Rohm and Haas cuts to address US building slump

17 June 2008 17:46  [Source: ICIS news]

HOUSTON (ICIS news)--US chemicals producer Rohm and Haas is closing plants and eliminating positions mainly in response to deterioration in the US construction industry, the company said on Tuesday.

US housing has been in a multi-year slump, and house building is an important end user for the company's acrylic emulsions and other materials used in construction.

"We are talking about 18-20% of the company, which is really US based building construction," CEO Raj Gupta said in a conference call. "It is really being squeezed by rapid increases in cost and a substantial decline in demand."

The 2008 US market for architectural coatings should shrink 7-8% year over year, he said. That is similar to the 7% year-over-year decrease that occurred in 2007.

"We are acting decisively to address head-on the challenges we face," Gupta said. "We are making the right moves to restore profitability, primarily in our North American business."

Other parts of the reduction would re-align the company's electronic materials group, as much of the business is shifting to Asia, he said.

Overall, Rohm and Haas is eliminating 925 positions, mostly in North America.

It is closing its plant in La Mirada, California; Louisville, Kentucky and Apizaco, Mexico, said Jacques Croisetiere, chief financial officer. All three make materials for paints, coatings, packaging and building.

Rohm and Haas is also closing its electronic technology site in Phoenix, Arizona, and it is consolidating operations at a site in Taiwan, and in Newark, Delaware, Croisetiere said.

Regarding the performance of the company's segments, Gupta said the company's electronic materials growth continues to grow according to expectations, with solid growth in electronic technologies and improved performance in display technologies.

In addition, overall company growth continues to increase in rapidly developing economies, he said.

However, costs for raw materials, energy and freight have exceeded the company's earlier expectations. Gupta said. For 2008, those costs should increase by $600m (€390m) year over year, he said.

The company's surcharge, which it introduced at the end of April, should help offset rising costs, Gupta said.

So far, the surcharges has been gaining traction, and Gupta expects all of them to be in place by the end of June.

Rohm and Haas favoured surcharges over price negotiations because of the difficulty in forecasting cost increases, given their exceptional volatility, Gupta said.

Shares of Rohm and Haas were trading at $52 on the New York Stock Exchange, down 0.74%.

($1 = €0.65)

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