Perhaps unsurprisingly, among the worst of the recession-ravaged sectors is industry. As countries’ economies slow, they require fewer vehicles, large engineering projects are cancelled, and factories slow their output. Yet industrial stocks should not be written off totally. Within this broad category, there some companies which remain relatively protected from the downturn. Investors have shunned them, so shares can be a bargain. 


Enter any major port around the globe and you will be dwarfed by vast tanks, designed to hold millions of litres of crude oil and chemicals. Chances are they will be owned by Vopak, the largest independent owner of these storage tanks in the world. 


Vopak is more a utility than an industrial company. There is a structural shortage of storage capacity and it has a 20% share of what little there is available.


The downturn has hit shipping of dry bulk goods, but the volume of oil and oil products has barely been touched. Oil continues to be found in different countries from where it is used, so trade flows remain buoyant. 


What’s more, geopolitical tensions mean people are afraid of disruptions in oil production. Vopak is also building a liquid petroleum gas terminal, which should prove attractive following the political difficulties over gas pipelines during the winter. 


Vopak said in January that it had not, at that stage, benefitted from the so-called contango situation in oil — where future prices are above today’s prices — as its tanks were full. But it hoped to renew contracts on favourable terms because of this anomaly. 


A large part of the company’s revenues comes from fixed contracts, only 30% are shorter than a year, giving some further protection against the downturn. 


Vopak has warned that a slowdown in the chemical industry could impact revenues generated from transferring the contents of its chemical tanks, but said that even these were still being used to capacity.


Wary investors need only look to the results. Earnings rose an impressive 22% in the last three months of 2008, as other industrial companies struggled to keep numbers in positive territory. 


The shares have come down with the rest of the sector, from a high of €48 to a low of €21 in the second half of last year. They are now creeping up again, but look cheap considering Vopak’s dominant position in what appears to be a very steady business. 


Listed on the Euronext Amsterdam Stock Exchange, the shares are trading on around 10 times forecast earnings. The stock is expected to yield a healthy 4.3%. 


GEA, listed on Germany’s Dax, makes heavy equipment to keep things cold, hot, dry them, evaporate them, or compress them. The company works in all manner of industries, from energy to pharmaceuticals. 


Most significantly, half of its sales are to food manufacturers, a segment which always prove resilient in a downturn. After all, we still need to eat and drink. GEA machines milk a third of the world’s dairy cows, and the company makes equipment for the entire dairy chain, from manure handling up to the machines that make the milk powder. 


Chairman Jürg Oleas says the food division is stable and even grew slightly in 2008, and that sales of air conditioners and ventilation systems have been stunningly robust.


However, nearly a quarter of its business is in the energy sector, and Oleas has warned of flagging sales in oil and gas. He said orders in the marine sector had also slumped. 


These declines have already been factored into the share price. The shares have been hammered, dropping from a high of nearly €27 last May, to less than €8 at the time of going to press. 


Investors were spooked by bad news from competitors. At the end of December, domestic rival Krones warned that order intake would be lower in the fourth quarter; Sweden’s Alfa Laval has said it is restructuring in view of declining demand. 


The plummeting share price means that the company is now trading on less than seven times forecast earnings. At that kind of value potential acquirers are likely to be looking over the various operations. There are still trade buyers keen to bolt on good businesses in a downturn.


While many other industrial companies may get dragged down with the economic cycle, GEA should still be able to keep its head above water thanks to its various food-related activities. At this price, things should only get better.