Date: Thu, 20 Nov 1997 20:30:08 GMT Server: NCSA/1.5.1 Last-modified: Tue, 11 Feb 1997 14:13:36 GMT Content-type: text/html Content-length: 18956 Analyst Conference Call 4Q96




Rohm and Haas Company
Analyst Conference Call


January 22, 1997

Rohm and Haas Company released fourth quarter and full-year 1996 earnings on Wednesday,
January 22nd. Later that morning, Bill Andrews (Corporate Controller), Fred Shaffer (Chief
Financial Officer) and Larry Wilson (Chief Executive Officer) participated in a conference call with
financial analysts. What follows is a synopsis of that session.

As the meeting began, Larry Wilson said, "Quite simply, 1996 was a very good year for Rohm
and Haas. We ended the year on a very strong note -- fourth quarter unit volume was up 14
percent, and earnings per share was up 19 percent higher than in 1995. For the full year, earnings
per common share were up 29 percent on 6 percent volume growth."

Wilson noted that the profitable growth trend that began at mid-year continued with increasing
strength during the fourth quarter. The company's core acrylic businesses were the drivers for that
growth. On a regional basis, Latin America had an outstanding quarter and its best earnings year
ever. Earnings for that region were $32 million.

Highlights:

Pre-tax

Japan land sale $10.2 mm    (reported in other income)
Japanese plant shutdown (4.1) mm    (reflected in cost of sales)
Other restructuring in Japan (3.6) mm    (reported in other expenses)
Bristol plant downsizing (8.0) mm    (reflected in cost of sales)
AtoHaas Europe restructuring (3.7) mm    (reflected in equity of affiliates)
_______
(9.2) mm

The impact of these charges by business group are:

After-tax

Polymers, Resins & Monomers $(7) mm
Plastics (6) mm
Agricultural Chemicals 6 mm
Performance Chemicals 1 mm
Total $(6) mm

Without these items, pre-tax earnings would have been up 12 percent for the quarter, and earnings
per share would have been up 27 percent.

Bill Young, Donaldson, Lufkin and Jenrette
Can you give further detail about why Agricultural Chemicals performed so well
in the fourth quarter?
Ag Chem results were up in every region, except Europe. Sales of Dithane fungicide were
especially strong in Latin America. In addition to increased sales of Dithane, the business saw
good growth in its newer products -- the herbicides based on pyridine chemistry, the MAC (molt
accelerating compound) insecticide products, and Goal herbicide.

Would you comment on any trend you saw in raw material pricing, and your
outlook for 1997? What kind of guidance are you giving your managers?

There was a slight upward trend in raw material costs from the third to the fourth quarter, and we
expect to see that trend continue into the first quarter of 1997 for most of our raw materials. The
exception is acetone, which has come down in price.

What we're telling our managers is what we always tell them when raw material costs go up --
raise selling prices and get back any lost margin as soon as possible. Using acrylic emulsions as an
example -- we have implemented a price increase effective at the beginning of 1997 of 2 1/2 percent
for the United States. When this is fully effective, we'll end up about even.

Frank Mitsch, Merrill Lynch
Polymers & Resins had great volume growth at the end of the year. Do you expect
that kind of demand to continue through 1997?
You won't see volume growth of 14 percent on an ongoing basis, but we do expect Polymers &
Resins to grow above GDP rates again in 1997. Ongoing volume growth should be in the range of
7 to 8 percent.

Can you comment on the AtoHaas Europe restructuring?
Our partner in the joint venture, Elf Atochem, took action early in January to affect a substantial
reduction of costs in Europe. We expect AtoHaas Europe's financial performance to improve
gradually as 1997 progresses.

How is Shipley doing? What is the trend there?
Fourth quarter sales for Shipley were the highest they were at any point in 1996. It looks to us as
though the inventory correction that took place in the semiconductor industry in the second and
third quarter of last year is over. We expect continued good growth in this business in 1997.

