Rohm and Haas Reports Third Quarter Earnings
Rohm and Haas Co. reported earnings of $53 million, or $.24 per common share, compared with $77 million, or $.35 per share for the third quarter of 2000. The $.24 figure includes $.23 per share in earnings from ongoing operations+ and a one- time $.01 per share gain from insurance recoveries, net of non-recurring expenses associated with the company's restructuring efforts. As expected, earnings were approximately one-third below year-ago levels, but up slightly from second quarter 2001 earnings of $.22 per share. Profitability in the third quarter was helped by lower raw material and energy costs, a 10 percent decrease in selling and administrative costs compared to the third quarter of 2000, and lower interest expense in the period.
Reported sales for the quarter of $1,346 million decreased 15 percent from year-ago levels. Sales were down 10 percent, excluding $48 million in 2000 sales for divested businesses* and a $36 million unfavorable currency impact.
"We again saw clear evidence in the third quarter that we are doing the right things in a difficult environment," said Chairman and CEO Raj L. Gupta. "We are continuing to bring new products to market even during difficult economic times. We are protecting strong market positions around the world even as we ratchet back spending wherever possible. And we are working closely with our customers so that we can get through this downturn together and make a robust comeback on the other side."
Sales for Performance Polymers in the 2001 third quarter were down 5 percent from year-ago levels, excluding the impact of currency and the divested TPU business. Sales of newer product lines, including next-generation opacifiers for paints, label and packaging adhesives and new impact modifiers for plastics reported strong double-digit growth. Sales of architectural and industrial coatings products were also strong, particularly in China and the United Kingdom. These gains were offset, however, by persistently weak demand for products that serve the automotive, paper, leather and industrial powder coatings markets.
The story within Chemical Specialties is similar. Sales of ion exchange resin products for the industrial water treatment market were slow, while sales for products used in the pharmaceutical and bioprocessing markets strengthened. Similarly, sales of polymers and preservatives in the personal
care and household products markets grew at strong single-digit rates during the 2001 third quarter, while sales to the industrial market fell below last
year's levels. The overall sales for the Chemical Specialties group were down 6 percent for the quarter, excluding the impact of currency.
Sales for the Electronic Materials Business Group showed an expected 10 percent sequential decline from the second to the third quarter of this year, as a result of weaker demand worldwide. However, sales were recorded at a steady pace of about $68 million to $70 million in July, August and September, a hopeful sign that the steep declines seen earlier in the year may be over. Sales in the 2001 third quarter were down about one-third from the third quarter of 2000. Demand remained strong for the sophisticated products used to make the most powerful semiconductor chips. Sales of deep UV photoresists, antireflective coatings and pads and slurries for chemical mechanical planarization were flat or up slightly from the second quarter of 2001. Gupta pointed out that new technology development remains a high priority for this business regardless of the short-term condition of the economy. He noted that the company is continuing to make significant breakthroughs in the development of next generation photoresists (193 nm), copper-based pads and slurries for chemical mechanical planarization, embedded passives and low-K dielectric
Sales for the Salt business were up 3 percent from year-ago levels on a same-business basis, and showed an expected seasonal uptick of 10 percent from the second quarter of 2001. Gupta noted that Salt should finish well for the year, but that it is unreasonable to expect this business to top the weather-induced record-breaking performance of last year.
A regional look at the company's performance for the third quarter shows reported sales declines in all regions compared to year-ago levels, with Asia-Pacific experiencing the most severe percentage decrease due to the slump in the electronics market. However, there is ample evidence of good growth for selected product lines in every region.
Gupta said that the company continues to push ahead aggressively with cost control efforts, while continuing to strategically invest in those businesses with the greatest growth potential. He cited the company's acquisition of Chemetall's transportation adhesives business as a recent example. He noted that selling and administrative costs were nearly 10 percent lower in the third quarter compared to the year-ago period, while research and development costs remained steady. "We are aggressively re-evaluating our capital expenditures and managing for cash wherever we can without losing our focus on the longer term projects that will ensure a continued strong future for Rohm and Haas," he said.
Gupta said it was impossible to project an earnings range for the fourth quarter at this time, but did offer these thoughts. "Before Sept. 11th, we were beginning to see indications of an end to the demand declines in some of the markets we serve," he said. "However, the decline in consumer confidence after the September 11th events has reduced line-of-sight visibility through our customers to end-use markets to near zero. And while Electronic Materials fourth-quarter sales are continuing to track at third quarter levels, we have not yet seen the usual fourth quarter increase. And, given the weak consumer confidence, it's unclear whether our customers will again feel the need to make inventory adjustments at year end, which could affect December sales for both Chemical Specialties and Performance Polymers.
"Nevertheless, I am even more confident in the soundness of our product portfolio, the strength of our market positions and the extent to which we are controlling costs. This strength is evident in most of our markets, where sales are down compared with year-ago levels, but not to the same degree as the average market declines," said Gupta. He continued, "In this environment, we are taking advantage of every opportunity to improve internal efficiency and remaining vigilant for any signs of improvement in the outside world. That is, we are carefully watching end-use markets, staying in extremely close contact with our customers, controlling internal expenditures, pushing our restructuring plans through, and holding weekly global teleconferences with all of our business and regional managers to monitor sales and near-term outlook to ensure that we manage our supply chain efficiently and avoid inventory build up. In short, we are taking strong short-term actions without losing focus on the long-term growth and sustainability of Rohm and Haas."