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Welcome to Lawter! | ![]() |
John P. O'Mahoney CEO, Chairman |
Thank you for visiting our site. This page is designed to give you a detailed look at Lawter's financial highlights, goals, strategies, and opportunities. If you have further questions, please contact me. |
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1996 results reflected the momentum that is beginning to build. Sales of $194 million were down 5 percent due to softness in major markets brought on by record high paper prices at the end of 1995, strengthening of the U.S. dollar versus major trading currencies, and by our conscious decision not to accept lower-margin volumes in Europe in order to strengthen operating profit margins. Still, excluding the effects of a one-time charge on 1995 results, net earnings grew by 5 percent, to $28.8 million, or 64 cents per share, in 1996, reflecting improved margins from our plant modernization program. On a comparative quarterly basis, results were up each of the last three quarters of 1996 over 1995. The trends are in the right direction. Sadly, our founder, chairman and friend, Daniel J. Terra, passed away on June 28, 1996. Apart from his many civic and cultural contributions, Daniel Terra's legacy was to leave Lawter shareholders with one of the world's finest specialty polymers companies. The company he created is successful because we are highly focused, we have unequaled research and manufacturing assets, and we can deliver custom solutions globally. We know our business. We know our customers' needs. And we deliver. The core ink market we serve is growing at a rate slightly greater than inflation. However, we see opportunities for Lawter to grow more profitably -- and at a faster rate than our markets and our industry -- by aggressively harnessing our strengths to meet changing market and customer needs both within and outside our core market. Our goal is to achieve double digit sales and earnings growth. We intend to closely manage costs so that overhead grows more slowly than revenue, while earnings grow at a faster rate than sales. We will follow four basic strategies to achieve these goals.
After 56 years, there remain important areas in the graphic arts industry, such as publication gravure, where Lawter has room to grow its products and penetration. As you will read, we are responding with novel solutions to the opportunities being created by global consolidation of the ink and printing industries and to changing technologies within the printing industry. We also have sizable opportunities internationally, particularly in the Asia-Pacific region, where Lawter has had a small but growing presence. One-fourth of the world's inks are produced in this region, with about half of that in Japan. In 1996, our R&D team in Tianjin, China, focused closely on the special needs of this market and developed our first resins based on the resin-modifying phenols preferred by Japanese ink manufacturers to begin expanding our presence in that market. Closer to home, we continue to develop new ink vehicles and varnishes that offer superior performance at lower cost for today's high-speed offset presses. This high-speed press technology is leading the printing industry's growth by increasing its share of the market for high-volume quality printing. These, then, are examples of the opportunities in our core market. Global opportunities we are well-positioned to capture. Lawter's core expertise is in understanding the chemistry and physics of formulating and applying coatings to a variety of surfaces, whose properties we also understand, to achieve desired performance results. Our products help make it possible to print color newspaper photos that do not smudge, coatings on metal beverage cans that will not scratch, and printing on plastic food wrappings that will not crack in the cold. In 1996, we created a new division to begin transferring this expertise to the $40 billion global paints and coatings industry. Nearly 30 percent of the materials in paints and coatings are resins, and environmental requirements are forcing producers to reformulate their products with new resin mixes. We intend to identify needs created in this process, and use our advanced R&D and manufacturing to produce niche solutions. One of our first is Reactol 180, a resin that makes paint more resistant to corrosion, chipping, and flaking -- characteristics that previously had to be compromised to achieve required environmental results. Cytec Industries, one of the world's leading producers of the amino resins widely used as a base for paints and powders, last year began offering a blend using Reactol 180 polyol to produce coatings that are harder and more flexible than competitive products. We also are working on products that will make it possible to apply house paint with less preparation as well as other paints and coatings applications. Historically, we have established manufacturing facilities close to customers to improve delivery and customization capabilities. But the demands of today's high-volume, high-quality production require a new strategy. So, since 1992, we have undertaken the most complete modernization of production and R&D facilities in the history of the company. With the opening of our second major new plant -- in Kallo, Belgium -- last fall, we now have on two continents the most modern polymer plants in our industry. We also have a modern facility in Tianjin, China, to service the Asia-Pacific market as well as major plants in Waterford, Ireland, and Moundville, Alabama, and smaller facilities strategically located around the world. These new and expanded capabilities have enabled us to close older, less efficient manufacturing operations in the United States and Europe. They also will help us develop creative new products that provide improved performance over what is available in the market today -- and enable us to produce them with much greater efficiency. Our new manufacturing platform is enabling us to develop new, closer relationships with customers which, we believe, will add to our business volume and increase both top- and bottom-line growth. That is because with these plants there are unique ways to handle goods and work individually with customers to create "win-win" opportunities for both Lawter and our customers. We intend to aggressively pursue these strategic opportunities. Our growth objectives cannot be realized through internally generated activities alone. We will acquire companies within our core business or closely aligned with our core business technologies either to add to our sales mix and expand our service offerings, or to establish a more competitive presence in new markets and segments of the markets we choose to serve. For example, during 1996 we acquired Hercules Inc.'s lithographic resins business and Wolstenholme Rink PLC's resins and varnish business to strengthen our position in these markets and to take advantage of the capabilities and efficiencies of our new manufacturing base. These are some of the reasons we are enthusiastic about the future. This management team deeply appreciates what is special about Lawter, and the legacy granted by Daniel Terra. We are keenly aware of the values, competencies and relationships responsible for our success. We have developed sound strategies for taking Lawter forward on these strengths. We remain totally committed to creating shareholder value. And, as with Daniel Terra, we respect the fact that our performance depends on the contributions of 500 men and women in 15 countries who make up the Lawter team. Their efforts, every day, make it possible for us to submit this report with pride in our accomplishments and confidence in our future. |
