rohm and haas company -...

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Rohm and Haas CompanyJacques M. CroisetièreExecutive Vice President and CFOMorgan Stanley Basic Materials Conference

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Forward Looking Statement

The presentation today may include forward-looking statements as that term is defined in securities law, including but not limited to anticipated plans, litigation and environmental matters, currency effects, profitability, and other commitments or goals. Such statements are subject to a number of risks and uncertainties, many of which are listed in Rohm and Haas’ 10-K filing with the Securities and Exchange Commission.

Copies of all recent SEC filings, and additional information about Rohm and Haas, are available through our web site:http://www.rohmhaas.com

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Regulation G

The presentation today may include the display of some company data that do not directly conform to generally acceptable accounting principles, or GAAP. Management believes that the presentation of some non-GAAP data provides investors with additional insight into the ongoing operations of the business. These measures should not be viewed as an alternative to GAAP measures of performance. Furthermore, these measures may not be consistent with similar measures provided by other companies.

All non-GAAP data in the presentation are indicated by a footnote. Tables showing the reconciliation between the GAAP and non-GAAP measures are available, with today’s presentation, on the investor section of our web site athttp://www.rohmhaas.com

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Why Should You Own ROH?

• Long history of strong performance and rewarding shareholders

• Clear strategic plan that raises the bar on financial performance

• Excellent culture, governance, and leadership talent

• Expectation of higher and more consistent future shareholder rewards

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Rohm and Haas Today Organized for the Future

* External Sales

2006 Sales By Segment Distribution of Operating EBITDA (NG)

(NG) Non GAAP financial measure

Salt10%

Packaging & Building Materials

21%

Primary Materials*

11%

PerformanceMaterials

14%

ElectronicMaterials

19%

Paint & CoatingsMaterials

25%

50%

75%

100%

2002 2003 2004 2005 2006

Chemicals Elec. Mat. Salt

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2006 - Solid Performance

Key Metrics 2006 Chg v.s. 2005

Net Sales $8.23 B

Gross Margin (1) 30.1%

4%

10bp

23%

140bp

EPS (2) $3.41 24%

Earning from continuing operations $755 MM

A/T Profit Margin 9.2%

$(107) MMCash from Operations $840 MM

(1) As Reported, before reclassification adjustments(2) Diluted earnings per share (in dollars) from continuing

operations

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Exceeding Mid Term Targets

(1) As presented at 2003 Annual Shareholder Meeting(2) Return on Capital Employed


2005 2006Actual

3%

9%

13%

14%

38%

34%

(1)%

8%

11%

15%

Payout per Share Ratio ~33% 41%

36%Debt To Capital Ratio 40%

Key Metrics Mid TermTargets (1)

Sales Demand 4 – 6%

A/T Profit Margin 9 - 10%

ROCE(2) (NG) >10%

Dividends per Share ~10%

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Strong Financial PerformanceConsistently Improving Returns

Increasing Portion of Portfolio > WACC Rolling 4 Quarters Diluted EPS


42% 52%69% 74% 75%

2002 2003 2004 2005 2006E

9%

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Q1 03 Q1 04 Q1 05 Q1 06

As ReportedBefore Restructuring & Asset Impairments (NG)

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Strong Financial PerformanceContinued Robust Cash Generation – Balanced Cash Deployment

• Reinvest in core businesses

• Invest in new platforms

• Bolt-on acquisitions

• Dividend growth

• Share repurchases

Cumulative Cash from Operations($MM) ($MM)

0

1,000

2,000

3,000

4,000

5,000

2002 2003 2004 2005 20060

1,000

2,000

3,000

4,000

5,000

Cumulative Cash From OperationsCumulative Cash Returned to Shareholders

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Steady Productivity ImprovementEarnings Per Employee Trend

• European Infrastructure Optimization

• Manufacturing Footprint Redesign and Capacity De-bottlenecking

• Shared Services Process Leverage

• State-of-the-Art Information Systems

($MM)

(1) Earnings from Continuing Operations(NG) Non – GAAP Measure

Earnings Per Employee (1,NG)

11.616.5

30.1

38.7

47.7

0

10

20

30

40

50

2002 2003 2004 2005 2006

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Total Shareholder Return vs. S&P 500

ROH 10.8%

S&P500 6.2%

5 Year TSRPeriod Ending December 31, 2006

-50

0

50

100

Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006

ROH S&P500

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Position Portfolio for Accelerated Growth

Build Value Creating Business Models in Emerging Markets

Innovate with Market/Customer Focus

Operational Excellence/Continuous Improvement

Deploy Right Talent in Right Places

Vision 2010

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The External EnvironmentObservations

• Demand for chemistry-based, specialized materials will continue to grow

• Markets are becoming increasingly regional (and local)

• Competition is intensifying across all segments

• Customers demand innovative and customized products, services and solutions

• Connectivity is changing everything

• Technology, speed and talent are the true differentiating characteristics

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Position Portfolio for Accelerated Growth

• Leverage Specialty Materials’ integrated acrylic monomer and polymer chain

• Accelerate investment in Electronic Materials

• Develop a strong portfolio of growth specialties

• Fix or divest underperforming or non-strategic assets

• Supplement organic growth with “bolt-on” acquisitions, where justified

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• Problem-solving capability in a broad range of end markets