Ted Semegran, Dean Witter Reynolds
Do you expect to see volume increases in the first quarter of 1997 of the same
magnitude as you did in the fourth quarter of 1996?
If economic conditions continue to look good. We would expect another favorable volume
comparison during the first quarter. You might recall that volume growth disappeared for us from
March 1995 to May 1996, then returned. Our volume comparisons should look good for the first
half of 1997, but it will be harder to get dramatic increases on a comparative basis as the year
continues.

What are the operating levels for your acrylic acid plant?
We're currently running our acrylic acid manufacturing plant at better than 100 percent of
nameplate. We've reason to believe that the industry overall is running at rates in the high 90
percent range. 1997. We will be adding capacity at our plant in Houston at mid-year, as will
BASF. LG is adding additional capacity in Korea. With demand growth of about 5 to 6 percent,
we would expect to see industry capacity utilization to be in the 90 to 95 percent range.

Are you buying acrylic acid?
We have long-term contracts with a number of suppliers, but we are currently purchasing at
contract minimums, as opposed to the maximum levels earlier on.

What's the outlook for your plans for an acrylic acid facility in Europe?
Nothing has changed. We purchased land last fall, and are prepared to build if we have to.
However, we intend to postpone building anything as long as we can. With capacity coming into
the market from Thailand, Indonesia, Taiwan and Korea, we don't want to do anything that puts
the market out of balance -- and we believe we can get further efficiencies out of our existing plant
in Houston.

As we see it today, it doesn't seem like there will be a need for us to bring another plant on-stream
until after 2000 or 2001.

Jeff Spetalnick, Oppenheimer
Can you comment on demand for methyl methacrylate?
Our MMA plant ran at about 80-85 percent of capacity throughout 1996. We have not been affected
like other producers because we currently are not a big supplier to the merchant market. Most of
the MMA we make is consumed internally for our plastics and acrylic emulsion products.

Avi Nash, Goldman Sachs
Can you be more specific about where demand is coming from in Polymers and
Resins? What end markets look strong to you?
There was good growth in products for the paper market. Sales of hollow-sphere pigment for both
paper and paint also were strong. In addition, Latin American business was good. Demand was up
in Asia-Pacific and in Europe as well. Looking ahead, we don't expect to see lots of future quarters
with 16 percent volume growth, in part because the fourth quarter comparison was helped by a
lousy fourth quarter in 1995. Over the past decade, Polymers & Resins has shown growth in the 7
to 8 percent range. If economies hold up, we would expect that kind of growth in the future.

Nick Spencer, Sanford Bernstein
Were you surprised by anything you saw in the fourth quarter numbers?
In all honesty, the quarter turned out pretty much the way we expected it would.

The tax rate was low. Will that continue into 1997?
We would expect our steady state tax rate to be about 33 percent.

And capital spending? What does that look like for 1997?
We spent $334 million in 1996. We expect capital spending to be around $350 million in 1997.

Will you continue to repurchase shares?
We brought in 4.4 million shares in 1996 under two authorizations from our Board of Directors.
We have 2.6 million shares remaining under the second repurchase authorization. We would hope
to bring them in quickly, as market conditions allow.

James Wilbur, Smith Barney
What's your outlook for the European Region?
Without the impact of the losses at AtoHaas Europe, our European earnings would have been up
10 percent for the year. We expect to see continued improvement in Europe in 1997, as the losses
at AtoHaas decrease, and as economies pick up. Just looking at the same economic forecasts that
all of you see, indications are that the U.S. economy will have a better 1997 than Europe. Still our
history in Europe shows that Haas's business grows faster than the overall European GDP.

Jeff Spetalnick, Oppenheimer
Comment, please on the performance of the Biocides business.
Biocides is our most profitable business, with the best return on assets of any of the 10 businesses
we run. However, we're not seeing the double-digit growth that we once did.

We're approaching market maturity in water treatment and a few other end-use markets, but we are
hoping for good growth in marine, wood and plastic applications.

Andy Cash, NatWest Securities
If you could discuss acrylic acid again for a moment. With the industry running at
very high rates, has there been any indication of customers substituting other
products in their processes or having to wait for deliveries?

