Enviromental stock watch

Conventional wisdom says that US environmental stocks will suffer if President Bush is re-elected. But US company Headwaters should prosper however the election turns out, say specialist US analysts. Environmentalists love to hate coal-burning power plants, which spew all sorts of pollutants into the air. However, Headwaters recycles the ash and reportedly commands about half the US market for fly ash and other recyclable coal by-products and gets about 26% of its revenue by selling bulk ash to companies that use it to make construction materials. Headwaters keeps about half the ash it recovers and makes these materials itself. Its building-materials division produces 44% of revenue.

Thanks to the construction boom and cement shortages, business is booming. “We are having a record year,” says Headwaters chief executive Kirk Benson. The company expects earnings before interest, taxes, depreciation and amortization - a form of cash flow - to grow between 33 per cent and 39 per cent next year, despite rising interest rates and a slowdown in construction.  In a down market, building-materials companies use more fly ash, says Benson. It’s cheaper than cement and can produce a stronger form of concrete.