Rohm and Haas Company on October 9 announced a set of strategic initiatives designed to accelerate growth and enhance profitability. The company believes these collective efforts will help it build on its most successful technologies and enable it to respond more quickly, and appropriately, to market needs around the world.
These initiatives include:
"Now is the right time to launch these initiatives. We have the depth of talent and financial strength to implement an organizational structure that facilitates future growth," said Raj L. Gupta, chairman, president and CEO of the $8 billion specialty materials company. "During the past seven years, we have transformed Rohm and Haas through portfolio changes, and have increased profitability with both process and information technology improvements. And, since 2003, we have rewarded our shareholders with strong revenue growth and a more than doubling of earnings, resulting in total shareholder return of 13.4 percent during that time. But while good, this is not good enough. We believe we can do better. We see and understand the dynamic changes in the global marketplace, and are taking the steps required to be nimble, responsive – and financially successful – in a fast-changing world."
At the highest level, the new organizational structure is the first step toward implementing these initiatives. It consolidates the existing company into three more logical and efficient major business groups – Electronic Materials, Specialty Materials and Performance Materials. Each group has its own charter, yet all are expected to take advantage of economies of scale that larger organizations provide in terms of supply chain, manufacturing excellence, and so on. Details about the structure can be found below.
Underlying this structure will be a stronger regional organization – strategically charged with ensuring that the company can move more quickly to respond to local market needs for technology, new products and services.
"Rohm and Haas has been quite successful in competing head-to-head with multinational firms," said Gupta. "However, we believe the competition in the future will emanate from smaller, regionally based firms. We are structuring ourselves to ensure we have the flexibility – and ability – to compete locally for talent, and for a larger share of customers, especially in emerging markets. Our local business organizations will have increased independence and accountability for getting closer to customer needs and driving profitable growth."
The organizational structure outlined below will be effective January 1, 2007, after the company finalizes organizational changes and reconfigures financial systems for reporting purposes:
Electronic Materials ($1.3 billion in 2005 sales)
- Circuit Board Technologies
- Semiconductor Technologies
- Packaging and Finishing Technologies
These businesses essentially remain unchanged. The goal for Electronic Materials is to double sales by 2010 by strengthening their position in the semiconductor industry. Electronic Materials will accelerate its investments in technology, capital and talent development in
Specialty Materials ($5.7 billion in 2005 sales)
- Primary Materials ($2 billion in 2005 sales) – includes the company's existing Monomers business and the polyacrylic acid segment of Consumer and Industrial Specialties
- Paint and Coatings Materials ($1.9 billion in 2005 sales) – includes the architectural and industrial coatings segments of today's Architectural and Functional Coatings business, as well as other coatings-related polymer lines from other parts of the Rohm and Haas portfolio.
- Packaging and Building Materials ($1.8 billion in 2005 sales) – includes the existing Plastics Additives, Adhesives and Sealants businesses, as well as the graphic arts, paper, leather, textile and non-woven segments of today's Architectural and Functional Coatings business.
The objectives for the Specialty Materials Business Group are to leverage the company's flagship technical and operational strengths in acrylic technology, optimize the supply chain, and invest in innovation. Pierre R. Brondeau will be business group executive for Specialty Materials.
Performance Materials ($1.1 billion in 2005 sales*)
This business group represents the company's expertise in enabling technologies that meet growing societal needs for water treatment, health care and energy. This includes the ion exchange and sodium borohydride technologies of Process Chemicals, the biocides and personal care related segments of Consumer and industrial Specialties, the AgroFresh business, and other profitable, niche technologies. Alan E. Barton will be Business Group Executive for Performance Materials.
* For financial reporting purposes, this group also will include results for Powder Coatings.
In addition to these major business groups, the Salt ($925 million in 2005 sales) and Powder Coatings ($322 million in 2005 sales) businesses will be managed as stand-alone businesses under the guidance of chief financial officer Jacques M. Croisetiere.
Financial reporting for the company through the remainder of 2006 will follow the company's existing business unit structure. Effective January 1, 2007, the company will report sales and earnings for the following segments: Electronic Materials, Primary Materials, Paint and Coatings Materials, Packaging and Building Materials, Performance Materials and Salt. Rohm and Haas will provide more detailed information about the business structure and historic financial comparisons at a later date.
Gupta noted that the announcement of the new strategic plan comes as the company is set to deliver another strong financial quarter. Rohm and Haas expects third quarter sales to be 7 percent higher than the prior-year period, and earnings to be approximately $.85 per share, including approximately $.03 per share mainly due to the settlement of tax contingencies in the quarter.
"As we have done consistently over the past several years, we are reporting another quarter of performance driven by demand growth across many businesses," said Gupta.