Speaking at a conference in New York City, Gupta said, “Rohm and Haas is confident in its ability to successfully navigate its way through this part of the economic cycle because of the strength of our technology, products and market positions, as well as our ability to improve the operational efficiency of our organization on an ongoing basis.” Gupta noted that the company’s investment in research and development has remained flat with last year, but with a greater focus on products aimed at the markets targeted for fastest growth, including the electronics, coatings, adhesives and consumer care markets.The company expects to spend approximately $220 million for R&D for the full year 2001. He also cited Rohm and Haas’s continued investment in the transformation of its enterprise resource planning (ERP) effort. “This implementation is going quite well – we are on time, on plan and on budget with this massive company-wide effort.” To date, Rohm and Haas has spent approximately $100 million for the ERP effort, including $80 million in capital. The company said it expects to spend approximately $275 million over five years to create a state-of-the art backbone for the organization to enhance efficiency and customer service. The overall investment is expected to be largely cash flow neutral as it replaces spending for legacy systems. The chairman also reported good progress on the company’s efforts to bring manufacturing capacity in line with demand and to reduce the overall cost structure of the organization. He said that cost reductions made thus far have lowered the company’s overall run rate by approximately $90 million. The goal is to achieve a $200 million lower run rate by October 2002. The $200 million figure includes recovery of approximately $60 million in stranded, or overhanging support costs associated with businesses that have been divested or exited. These businesses include agricultural chemicals, industrial coatings the European salt business, and less profitable segments of its adhesives and dyes businesses.
Gupta did not update the company’s financial performance for the quarter, but did say that Rohm and Haas’s performance in the final three months of any year is highly dependent upon the strength of consumer buying patterns during the holiday season, the extent of inventory adjustments at customers’ operations in the last half of December and, to a much lesser extent, weather conditions that can affect sales of consumer paint and highway de-icing salt.
Gupta shared information showing how the company’s earnings rebounded strongly after economic downturns in previous time periods, and said he believed that the company has the ability to do so again this time as the economy improves. “We’re doing all the right things,” he said. “We have a vibrant, more profitable portfolio of products, we’re investing strongly in areas that will improve our ability to deliver new technology to customers, and we are improving the overall cost structure of our organization. We have made tough choices and the right decisions about where we should focus our resources going forward,” he continued. “We are demonstrating our ability to innovate our way through this downturn. As a result, our shareholders will see an even stronger, more vibrant Rohm and Haas in the years to come.”