We have had no problem delivering acrylic acid to our customers, and don't anticipate any
problems in the future. And to our knowledge, no other producer has had problems, except for the
temporary outage at Hoecsht-Celanese late last year.

With new acrylic acid capacity coming into the market in 1997, are you doing any discounting?
No, none at all. We supply acrylic acid to very few merchant customers. The product we sell to
our largest customers is sold on a formula price. And you can be darn sure we are not discounting
emulsion prices to fill up our monomer plants.

You have a phenomenal balance sheet. Cash flow appears to be strong. Any early thoughts on what you might do with it? Additional buybacks? Acquisitions?
We have been buying shares pretty aggressively. We expect to continue to do that whenever
possible. As for acquisitions, if we can find an acquisition candidate that is a logical fit with our
organization and one that adds immediate earnings to the company, then we would seriously
consider it. We won't make dilutive acquisitions.

Paul Raman, Paine Webber
How has the Haas family reacted to the stock buy back, the recent increase in
stock price and your plans to grow the business for the long term?
The Haas family pays attention to the same things any other large shareholder does. They are
happy to see us do well. I don't think they follow the stock price on a daily basis, but they want to
see us prosper and grow and to continue to improve our return to shareholders. That's exactly
what we want to do, too.

It should be noted that we're using our excess cash to buy back stock, but that doesn't pre-empt us
from considering acquisitions. We have ample capacity to raise capital to make acquisitions as
well.

George Stairs, Putnam Investments
Can your provide some of the balance sheet items?
At quarter end, cash was about $11 million, short-term debt was $144 million; long-term debt
$562 million, and stockholders' equity was $1,728 million.

Kate O'Conner, Morgan Stanley
For the second year in a row, your Ag business has broken with its traditional
seasonal pattern. Is there any fundamental change that has taken place? Will this
trend continue in the future?
As the business has grown globally, we see less and less "seasonality" in the numbers. There was
a time when Dithane sales in Europe had a dominant effect in pushing a peak in Ag sales in the
second quarter. However, business has grown dramatically in Latin America and in Asia-Pacific.
We don't see seasonality the way we once did.

Ted Semegran, Dean Witter Reynolds
Can you give a bit more detail about the currency effect in the fourth quarter?
What does the currency picture look like going forward?
The overall net effect on our earnings per share was a positive 1 cent for the quarter, with an
adverse impact on operating income exposure of about 2 cents, offset by balance sheet items.

It's mighty difficult to predict what might happen with currencies. The one thing that remains true
for Rohm and Haas is that a 1 percent change in our market basket of currencies will have an effect
on our earnings per share of about 1 to 2 cents per share.

Avi Nash, Goldman Sachs
Could you comment on profit margins?
Our margins improved as 1996 progressed. They looked pretty good in the fourth quarter. They
are not the highest they've ever been, but we're close to where we were at the end of 1994 -- very
healthy.

Looking forward, a lot will depend upon raw material costs. Obviously when raw materials like
propylene cost us 12 to 13 cents a pound, margins look better than they do when propylene costs
us 27 to 28 cents a pound.

However, we're not waiting for raw material pricing to change. We're still driving costs out of our
business and making ourselves more efficient in every way. You could see that that efficiency paid
off for us in the fourth quarter. The effect is right there on the bottom line.

I would hope anyone who follows us would give us some credit for our below-the-line
improvements. We've brought selling, administrative and research costs down to 20.5 percent of
sales -- we're back below 1985 levels!

Jeff Spetalnick, Oppenheimer
Can you comment on your Shipley business? What's the split these days between
the two business segments there?
Shipley sales are about 45 percent on the printed wiring board side, and about 55 percent on the
microelectronics/semiconductor side. The fastest growth is occurring on the semiconductor side,
and we expect to see that trend continue.

Shipley did well in 1996, and they ended the year with a strong December. That should continue.
We didn't see the weakness in our business that others in the semiconductor business felt at mid-
year. Business was especially strong in Asia-Pacific and in the United States.