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News

Rohm and Haas reports third-quarter 2004 results

Rohm & Haas Co : 27 October, 2004  (Company News)
Rohm and Haas Co has reported third-quarter sales of USUS$1803 million, a 13% increase over the same period in 2003, reflecting strong demand, higher selling prices, as well as the favourable impact of currency movement on the revenue line.
Rohm and Haas Co has reported third-quarter sales of USUS$1803 million, a 13% increase over the same period in 2003, reflecting strong demand, higher selling prices, as well as the favourable impact of currency movement on the revenue line.

Earnings of US$137 million, or US$.61 per share, were up 37% on earnings of US$100 million in the prior year period. Third quarter results include approximately US$19 million, after-tax, from gains on real estate transactions, the sale of the remaining interest in the European Salt business which the company sold in 2000, as well as insurance settlements.

'This quarter's results reflect the continuation of the solid growth we have experienced since late 2003 across our key markets, as well as the impact of higher pricing we have been implementing during the year,' said Raj L. Gupta, chairman and chief executive officer. 'We saw increased demand across all our business segments and most regions, particularly Asia-Pacific.'

Gupta noted that the improved global economy continues to put pressure on supply and pricing for petrochemical-based raw materials and other commodities, tempering the impact of the higher demand on gross profit margins. 'The unprecedented escalation of raw material costs has required us to be quick and persistent in pursuing price increases to contain the erosion of gross profit margins,' he said, 'and this quarter's results provide evidence that while we have not yet been able to recover all these higher raw material and energy related costs through pricing, we are making progress.'

Sales in the Coatings business of US$627 million represent a 12% increase over the same period in 2003, primarily driven by strong demand, higher pricing, and favourable currency. Demand was strong in the global Architectural and Functional Coatings sectors across all regions. Sales in Powder Coatings were up due to the favourable impact of currency, higher demand, and modestly higher selling prices.

Automotive Coatings sales were also up over the prior year, mainly from share gains in the North American market, as well as new product introductions in Europe. Earnings of US$54 million for the Coatings business were relatively flat with the US$55 million in the prior year period, as higher demand, higher selling prices and the favourable impact of currencies were offset by higher raw material and energy costs. Despite higher pricing, gross profit margins remain under pressure as a result of the continuing escalation of raw material and energy costs.

Performance Chemicals sales of US$403 million were up 14% over the comparable period in 2003, driven by higher demand across all businesses, the favourable impact of currencies and higher pricing. The sales improvement in Plastics Additives reflects a general economic recovery in North America, higher pricing across all regions, and the favourable impact of currencies.

Sales in Process Chemicals were also up compared with the same period a year ago, with strong growth in Organic Specialties and Ion Exchange Resins, particularly in the Asia-Pacific region. Consumer and Industrial Specialties posted higher sales across all regions, with strong growth of biocides used for wood preservatives in North America, as well as personal care products. In addition, demand for detergent dispersants was up, particularly in North America and Asia-Pacific. Earnings of US$36 million are up 44% over the comparable period in 2003, as higher demand, higher selling prices, efficient manufacturing operations, and the favourable impact of currency more than offset higher raw material and energy costs.

Monomers sales of US$365 million were up 16% over the third quarter of 2003, reflecting higher selling prices, increased demand for both captive and merchant markets, and the impact of favourable currencies. Earnings of US$28 million were down from the US$33 million in the prior period, as increased selling prices and favourable operations were more than offset by the escalating raw material and energy costs.

Electronic Materials sales of US$319 million were up 17% over the third quarter of 2003, reflecting higher demand across all regions and a more favourable product mix, with the largest growth occurring in the Asia-Pacific region. All three Electronic Materials businesses experienced strong growth in the quarter, driven by their advanced product lines, which increased approximately 22% over the same period a year ago. The Circuit Board Technologies sales increase was contributed by strong growth in the Asia-Pacific region. Sales from Semiconductor Technologies reflect higher demand across all regions, with Asia-Pacific also representing the largest growth. Packaging and Finishing Technologies sales were also up from the prior period, the result of share gains across all regions. Earnings of US$37 million were up 37 % over the same period in 2003, largely attributable to the more favourable mix of products, and stronger sales of the advanced product lines.

Adhesives and Sealants sales for the quarter were US$169 million, up 8% over the comparable period in 2003, driven by higher pricing and higher demand, as well as the impact of favourable foreign currencies. The higher demand in North America was across most markets, while the Asia-Pacific growth was driven primarily by packaging and pressure sensitive adhesives. Earnings of US$8 million in the third quarter of 2004 were up substantially over break-even results in the comparable period in 2003. The increase from the prior period is due to higher selling prices, the absence of restructuring related costs coupled with higher demand, and the favourable impact of currency, which more than offset the higher raw material and energy costs.

Salt sales of US$152 million increased approximately 3% over the same period in 2003 because of higher demand in certain non-ice control markets, higher pricing, and favourable currency. Salt earnings of US$3 million were flat with the prior year period, as the impact of higher selling prices, and non-ice control volume gains were offset by higher energy related costs.

Corporate expenses of US$29 million for the quarter were down from the US$43 million in the prior year period, primarily because of the gain on the sale of the remaining interest in the European Salt business which the company sold in 2000, gains on real estate transactions, as well as the absence of foreign currency translation losses.

Sales in North America were up 12% over the comparable period in 2003, because of the higher demand across many of the businesses, higher pricing, and the favourable impact of currency exchange between the US and Canadian dollars. The decorative coatings market in the region continues to remain strong, as well as construction related markets supported by the Plastics Additives and Consumer and Industrial Specialties businesses.

European sales for the quarter were up 7% over the third quarter of 2003, reflecting the impact of a weak US dollar, higher pricing and relatively flat demand. Sales in Asia-Pacific were up 25% over the comparable period last year, contributed by growth of the electronic materials markets, solid demand in most other key markets, and the favourable impact of currency.

Latin America sales are up 28% over the prior year period, reflecting the improvement of the overall economic environment throughout the region.

Sales for the nine months ending 30 September 2004 were US$5436 million, representing a 14% increase over the comparable period in 2003. All businesses posted higher sales due to increased demand across all regions, higher selling prices, and the impact of favourable currencies.

Earnings for the nine months ending 30 September 2004 were US$369 million or US$1.64 per share on a diluted basis, compared to earnings before the cumulative effect of accounting change of US$179 million or US$.81 per share in the prior year period, reflecting increased demand, higher pricing, and the impact of favourable currencies, which more than offset the higher raw material and energy related costs. 2003 results also included US$101 million, or US$0.45 per share in after tax restructuring and asset impairment charges.

In discussing the outlook for the remainder of the year, Gupta noted that the overall economic outlook remains reasonably strong, and the company expects continued growth in demand across all regions, while there is some indication of a slowing in the overall Electronic Materials market. The persistently high raw material, energy and freight related costs should continue throughout the remainder of the year.
“The escalation of raw material and natural gas costs is occurring at rates faster than our price increases can fully recover, although we are beginning to see the benefits of the pricing initiatives we implemented earlier this year,' Gupta said. 'For the rest of this year, we will experience the normal seasonal shift from our Coatings business to Salt and Electronic Materials, as well as ongoing selling price increases, and expect full-year sales growth in the 12-13% range, resulting in full-year sales of approximately US$7.2 billion and full-year earnings in the range of US$2.10 to US$2.20 per share.
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