Fitch Assigns Initial 'A-' to Rohm and Haas' Sr Unsecured Debt

Business Wire, Dec 10, 2004

CHICAGO -- Fitch Ratings has assigned an initial rating of 'A-' to Rohm and Haas Company's (Rohm and Haas) senior unsecured debt. The rating applies to Rohm and Haas' senior unsecured credit facility and its senior unsecured notes and debentures. Fitch has also assigned an 'F2' initial rating to Rohm and Haas' commercial paper program. The Rating Outlook is Stable.

Rohm and Haas' ratings incorporate its strong profitability, cash generation ability, and manageable debt level, as well as its diverse mix of businesses and the market position of its products. Rohm and Haas had strong EBIT and EBITDA margins at 11.3% and 18.0%, respectively, for the 12 months ended Sept. 30, 2004. EBIT margins remained double-digit in four of the past five years, during which the chemical industry underwent a prolonged downturn. Throughout the downturn, cash flow generation remained strong. Both cash generated by operating activities and net free cash flow were significantly positive during the downturn. Moreover, the company has worked to reduced debt from a high of $4.1 billion in 1999 to approximately $2.5 billion today. The specialty nature of many of its products, market position, and diverse businesses support Rohm and Haas' consistent and strong profitability. For the trailing 12 months ended Sept. 30, 2004, total debt-to-EBITDA was 2.0 times (x) and EBITDA-to-interest incurred was 8.6x.

The Stable Rating Outlook reflects the likelihood that earnings growth, strong cash generation, and stable debt level will support the ratings in the next 12 to 18 months. Fitch expects total debt-to-EBITDA to be less than 2.0 times (x) and EBITDA-to-interest incurred to be greater than 9.5x in 2005, as a result of continued strong market trends and financial performance. As balance sheet cash builds, Fitch expects that Rohm and Haas would use cash to invest in its growth businesses via bolt-on acquisitions. Additionally, Rohm and Haas could use cash for its stock buyback program and to support dividend growth.

Rohm and Haas is a specialty chemicals producer based in Philadelphia, PA. Its diverse product portfolio includes acrylic emulsion polymers and additives for coatings, photoresists for electronics, plastic additives for vinyls, ion exchange resin for water treatment, salt, and acrylic monomers. Rohm and Haas earned approximately $1.3 billion of EBITDA on sales of $7.1 billion through the 12-month period ended Sept. 30, 2004. Fitch initiated ratings on Rohm and Haas as a service to users of Fitch's ratings.