Rohm And Haas Cuts Back

ROHM AND HAAS is eliminating about 925 jobs and shutting down capacity, primarily in its North American chemical operations, the firm announced on June 17. These moves complement pricing surcharges put in place in April to recover rapidly escalating raw material, energy, and freight costs.

The company, which was one of just a few U.S. chemical makers to report an earnings decline in the first quarter, says it is counting on the changes to help it achieve growth and profitability goals set two years ago.

"While the actions today were accelerated by the current market conditions, particularly in North America, they are part of our long-term strategy to reposition the company," CEO Raj L. Gupta said in a conference call with analysts. The strategy is to focus on core businesses in coatings and electronics while expanding in rapidly developing economies, he said.

To reach this end, Rohm and Haas is reducing its North American emulsion polymers capacity by 30% by curtailing production in La Mirada, Calif., and Louisville, Ky. Productivity improvements, along with lower demand, will allow its remaining facilities to meet customer needs. About 70% of the job cuts will come in the specialty materials and chemicals businesses.

In the electronic materials area, Gupta said the company will make adjustments in manufacturing and technical service to emphasize the Asia-Pacific region. The firm will close a tech center in Phoenix and consolidate operations in Taiwan and Newark, Del. And it will reduce staff in North American packaging, display, and microelectronics technologies areas.

The company's chemical businesses have been performing worse than expected in Western markets, but sales growth so far this year is up 32% in rapidly developing economies, Gupta said. By 2010, Rohm and Haas expects to reap annual savings of about $110 million, which may, in small part, offset rising costs. "We now anticipate that our total raw material, energy, and freight bill could be up as much as $600 million year-on-year in 2008," Gupta noted.

Rohm and Haas's actions are "proactive, but painful," Citigroup Global Markets analyst P. J. Juvekar wrote in a report on the company. "We think this is a sign of what to expect in the second half of 2008 from many of our chemical names."