Opportunity #1 -- Consolidation | |
Over the past decade, the world' ink and printing industries have consolidated, leaving fewer, more dominant market participants. These industry giants buy in larger volumes, often operate globally, and, increasingly, are choosing to rely on fewer, bigger suppliers able to meet their exacting quality standards, demanding just-in-time delivery schedules and worldwide operating requirements. Among the specialty polymers companies focused on the printing ink market, Lawter is one of the few that can meet these specifications on every count. Our intent is to get closer to these global market leaders by adding value in new ways -- with new products, services and relationships that take advantage of our broad product line, industry-leading research, financial flexibility, and flexible, world-class manufacturing. We alone are positioned to provide global sourcing contracts -- and global sales, service, research and manufacturing -- for nearly all the specialty ink-making polymers these market leaders require whenever and wherever they require them. At the same time, Lawter remains fully committed to serving the entire spectrum of our printing ink customers. We recently established account groups to service every customer with a dedicated team, including sales, R&D, manufacturing and quality assurance, so we will better understand the unique requirements of each customer at every level, and have the focused resources necessary to ensure they receive superior quality and service. |
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Opportunity #2 -- Changing Needs | |
Growth in the $10 billion worldwide ink industry is being driven by such factors as growing literacy, rising consumerism in emerging markets, and the expansion of catalog shopping within developed nations. As the world's leading specialty polymers company focused primarily on this market, Lawter is well-positioned to grow with these trends. But the needs of ink manufacturers and their customers also are being defined at a more fundamental level by such technical issues as faster press speeds, wider presses, recycled papers, environmental concerns, and new "distributed print" models that make it necesary to produce consistent, precision quality for documents produced at multiple sites. Lawter's ability to respond to the accelerating pace of such changes in the printing inks and graphic arts industries more rapidly and more effectively than our competitors represents our second major opportunity to outgrow our markets. At Lawter, we have been the industry's leading innovator for generations. In the 1960s, we were the first to figure out how to successfully apply heatset varnishes, making possible a whole new generation of colorful, glossy magazines. More recently, we have developed a new class of high molecular weight resins to stand up to the physical stresses of presses that run at speeds of up to 3,000 feet per minute -- nearly double the rate of the fastest presses a decade ago. Our new Ultra Rez and Webvar products are dramatically less costly, yet offer significantly improved print quality. Our innovations have helped to make lithography more cost competitive. We have more than 800 products in our line, with about 200 active at any time. Yet these numbers belie the magnitude of our ability to create and customize solutions. Orders for nearly all Lawter products can be customized to alter viscosity, solubility, and other characteristics to meet the precise operating requirements and performance expectations of a particular customer in a particular plant for a particular job. |
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Opportunity #3 -- World-Class Advantages | |
A strong, flexible balance sheet. Experienced, capable people. The intellectual capital of a company with 56 years experience in one, focused business. A reputation for quality and service -- and global relationships to match. These are some of Lawter's competitive advantages. Now, add to them world-class research and manufacturing -- half a million square feet brought on line over the past four years -- and you have the necessary elements for the next major profitable growth period for Lawter. With our modern laboratories and new proprietary manufacturing processes, we are increasing yields, reducing costs, improving quality -- even making new products and customer relationships possible. The start-up of our 230,000-square-foot Kallo, Belgium, plant in the third quarter of 1996 completed the lion's share of an $80 million capital investment program designed to give Lawter leading-edge manufacturing technologies for the 21st Century. The results since the opening of Kallo's sister plant in Pleasant Prairie, Wisconsin, and a smaller facility in Tianjin, China, demonstrate the value of the company's largest capital program ever. Manufacturing in these hub plants is highly automated with computer-based controls designed to monitor and record all production systems and provide real-time data collection. As a result, we have dramatically improved production cycle times for our printing ink vehicle, alkyd, and hard resin production lines. Operating efficiencies, quality and product standardization have improved accordingly. For example, in the past, two or three smaller kettles had to be combined to fill a road tanker. Our new facility is able to fill a tanker with a single kettle. In addition, new pressurized, high-temperature processing technologies allow ink vehicles to be manufactured in one continuous process. More importantly, perhaps, the same technologies have made it possible for Lawter to produce new types of resins and ink vehicles with improved print properties at lower cost. This new technology, along with the Hercules acquisition late last year, now offers Lawter an opportunity to look into the publication gravure market. This is a large segment of the printing industry which Lawter has not been part of in the United States. |
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