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Original Source: FD (FAIR DISCLOSURE) WIRE
. Raj Gupta, Rohm and Haas Company, Chairman, President, CEO . Jacques Croisetire, Rohm and Haas Company, EVP, CFO . Alan Barton, Rohm and Haas Company, EVP, The Americas . Andrew Sandifer, Rohm and Haas Company, Director, Investor Relations . Kevin McCarthy, Banc of America Securities, Analyst . Mike Sison, Keybanc Capital Mkts, Analyst . David Begleiter, Deutsche Bank, Analyst . Pierre Brondeau, Rohm and Haas Company, EVP, Business Group Executive, Electronic Materials and Specialty Materials . PJ Juvekar, Citigroup, Analyst
. Bob Koort, Goldman Sachs, Analyst . Frank Mitsch, BB&T Capital Markets, Analyst . Don Carson, Merrill Lynch, Analyst . Dmitry Silversteyn, Longbow Research, Analyst . Steven Schwartz, First Analysis, Analyst . Silke Kueck, JPMorgan, Analyst
ROH reported 3Q07 EPS of $0.61, including $0.26 for restructuring, asset impairment, and one-time non-cash pension charge. Expects full-year annual sales to be $8.8b.
A. Key Data From Call 1. 3Q07 EPS = $0.61 (including $0.26 for restructuring, asset impairment, and one-time non-cash pension charge). 2. 3Q07 share purchase = 3.1m shares at an avg. cost per share of approx. $56.86. 3. 2007 first nine months CapEx = $276m. 4. Full-year annual sales guidance = $8.8b.
S1. 3Q07 Business Review (R.G.) 1. Highlights: 1. 3Q07 results were strong across all businesses and regions except North America with particularly solid growth coming from Rapidly Developing Economies and record performance of electronic chemicals.
2. As anticipated sales and profits in North America were adversely impacted by continued weakness in the US housing-related markets. 1. Diversified portfolio and global business presence offset to capitalize on strong demand to for Co.'s product outside the US, yielding a 14% increase in sales outside the US vs. 3Q06.
3. Implementing progress strategy, which is reflected in 7%
increase in global sale growth this year and 23% increase in
Rapidly Developing Economies in 3Q07. 4. Launched several new products and started up new manufacturing facilities in rapidly developing markets. 5. Impact of weaker US building infrastructure markets combined with rising raw materials, energy and freight costs, and disappointing operating performance of the Houston plant contributed to significant decline in earnings in North
America. 1. Houston problems are generally behind ROH and Co. is taking necessary pricing action to mitigate the impact of sudden and large increases in raw materials. 6. Well prepared to manage what ROH expects to be continued weakness in the US housing-related market over the next 3-5 quarters. 2. Additional Details: 1. Sales were up 7% with higher demand representing 4%, currency 2%, and pricing 1%. 1. Saw very healthy growth rate across all regions except North America. 2. Sales in Europe were up 8%, Asia-Pacific grew 21%, and Latin American sales were up 13%. 2. Sales in North America overall were flat YoverY.
1. Sales comparisons for core businesses in North America continues to improve. 2. Excluding Morton Salt, the sales in the region were 2% behind 3Q06 vs. a decrease of 9% in 1Q07 and 4% in 2Q07.
3. Demonstrates continued QonQ improved comparisons which ROH
anticipated. 3. Rapidly Developing Economies, which include all countries in the Latin American region, central, eastern Europe, and Turkey, and Asia-Pacific region excluding Japan, Australia,
and New Zealand were up 23% for 3Q07. 1. Reflects Co.'s efforts to accelerate growth by building the sales, research, and manufacturing infrastructures in these geographies. 4. Profit margins in these countries also continued to improve and are tracking Co.'s expectations. 5. Earnings as reported was $0.61, including $0.26 for restructuring, asset impairment, and one-time non-cash pension charge. 6. EPS, excluding these charges was $0.87, comparable to 3Q06. 1. There were several unusual items during 3Q07, which were essentially offsetting. 2. Costs associated with the establishment of the European headquarters.
3. Anticipated dilution from Kodak acquisition. 4. Drop in other income vs. 3Q06 were offset by favorable tax on underlying operations, favorable currencies, and net impact of several smaller items. 7. 3Q07 results reflect strong earnings momentum for all
businesses except Specialty Materials. 8. Electronic Materials Group had record performance with earnings of $72m, 13% increase over 3Q06. 1. Excluding the impact of Kodak light management film technology business, earnings increased 23%. 9. Earnings for Performance Materials excluding current and prior-year restructuring charges, increased 45%. 10. Salt earnings doubled from $4m to $8m, primarily from increased sales demand supported by productivity initiatives. 11. Specialty Materials Group which primarily consists acrylic chain businesses had solid 5% sales growth, with North America flat and the rest of the regions growing at strong rates.
12. Earnings for Paint and Coating Materials and Packaging and
Building Materials were essentially unchanged from 3Q06, with
North America decline offset by gains in other regions. 13. While Primary Materials business reported a 5% gain in sales,
this profitability was adversely impacted by poor operating
performance at the Houston facility, higher raw material
costs, and lower third-party selling prices. 1. While Houston plant experienced unplanned operating issues associated with the major scheduled maintenance turnaround in 1Q07 and 2Q07, along with unrelated issues in this qtr., the facility has returned to more normal level of operating performance since early Sept. 3. Vision 2010 Implementation: 1. Almost exactly one year after introducing the Vision 2010 strategy, ROH is making excellent progress in achieving and in many cases exceeding the milestones. 1. There were several factors this year that limited the ability to realize the full benefits of this progress. 2. Portfolio:
1. Strengthened it by building the Flat Panel Display Technologies business to announce formation of majority owned JV with SKC, Incorporated, in Korea. 2. Exited a digital imaging business line. 3. Continued to explore strategic options for the Salt business.
4. While ROH had intended to finalize the path forward for this
business, by this year-end, turmoil in the financial markets makes it likely that it will take longer than anticipated. 5. At the Rapidly Developing Economies, ROH launched formal operations of JV, JinHaas in China, enabling it to become the first multinational co. with significant footprint in plastic additive manufacturing in China.
6. Celebrated inauguration of its second state-of-the-art acrylic emulsions facility in India, making Rohm and Haas India one of the largest and fastest and the largest growing producer of environmentally, friendly advanced emulsions and additives for paints and coatings, and other water based polymer industries. 7. RDE (Rapidly Developing Economies) has become a growing component of total sales in each subsequent qtr. reaching 26% of total sales in 3Q07. 3. Innovation:
1. Announced the launch of a locally developed new generation
flexible acrylic copolymer designed specifically for the Chinese coatings market. 2. Launched an additive that broadens the usability of polylactic acid bio-based plastic by making them stronger without sacrificing clarity and greatly improving the performance of this green packaging material. 4. Efficiency and Operational Excellence:
1. Has begun to see the financial and operating benefits of 21st century manufacturing initiative which is focused on streamlining activities and accountability, work processes, and integrated data management in the manufacturing plants. 2. Results have been lowering operating costs, increased productivity, and higher online efficiency in the plants that have implemented this so far. 3. While this initiative so far is focused …