hybrid vehicles. Lately, the company has been seeking to expand its presence overseas, looking to take advantage of healthier emerging economies. This is evidenced by its continued investment in Suzhou, China, where the company’s facilities will function as the production base and regional headquarters, in order to better serve customers in Asia.
Most of Rogers’ products are sold through direct sales channels positioned near major concentrations of its customers throughout the Americas, Europe, and Asia. Components were sold to over 2,600 customers worldwide in 2010. Although the loss of all the sales made to any one of its larger customers would require a period of adjustment, during which the business of a segment would be adversely affected, the company has a well-diversified customer base. Also, its business relationships with major customers within all key markets are favorable, and it appears that it is in a good position to respond promptly to variations in customer requirements and technology trends.
Rogers Corp. faces a somewhat tricky competitive landscape. Demand often depends on the income of consumers or the profitability of business customers, because many technology products and services are expensive. The profitability of individual companies is driven by their ability to develop and market new products. Large companies often have advantages in access to capital and marketing. Small companies, however, can typically compete successfully if they have expertise in a particular field of knowledge. ROG is a relatively small player (market cap of less than $1 billion), and since the electronics and semiconductor equipment industries can be quite capital intensive, considerable downside risk exists around new product launches. The company’s main competition stems from Cookson Group Plc, Kingboard Chemical Holdings Limited, and Park Electrochemical Corporation (PKE).
Still, Rogers’ long-term outlook appears solid. The company should benefit from three major trends: the acceleration of Internet usage, larger investments in mass transit applications, and the growth in clean technology initiatives. These segments comprise roughly two-thirds of its sales, up from less than 50% last year, and have demonstrated strong momentum of late. Furthermore, the demand for wireless data ought to spur additional top- and bottom-line gains, as smartphones and tablet computers garner further popularity. Moreover, the expansion of wireless data providers ought to enable Rogers to cash-in on infrastructure and network buildouts.
The company has also realized increased interest for its hybrid vehicle solutions, wind and solar construction capabilities, as well as fuel cells and energy-efficient motor drives. Recently, it entered into a relationship with Himag, a designer and manufacturer of planar transformers, to develop electric car charging systems. The new platform would enable electric vehicles to charge faster and generate less heat.
All told, Rogers’ latest product innovations and design wins that utilize larger amounts of printed circuit material, coupled with large contracts from top original equipment manufacturers, have it primed for strong top- and bottom-line advances in the coming years.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.