Roseville chemicals firm Hawkins is suddenly a darling with investors

Hawkins Inc., since listing on the Nasdaq stock market nearly 50 years ago, has been one of the smaller publicly traded companies in Minnesota. But it has been a reliable one, not missing a dividend since the mid-1980s and delivering profits in 19 of the last 20 years.

Now, as investors are making a broad shift into companies perceived as delivering value, the Roseville-based producer of chemicals and specialty ingredients is one of the hottest investments in the country.

Shares in Hawkins have risen 44% this year, well above the 6% climb of the S&P 500 index. They closed Friday at $38.91, just shy of a record high set a week earlier.

In January, the company reported strong quarterly results with earnings per share that rose 74% for the period ended Dec. 31. Hawkins also announced a 2-for-1 stock split at the end of January. And last month, it announced an acquisition that expanded its water-treatment business, which operates in 20 states and provides about 30% of revenue.

Often, a string of news draws the attention of investors. The company was also recognized by Newsweek magazine in its list of 400 most responsible companies for 2021. But broadly, the stocks of chemical companies have fared well in the last six months. And several market analysts have stated that small-cap stocks should outperform the larger stock indexes in 2021.

Patrick Hawkins, the company's chief executive, said it's hard to explain all the pieces that might contribute to a rising stock price. "We are a small-cap stock," he said last week. "It doesn't take a lot to get that demand up there if people think its undervalued."

As it did for a lot of industrial firms, the coronavirus pandemic created opportunities for the company. For instance, its health and nutrition business, where it provides ingredients for supplements, saw a 75% increase in revenue during the latest quarter.

He said the beauty of its distribution businesses is that they can adjust the amount of product they move through their system without having to adjust the staffing too much or make capital intensive investments.

"The focus for us is to try and sustain what we've built on. So if we've gotten new customers throughout this process we want them to remain customers long-term," Hawkins said. "I think we are well-suited whether it continues to keep on growing or it declines somewhat. We are well-suited to be there one way or the other."

His grandfather, Howard "Curly" Hawkins, started the company in 1938. The company went public in 1972, when it had annual revenue of $7.2 million and net income of $216,000. John Hawkins, a son of Curly and uncle of Patrick, took it through a second generation of family leadership. After John Hawkins died in 2011, Patrick, who started work at the firm's loading dock in 1992, became chief executive.

The firm has done more deals under his leadership, including a key acquisition of Stauber Chemical in 2015 that essentially created its food and nutrition group.

"Patrick has an enormous amount of credibility within his organization and within the boardroom," said James Thompson, a former Cargill Inc. and Mosaic Co. executive who is the chairman of Hawkins.

For much of its history, the company was a good, but slow-growing, commodities company that built its revenue by finding new customers, securing reliable suppliers and expanding its distribution network. It has paid a dividend since 1985.

In its last fiscal year, industrial customers accounted for more than half of the company's $540 million in revenue. It provides nearly 100 chemical compounds, from aluminum chloride to zinc chloride, to industrial firms of all sizes.

Water-treatment products accounted for 30% of revenue, and health and nutrition products the rest.

For investors and corporate governance analysts, Hawkins stands out for its relatively low ratio of CEO-to-employee pay. According to the company's latest proxy, Patrick Hawkins' total pay for the most recent year was $1.87 million, while the median employee among its 640 employees at the time earned $91,452.

That's a ratio of 20-1. At many publicly traded companies, the CEO's pay is much higher relative to the average employee.

"They have to sell, communicate, be good at math, competitive, want to really win but know how to drive a really big truck," Hawkins said. "And is willing to deliver hazardous chemicals, it's unique — you have to pay them well."

Nobody in the company is paid less than $15 an hour, and the hourly wage of most production workers is well into the $20 range with some nice benefits.

Patrick Kennedy • 612-673-7926