• World’s largest and most diverse Acrylic polymer business

• Integrated supply chain: monomers polymers

• Technology leader

• Manufacturing excellence– Global acrylate / methacrylate sourcing– Global polymers network– World-class cost and quality

• Significant merchant business

Specialty Materials A Unique Global Franchise Leveraging the Monomer / Polymer Chain

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Electronic MaterialsLeading Global Supplier of Enabling Materials

• Invest Heavily in R&D– Drives advanced technology and a healthy pipeline– R&D investment 8% of sales; 12 R&D/Tech. Centers worldwide

• Leverage our Integration Capability– Application and Integration Labs throughout Asia and U.S.– Key to delivering right products/processes that meet specific

customer needs

• Capitalize on our Global Manufacturing Footprint– Global sourcing from manufacturing facilities in the U.S., China,

Hong Kong, Taiwan, Korea, Japan, and Europe

• Continue Strong Focus on Asia– Continue developing infrastructure, market positions,

technology, and local talent

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Performance MaterialsTwo-Pronged Growth Mission

Build on Today’s Core(Ion Exchange Resins, Biocides)

Develop New Platforms(Agrofresh, Others)

Leverage leading market positions and unique solutions for bio-processing, water treatment, antimicrobial, and food markets

Key Factors:• Technology development• Broader product portfolio• Varied business models• Global reach

Focus on fast-growing market segments and geographies requiring new technologies (e.g. healthcare, water, energy, food)

Key Factors:• Technology driven• Higher risk, return• New-to-the-company areas• Critical mass – consolidate efforts

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• Local technology delivery; product customization

• Streamlined organizational structure; closer to customers

• Invest in local talent development

• Optimized capital and operating costs in each region

• Regional monomer sourcing

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Sales 2006 2002 – 2006 CAGR

Asia Pacific(ex Japan, ANZ)

$1.2 B

2006 – 2010E CAGR (1)

17% 22%

15%

19%

21%

35% (2)

14%

38%

18%

% of Global Sales 21%

Latin America $0.3 B

CEET $0.2 B

TOTAL EMERGING $1.7 B

(1) Organic growth and Acquisitions(2) % of Global Sales is 2010 Year End Estimate

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Innovation With a Market / Customer FocusAccelerate Development Of Locally-Tailored Products

• Target areas where customers desire technology-driven solutions and are willing to pay

– Electronics, Coatings, other Specialties

• Balance Product and Process efforts• Breakthrough / Step Change rather than Incremental• Globalization

– Closer to markets and talent pools

– Broader reach, internally and externally

• Eco-friendly focus• Leverage external partnerships

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Operational Excellence / Continuous Improvement

• Focus on asset productivity– Flat conversion costs for 3 years– Capital efficient emerging market plants– Global footprint optimization

• Optimize global sourcing of raw materials and services– 2007 Target double purchases from low cost countries ~10% of

total purchases– Regional monomer sourcing

• Responsive and efficient business services– Administrative costs currently 6.7% of sales Target 5.5%– Regional services model

• Focus on lowering effective tax rate– Targeting 28% sustainable tax rate

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Growth EBIDTA% (NG) ROCE (NG)

Circuit Board Technologies

Packaging and Finishing Technologies

Semiconductor Technologies

Performance MaterialsSalt

Specialty MaterialsPrimary Materials Paint & Coatings MaterialsPackaging & Building Materials

Electronic Materials

= Market < Market

< 17%

ROCE < 9%

< 20%

ROCE = 9%

> Market

> 20%

Return ROCE > 9%

Sales Demand Growth

EBITDA%

Vision 2010 Targets


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Performance and Targets…Raising the Bar

Key MetricsAverage

Performance2004 - 2006

2010Targets

Sales Demand Growth 3%

EPS Growth 42%

5-7%

10-14%

> 20%EBITDA % (NG) 19%

ROCE (NG) 11% > 13 %(NG) Non GAAP financial measure

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Thank you.

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Glossary of TermsA/T Profit Margin Net Earnings from Continuing Operations before cumulative effect of accounting changes/ Net

Sales

CAGR Compounded Annual Growth Rate

Debt To Capital Ratio Total Debt/ (Total Debt + Shareholder’s Equity)

EBITDA Earnings Before Interest, Taxes, Depreciation, Amortization and Asset Impairments

EBITDA Net Interest Coverage EBITDA / Interest Expense

Emerging Markets –APR

Sales into countries in ROH defined Asia Pacific Region excluding Japan, Australia and New Zealand

Emerging Markets –LAR Sales into countries in ROH defined Latin America Region

Emerging Markets -CEET

Sales into countries in ROH defined Central, Eastern Europe (including Russia and other former Soviet Republics) & Turkey

EPS Before Restructuring. & Asset Impairment

Diluted EPS, excluding the impacts of restructuring and asset impairment charges

Payout Ratio Dividend Per Share/ Diluted EPS from continuing operations

ROCE Return On Capital Employed

Sales Demand Growth Sales growth excluding the impact of pricing and currency

TSR Total Shareholder Return (capital appreciation + dividends)

WACC Weighted Average Cost of Capital

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