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Rohm and Haas Company Reports Second Quarter Results

Published on 2008-07-28. Author : SpecialChem

PHILADELPHIA -- Rohm and Haas Company has reported second quarter 2008 sales of $2,567 million, a 17 percent increase over the same period in 2007, with Electronic Materials and the chemical businesses outside North America delivering strong growth. Real growth of 7 percent, consisting of 4 percent demand and 3 percent from acquisitions, was the largest driver of sales growth in the quarter. In addition, currency and selling price accounted for 6 percent and 4 percent, respectively, of the sales increase. The company reported second quarter 2008 earnings from continuing operations of $147 million, or $0.75 per share, compared to $161 million, or $0.75 per share, for the second quarter of 2007. This quarter's results include a $0.23 per share gain from the divestiture of the company's stake in UP Chemical Company as well as a $0.30 per share charge related to the restructuring actions announced last month. Adjusted earnings per share, excluding restructuring, asset impairments and the impact of the divestiture of the company's stake in UP Chemical Company, were $0.82, up 8 percent versus the prior-year period.

"We demonstrated strong sales momentum in the second quarter, particularly in Electronic Materials and the chemicals businesses outside North America," said Raj L. Gupta, chairman and chief executive officer of Rohm and Haas Company. "We have made good progress against our Vision 2010 strategy for accelerating profitable growth through pricing actions and a realignment of our geographic footprint and support services, despite the challenge of an increasingly difficult economic and business environment."

Gupta added, "Looking to the future, we are excited about the potential of a stronger, faster growing and more profitable company. The announcement of the definitive agreement for The Dow Chemical Company to merge with Rohm and Haas places us at the heart of change for the specialty chemicals and advanced materials industries."

SECOND QUARTER 2008 FINANCIAL SUMMARY

Business and Regional Performance

Business results for Q2 2008 are presented on an adjusted basis below, where earnings for both periods exclude restructuring and asset impairment charges as well as the impact of the divestiture of the company's stake in UP Chemical Company. A reconciliation to GAAP and adjusted earnings by segment is provided in the appendix.

Electronic Materials Group

The Electronic Materials Group comprises two reportable segments which provide materials for use in applications such as telecommunications, consumer electronics and household appliances. Sales for the Electronic Materials Group were $536 million in the second quarter of 2008, up 34 percent over the same period in 2007, reflecting the impact of acquisitions in Display Technologies as well as solid organic growth of Electronic Technologies. Adjusted pre-tax earnings for this Group were $101 million, up 7 percent from 2007, reflecting strong profit growth for Electronic Technologies, partially offset by operating losses in Display Technologies.

Electronic Technologies

The Electronic Technologies segment is comprised of the company's Semiconductor Technologies, Circuit Board Technologies and Packaging and Finishing Technologies business units. Sales for the segment of $460 million were up 16 percent versus the second quarter of 2007, driven by strong growth in Asia for all business units. Sales in the second quarter excluding precious metals pass-through sales were up 15 percent.

  • Semiconductor Technologies sales grew 13 percent, reflecting strong demand and favorable currencies, particularly in the Asia Pacific Region.
  • Circuit Board Technologies sales increased 20 percent as compared to the same period last year, with solid growth in the Asia Pacific Region more than offsetting declines in North America.
  • Packaging and Finishing Technologies sales rose 20 percent versus last year, primarily driven by strong growth in precious metal sales and in process sales.

Adjusted pre-tax earnings for this segment of $107 million were up 11 percent from the second quarter of 2007, reflecting increased demand and favorable currencies, partially offset by higher metal costs and increased costs related to expansion efforts, including the new Asia Technical Center in Taiwan.

Display Technologies

In June 2007, the company acquired the assets of Eastman Kodak Company's Light Management Films technology business, which produces advanced films that improve the brightness and efficiency of liquid crystal displays (LCD). On November 30, 2007, the company completed the formation of SKC Haas Display Films, a majority-owned joint venture with SKC, Inc., of South Korea for the development, manufacture and marketing of advanced optical and functional films used in the displays industry. On April 4, 2008, the company acquired Gracel Display, Inc., a leading developer and manufacturer of Organic Light Emitting Diode (OLED) materials. The new businesses, along with process-related materials also used in the displays industry previously included as part of the Semiconductor Technologies unit, form the Display Technologies reportable segment. Display Technologies sales were $76 million in the quarter. The segment reported an adjusted pre-tax loss of $6 million in the quarter, compared to $11 million in the first quarter of 2008. This was in-line with expectations for improvement as the year progresses.

