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Published: Sunday, 1/8/2006

Region's stocks hit brakes

BY HOMER BRICKEY
BLADE SENIOR BUSINESS WRITER
Performance leader The Andersons, of Maumee, has operations including grain. Performance leader The Andersons, of Maumee, has operations including grain.
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There's a four-letter word that describes the stock performance of Toledo-area public companies last year: grim.

After four straight years of besting stock indexes, this region's marketbasket of 21 public firms gave shareholders a composite return of minus 11 percent.

Only five of the companies had gains in stock price and dividends, a positive total return.

Leading the pack was The Andersons Inc., the Maumee agribusiness whose stock topped $40 during 2005 and hit record levels.

"It was a good year," said Michael Anderson, president and chief executive officer. "I do think the market is recognizing and rewarding the successes we've had, which I'll call sustainable growth."

Investors liked the company's investments in its growing railcar business and a new segment, building ethanol plants. The firm, which has annual sales of about $1.3 billion, operates grain, retail, and lawn-fertilizer divisions.

At the other end of the local-stocks spectrum were several companies whose stock value plunged 50 percent or more, including manufacturers Dana Corp., Libbey Inc., and Tecumseh Products Co.

Nationally, last year wasn't great for other companies' stocks either. The Dow Jones industrial average lost a fraction of 1 percent, to end 2005 at 10,717.50, but because of dividends, its stocks' total return was 1.7 percent.

The Standard & Poor's 500-stock average rose 3 percent, to 1,248.29, and with dividends total return was 4.9 percent. And the Nasdaq composite average rose 1.4 percent to close the year at 2,205.32.

"High interest rates do reduce demand [for big-ticket items]," said George Mokrzan, senior economist for Huntington National Bank in Columbus. "Another factor was high energy costs that hit some companies on the cost side."

A number of the Toledo area's big manufacturing companies blamed higher energy costs and higher steel costs for their lower profits, and several issued profit warnings during the year.

Dana, an automotive parts supplier, experienced many of the same woes that afflicted the automotive industry in general, such as sagging demand, high labor costs, large layoffs, and struggling finances.

During the year, the Toledo firm cut its profit forecast by half, said it would restate $47 million worth of past earnings, trimmed its dividend, and announced it is going through another restructuring, shedding segments with annual sales of $1.3 billion.

A number of area firms were affected not only by energy costs but also by the lingering aftereffects of the Gulf Coast hurricanes.

At one point, the stock of Libbey, which also incurred higher pension and retiree medical costs, sank to its lowest since the tableware maker was spun off from O-I in 1993.

The eight area companies that are traded on the New York Stock Exchange showed total return last year of minus 19 percent, compared with minus 7.5 percent among firms listed on Nasdaq or Nasdaq's over-the-counter Bulletin Board system.

Shares of Ohio Art Co., the Bryan toymaker traded on the Pink Sheets, fell 19 percent.

The area's performance would have been a worse if not for the takeover of Exchange Bancshares Inc., of Luckey. That small holding company, parent of 99-year-old Exchange Bank, was acquired by Rurban Financial Corp., of Defiance, and when its stock stopped trading on the Bulletin Board at the end of the year, the $19.65 price was up 23 percent.

Without that bit of a boost, the rest of the marketbasket of stocks would have had total return of minus 13 percent.

There were a few exceptions to the general rule, including Manor Care Inc., the nation's largest nursing-home operator, with total return of 14 percent.

The company had good cash flow during the year, and its hospice business grew, said spokesman Rick Rump. "We also increased our dividend for the second straight year in an industry sector where most companies don't even pay a dividend," he said.

Banks in the region generally had a tougher time in 2005. The largest, Sky Financial Group Inc., of Bowling Green, showed a slightly positive return only because of its dividend.

"As interest rates have risen, and the yield curve flattened out, it has been a tough operating situation for banks," said Kevin Thompson, chief financial officer for Sky.

The firm performed better than most, he said, in part because of greater interest from institutional shareholders, such as pension funds and mutual funds, which now own about 36 percent of Sky's stock, versus 26 percent a year ago.

Some experts see a ray of hope for the new year.

Richard DeKaser, chief economist for National City Corp. in Cleveland, said, "The dominant factor last year was the Fed's campaign to raise interest rates from unsustainable low levels, and the interest-rate uncertainty weighed very heavily on the market."

He likened the 13 straight Fed hikes to the situation in 1994, when the Fed also boosted interest rates aggressively.

"The stock market had a pretty miserable year then, and was flat to down slightly," he said. "But when the Fed finally quit, and it was clear there was no recession, and interest wasn't going to the sky, the market had a very solid year in 1995."

Indeed, that marked the start of five straight years of 20-plus percent increases in stock values.

Contact Homer Brickey at: homerbrickey@theblade.com or 419-724-6129.



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