Philadelphia-based Rohm & Haas Co. plans to cut about 5.7 per cent of its work force, or 900 positions, as it closes plants and freezes discretionary spending and employee salaries, marking the latest move by a chemical company to cut costs.
The new round of restructuring and job cuts is expected to generate about $90 million in annualised savings. These actions will also result in $90 million in pre-tax restructuring and asset impairment charges in the fourth quarter of 2008. The company also expects adjusted earnings per share from continuing operations for the fourth quarter of 2008 to exceed the current analyst consensus estimate of 64 cents a share.
The job cuts follow a host of actions by larger rivals, including Dow Chemical Co., which last year agreed to acquire Rohm & Haas for $15.3 billion. The restructurings have come as chemicals makers have reported demand tumbling in recent months. (See: Cash-strapped Dow Chemical gets EC regulator's nod for Rohm and Haas acquisition / Another chemical manufacturer files for bankruptcy protection in the US / Dutch petrochemicals major LyondellBasell files for bankruptcy)
This marks Rohm & Haas' second effort aimed at reducing costs and follows a June announcement of 925 job cuts in North America. The specialty chemicals and plastics company, which has about 15,000 employees, said at the time it would make a 30 per cent reduction in its North American emulsion network as costs continued to surge along with the price of oil, a key product ingredient. Since then, crude prices have tumbled nearly three-quarters.
There have been some questions, in light of the industry's current woes, whether the Rohm & Haas acquisition will close. Its stock closed Friday at $ 60.58; the deal's price is $78, meaning there is significant investor skepticism that any closing would take place at the previously agreed-to price.
Many expect the deal's value to be reduced, especially in light of Kuwait's pullout of a $17 billion joint venture that was a cornerstone of Dow's effort to transform itself. The company is seeking to move away from the less-profitable commodity chemicals into higher-margin specialty chemicals. (See: Dow Chemicals to sue Kuwait over failed petrochemicals JV)