Source: Chemtura news release
Chemtura Corp. summarized recent strides to improve liquidity as well as its strategy to weather the current economic climate as a viable, strong competitor in the specialty chemicals marketplace.
Craig A. Rogerson, chairman, president and CEO, said, "In November and December Chemtura, like many companies, experienced a sharp drop in demand from customers as orders were delayed or reduced as the recession took hold. With Chemtura's overall financial performance and outlook impacted by the deteriorating macroeconomic climate the Company, as previously announced, sought relief from our lending banks and subsequently entered into a 90-day amendment and waiver agreement with lenders under its senior credit facility on December 30, 2008."
Certain of the company's senior lenders further agreed to assist the company in establishing a new U.S. accounts receivable facility to replace much of the liquidity that had previously been available under the Company's existing accounts receivable facility. On Jan. 23, Chemtura closed on its new $150 million U.S. accounts receivable facility with a three-year term and terminated its former U.S. facility.
"In the meantime, we resolved to take firm measures to manage our liquidity going forward," Rogerson said. "We are reducing indirect costs by $50 million as a result of eliminating layers, broadening job scope, and utilizing the capabilities delivered by consolidating our enterprise systems around SAP 6.0. We are reducing our inventories by a substantial amount and have suspended our dividend. We are continuing where possible to make variable the fixed costs at our manufacturing facilities by curtailing production lines and furloughing employees as required to balance the reduced demand from our customers. We also retain a close focus on aggressively managing working capital to supplement our liquidity. We made good progress in the fourth quarter and plan to make further progress in 2009."
Rogerson said that one of the company's key objectives in the first half of 2009 is to secure the liquidity to meet the maturity of Chemtura's 2009 Notes when they come due on July 15.
"Our primary and preferred path to obtain this liquidity is the sale of asset(s)," he said. "We continue to pursue multiple asset divestment alternatives with multiple players and are in the midst of diligence activities with potential buyers. As we evaluate all of our alternatives (including asset dispositions), we will act in the best interests of all our stakeholders. While there are no assurances of success until a transaction is completed, the process to sell an asset continues to make solid progress."
"We have a solid portfolio of businesses today, and this will remain the case after an asset sale. Some are high-margin industry leaders. Others have good growth potential, while a few have significant challenges which we intend to resolve."
Rogerson said all of the businesses were affected to some extent by the economic downturn, which intensified as the fourth quarter of 2008 progressed. However, the company's Polymer Additives business took the brunt of the reduction in demand from customers, with sales for the fourth quarter, 2008 down 35 percent compared to the fourth quarter, 2007. Demand from electronic, building and construction, and polyolefin applications saw the most significant impact.
For the company as a whole, fourth quarter sales were impacted to a slightly lesser extent, down 23 percent compared to a year ago. However, full year 2008 sales were down 5 percent. This reflected first, the fact that the dramatic drop in demand did not occur until late in the year and, second, the divestiture of the Oleochemicals business, both of which were offset in part by higher selling prices due to raw material price increases and growth from some business segments.
Rogerson has had success in meeting challenges similar to those facing Chemtura, having been through difficult financial conditions before while serving as an executive, including as chief executive officer of Hercules Inc.
"We are managing Chemtura's businesses with the expectation that we will be here for the long run and that we will come out of this a more efficient and effective partner to our suppliers and customers, and a consistent, value-creating investment for our owners," he said. "We appreciate the commitment and support of our customers, suppliers and employees in this transitional period."
Source: Chemtura news release