Chairman Raj L. Gupta said the expected earnings improvement is due almost completely to a better business portfolio and product mix, along with cost reduction efforts that have been under way for nearly a year.
"We have been aggressively managing through the downturn," said Gupta. "We have done the expected -- cut costs and repositioned assets -- but we also have continued to invest heavily in research to bring new technology to market, and in an enterprise-wide information system that will allow us to respond even more quickly to changes in the marketplace. As a result, even though we are not yet seeing any dramatic improvement in external economies, we are seeing an improvement in the financial performance of Rohm and Haas."
Gupta commented on sales trends for the quarter. He noted that, even though overall sales for the first two months of 2002 trail year-ago levels by 10 to 12 percent, due primarily to sales declines in Electronic Materials and ice control salt. Sales are up 3 to 4 percent sequentially from the fourth quarter of 2001. In addition, he said that the Coatings and Plastics Additives businesses are seeing signs of paint and construction-related seasonal patterns, particularly in North America. "This is consistent with information from customers who say they have seen signs of returning health in the building and construction markets in the region, helped along by milder winter weather." This same milder winter has curtailed sales of highway ice control salt, which could result in first quarter 2002 sales as much as 20 percent lower for the Salt business. Comparisons with a very strong performance in 2001 also affect the quarter-over-quarter sales comparisons for the Electronic Materials business. Quarterly sales for this business are expected to be approximately 30 percent below year-ago levels. However, on a sequential basis, Electronic Materials sales are expected to be up 3 to 4 percent from fourth quarter 2001 levels. This reflects continued firming in end-use markets for printed wiring boards, and stronger sales for high-end products for the semiconductor market, including deep ultra-violet photoresists, anti-reflective coatings, and pads and slurries used for chemical mechanical planarization (CMP). And, within the Consumer and Industrial Specialties business, there were good sales of new preservative technology for the personal care market.
Traction in the company's coordinated, global effort to reduce its cost structure can be seen in significantly lower cost of goods sold and selling and administrative spending. "As we have said on earlier occasions, Rohm and Haas has not waited for external economies to improve," said Gupta. "Rather, we have continued to enhance the differentiated, specialty nature of our product portfolio, and to improve the operating efficiency of the company so that we could leverage market demand wherever we find it. We are now beginning to see the benefits of this very hard work," he said.
Gupta concluded by saying he is reassured by growing evidence that end-use markets have stabilized and that demand could soon return on a selected basis, but he said he was unwilling to alter his outlook for the year at this point. "We continue to see good things for Rohm and Haas in 2002 -- a more robust, higher-margin portfolio that will generate new products and technology for the marketplace, ongoing improvements in operational efficiency and -- as a result -- better earnings from operations in 2002 than in 2001. However, the extent of the improvement will depend upon the depth and breadth of the recovery, particularly in the electronics and construction markets, as well as any fluctuations in raw material and energy costs. In the meantime, we will continue to work to improve our company."