Headwaters: Despite Disappointing Quarter, Turnaround Looks Promising

Headwaters Inc. (HW)
is a company in the midst of a turnaround of its major business
operations. The company has been hit by the double whammy of the
housing construction slow down impacting the construction materials
division (50% of sales) and the complete phase out of Section 45K
alternative energy business (coal to syngas). The syngas business was
propped up by the tax credits which are now gone, but a couple of years
ago provided about 40% of Headwaters' profits.<!--more-->

To get the
business back on a profitable track, management is taking its
technology from the syn-gas business into some new areas and working to
improve productivity in the construction materials side. At this point
it appears the company is at the bottom of the turnaround cycle and
the numbers show it. Revenue for the 2nd quarter was $172 million vs.
$274 million a year ago and net profits were a minus 22¢ per share for
the quarter.