Rohm and Haas was recently in the news for their restructuring actions, which include plant closures as well as freezing of employee salaries, reflecting the slowing economy and widespread market weakness.
The Philadelphia, Pennsylvania company on January 20th, said it would cut about 900 jobs and incur charges in the fourth quarter. However, the company said it expects adjusted earnings per share from continuing operations for the fourth quarter to exceed analysts" consensus estimate. At that time, analysts polled by Thomson Reuters were expecting earnings of $0.63 per share, but now it has been revised up to $0.67 per share. Analysts" estimates typically exclude special items. Wall Street analysts have a consensus revenue estimate of $2.28 billion for the quarter. Net income in the year-ago period was $180 million or $0.91 per share, with operating revenues of $2.34 billion.
In a December note to its clients, Credit Suisse said it is lowering its earnings estimate for the company from $0.71 to $0.42. For 2009, the brokerage reduced its estimate to $2.43 from $3.16.
July last year, the company had a deal to be acquired by peer Dow Chemical Co. (DOW: News ) for $18.8 billion. Dow"s offer of $78 per share in cash was at a 74% premium to Rohm and Haas stock"s July 9 closing price. Dow was planning to fund the deal with a $13 billion bridge loan, a $3 billion equity investment by Warren Buffett"s Berkshire Hathaway Inc., and a $1 billion investment by the Kuwait Investment Authority.
However, the deal has been surrounded by uncertainties, ever since Kuwait scrapped its $17.4 billion joint venture with Dow Chemical late December, on political concerns. Further, ratings firms have threatened to cut Dow"s credit rating to junk status, if it draws down the loan under its current terms. A Dow spokesman recently said the company continues to look at options to complete the deal.
For the recent fourth quarter, Dow Chemical posted a net loss of $1.55 billion or $1.68 per share, compared to a profit of $472 million or $0.49 per share in the prior year quarter. Net sales declined 23% to $10.9 billion from $14.23 billion last year.
In December, Dow also announced massive job cuts saying it plans to slash about 5,000 full-time jobs, or roughly 11% of its global workforce, amid the global economic slowdown. Dow plans to close 20 facilities in high-cost locations and divest several non-strategic businesses as part of its efforts to reduce costs. Once fully implemented, the company expects the cost-cutting measures to lead to $700 million in annual operating cost savings by 2010. This is in addition to the $800 million in cost synergies it expects from its merger with Rohm and Haas.
Despite the pressures mounting on Dow, Credit Suisse analysts expect the company to close the acquisition of Rohm and Haas at the agreed upon price of $78 per share, on the belief that the merger agreement leaves little room for DOW to walk away from the deal. Additionally, given the specialty nature of ROH"s assets as well as DOW"s desire to transform itself into more of a specialty chemical company, the analysts expect Dow to stand by the agreement.
Rohm and Haas competitor EI DuPont de Nemours & Co., or DuPont, (DD: News ) has reported a loss for the fourth quarter compared with a profit last year, hurt by restructuring costs and weaker demand across most markets. The Wilmington, Delaware-based DuPont"s net loss for the quarter was $629 million or $0.70 per share, compared with a net income of $545 million or $0.60 per share, last year. Quarterly net sales declined 17% to $5.82 billion from $6.98 billion in the prior-year quarter.
Rohm and Haas closed Friday"s trading session at $56.50, up $1.73 or 3.16%, on a volume of 1.57 million shares. For the past 52 weeks, the stock has been trading between $44.13 and $76.50.
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