Specialty Materials Group

The Specialty Materials Group comprises three business units and represents the majority of the company's chemical business, serving a broad range of end-use markets. Net sales for this Group of $1,508 million were up 15 percent, including approximately $85 million in the quarter from pricing actions as well as favorable currencies. Adjusted pre-tax earnings for this Group were $153 million, down 14 percent from 2007, primarily resulting from high raw material, energy and freight costs, continued deterioration in the U.S. building and construction markets and moderating conditions in Western Europe, partially offset by higher pricing, strong demand from Rapidly Developing Economies and favorable currencies. The results for Specialty Materials are reported under the three separate reportable segments as follows:

Paint and Coatings Materials

Sales for the Paint and Coatings Materials business were $659 million, an increase of 9 percent over the same period in 2007, largely driven by higher selling prices and the impact of favorable currencies. Strong demand growth in Rapidly Developing Economies coupled with progress made in implementing pricing actions offset continued moderating conditions in Western Europe and a 12 percent volume decline in the U.S. for the second quarter compared with the prior-year period. Adjusted pre-tax earnings of $94 million in the second quarter of 2008 were down 10 percent compared to the same period last year, reflecting the impact of higher raw material, energy and freight costs, as well as lower demand in the US, partially offset by higher selling prices and demand growth in Rapidly Developing Economies.

Packaging and Building Materials

Packaging and Building Materials sales in the quarter were $515 million, up 11 percent over the same period in 2007, reflecting the impact of favorable currencies and higher pricing partially offset by lower demand. Demand remained strong in Rapidly Developing Economies, with further erosion in the U.S. and slowing conditions in Western Europe. Adjusted pre-tax earnings of $36 million were down 28 percent versus the prior-year period, with higher raw material, energy and freight costs and decreased demand partially offset by higher selling prices and favorable currencies.

Primary Materials

Primary Materials sales were $692 million, an increase of 24 percent over the same period in 2007. Primary Materials results include sales to our internal downstream monomer-consuming businesses, along with sales to third-party customers of Monomers, Dispersants and Industrial and Household Polymers. Third-party sales increased 35 percent over the same period last year, reflecting increased demand, higher selling prices and favorable currencies. Captive volumes were down 6 percent in the quarter. Adjusted pre-tax earnings of $23 million in the second quarter of 2008 were flat compared to the second quarter of 2007. Higher raw material, energy and freight costs and favorable currencies were offset by higher selling prices and the absence of operating issues experienced in the prior-year period.

Performance Materials Group

Sales for the Performance Materials Group were $332 million in the quarter, up 12 percent over the same period last year. The impact of favorable currencies, increased demand in Rapidly Developing Economies and higher selling prices more than offset weakness in North America. Process Chemicals and Biocides sales were up 15 percent over the same period last year, driven by favorable currencies and strong demand in Rapidly Developing Economies. Powder Coatings sales were up 11 percent compared to the comparable period in 2007, reflecting favorable currencies. Adjusted pre-tax earnings for the Performance Materials Group were $34 million for the second quarter of 2008, up 36 percent versus the prior-year period. Increased demand, particularly in Process Chemicals and Biocides, higher selling prices and favorable currencies more than offset rising raw material, energy and freight costs.

Salt

Salt sales of $191 million were up 7 percent compared to the same period a year ago, driven by pricing management, improved mix and increased demand for consumer and industrial salt products. Pre-tax earnings for the Salt business in the quarter were $6 million, up $2 million versus the same period a year ago, reflecting improved operating efficiencies, pricing and expense control efforts, offset by increases in energy, freight and other materials costs.

About Rohm and Haas Company:

Leading the way since 1909, Rohm and Haas is a global pioneer in the creation and development of innovative technologies and solutions for the specialty materials industry. The company's technologies are found in a wide range of industries including: Building and Construction, Electronics and Electronic Devices, Household Goods and Personal Care, Packaging and Paper, Transportation, Pharmaceutical and Medical, Water, Food and Food Related, and Industrial Process. Innovative Rohm and Haas technologies and solutions help to improve life every day, around the world. Based in Philadelphia, PA, the company generated annual sales of approximately $8.9 billion in 2007.

Forward Looking Statements

This release contains forward-looking statements that involve risks and uncertainties and are subject to change based on various factors. These factors include, but are not limited to (1) the cost of raw materials, natural gas, and other energy sources, and the ability to achieve price increases to offset such cost increases, (2) development of operational efficiencies; (3) changes in foreign currencies; (4) changes in interest rates; (5) the continued timely development and acceptance of new products and services; (6) the impact of competitive products and pricing; (7) the impact of new accounting standards; (8) assessments for asset impairments; (9) the impact of tax and other legislation and regulation in the jurisdictions in which the company operates; (10) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement between Rohm and Haas Company and The Dow Chemical Company or to the failure of any condition to be satisfied; (11) the risk that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the merger; and (12) the possibility that Rohm and Haas may be adversely affected by other economic, business, and/or competitive factors. Many of these factors are beyond Rohm and Haas's ability to control or predict. Actual results could vary materially from those expressed or implied in the forward-looking statement. Further information about these and other risks can be found in the company's SEC 10-K filing of February 21, 2008, and updated in the 8-K filing on June 6, 2008. This press release speaks only as of its date. Rohm and Haas is under no duty to update this information.

Source: Rohm and Haas


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