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    INVESTORS' DAY IN PHILADELPHIA Eight firms at chemical industry conference outline strategies to prosper in economic expansion


    the sun shines" and similar ex-pressions came up frequently at the 2nd Annual Chemical In-dustry Conference held at the

    Chemical Heritage Foundation in Phil-adelphia late last month.

    Representatives from eight major chem-ical companiesPraxair, Ashland, Cabot, Eastman Chemical, Lyondell Chemical, Hercules, DuPont, and Rohm and Haas outlined their firms' virtues and admitted to faults they plan to correct. But most of all, they discussed plans to get as much profitable growth as possible out of the current economic expansion.

    Ricardo S. Malfitano, senior vice presi-dent of Praxair, said demand for hydrogen is now growing 20-25% per year, making hydrogen the company's fastest growing business. Consumption by refiners to up-grade fuel, oil, and bitumen is a primary driver in hydrogen demand, he said. To meet that demand, Praxair expects to an-nounce that it will build at least one, if not two, new hydrogen plants before the end of this year.

    BUT MALFITANO noted that the firm's electronic gases business is not doing as well as it would like. "Volumes are 8% below last year," he said. So Praxair is em-phasizing services for electronics manu-facturing, where it can be better compen-sated for the intellectual properties built in. That includes supplying services for thin-metal deposition on semiconductors, as well as chemical mechanical planarization pads and slurries for polishing chips.

    Ashland's Gary Cappeline, chemical sec-tor president and chief operating officer, noted his firm's enviable conundrum. In a transaction completed on June 30, Marathon Oil bought Ashland's 38% in-terest in the Marathon Ashland Petrole-um joint venture along with Ashland's maleic anhydride business and 60 Valvoline oil-change centers. The transaction left Ashland with $1.1 billion after it paid down debt.

    "With all that cash, we'd be surprised if we're not on a number of radar screens now," he said. "We may have more cash on

    hand longer than we'd like," he added, ad-mitting that Ashland might be vulnerable to a takeover.

    Ashland may not use Marathon-sale pro-ceeds to buy back stock. Though it can do so, the company says it has no intention to buy back snares using other funds now. Cappeline said that at least some of the Marathon funds will go into acquisitions in the $ 1 million to $500 million range in businesses that Ashland knows well, such as adhe-sives, unsaturated polyester resins for fiberglass com-posites, and water treat-ment. He vowed not to overpay for acquisitions, so the firm might have to wait for the right opportunities.

    Richard A. Lorraine, East-man Chemical's chief fi-nancial officer and senior Smith vice president, said his firm will use the $400 million it received from the sale of its interest in Genencor to pay down its debt, fund its dividend, and pro-vide for growth initiatives.

    The firm is making headway on a poly-ethylene terephthalate (PET) facility un-der construction in Columbia, S.C. "Con-struction is a little ahead of schedule and a little under budget," Lorraine said, with completion still targeted for the end of 2006. The plant will use Eastman's Integ-Rex process, which makes the plastic straight from/>-xylene rather than the in-termediate purified terephthalic acid. In-tegRex is touted as producing PET in half the footprint of a conventional PET plant and at half the cost.

    Dan Smith, Lyondell's president and chief executive officer, said the ethylene business is now making a strong recovery. Owing to high Asian demand for ethylene and its derivatives and ethylene plant op-erating rates that are now at about 95%, Smith believes the ethylene market will continue to be strong through the end of the decade. Even though producers will be bringing on new capacity in the Mid-dle East between 2008 and 2010, he pre-dicted that start-up delays likely will keep

    the ethylene market tight and profit mar-gins high.

    AFTER MISSING Wall Street's expecta-tions consistently between 1998 and 2002, "Hercules is now back on track," said Pres-ident and CEO Craig A. Rogerson, and is in a better position to deal with "legacy is-sues." It is making contributions to the pension plan supporting 25,000 workers who once worked for aerospace and polypropylene businesses that Hercules sold more than a decade ago. And the firm hopes Congress will pass legislation that would effectively fix its asbestos liabilities at about $15 million.

    "We dialed back on R&D" when the firm was in trouble, Rogerson admitted.

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    As the economy and profits have recov-ered, Hercules increased its R&D budg-et 10% to $43 million in 2004 and plans to spend an additional 10% on R&D this year.

    John C. Hodgson, DuPont senior vice president, credited a redirection of his own company's R&D to an upsurge in patents at the firm from 801 in 2001 to 1,668 in 2004. But while technology advances are enhancing the firm's profits, he acknowl-edged that DuPont needs to do a better job selling multiple product lines to customers. "About 20% of our sales come from cus-tomers that buy across more than one DuPont business unit," he said. "It should be higher than that."To boost that figure, DuPont now deploys teams focused on selling a broad range of products to customers.

    Hodgson called the effort to increase sales "taking a greater share of wallet," while other presenters at the conference used other euphemisms. But they all made clear that they intend to increase sales and revenues during the current market upturn and to correct impedi-ments toward those goals wherever they can.-MARC REISCH

    20 C&EN / JULY 1 1. 2005 W W W . C E N - 0 N L I N E . O R G