One
reason for our success in 2000 is the balance in Ferro's mix
of businesses, which allowed us to deliver continued growth
while many companies in our industry fell short of expectations.
Only a portion of our businesses are dependent on petroleum-based
raw materials, so changes in those costs have a smaller impact
on Ferro's overall performance than on some other specialty
chemical companies, and our strong international presence
helps us balance the impact of economic cycles worldwide.
Our focus remains on improving the balance of our portfolio
and taking advantage of the opportunities in our target markets.
We are confident that sales and earnings will reflect the
success of these efforts long-term.
We continue to believe that our stock deserves a much higher
valuation than the level at which we ended 2000; however,
the 5 percent increase in value of Ferro shares in 2000 compared
favorably with the Standard and Poor's Mid-Cap Chemicals Index.
Ferro also outperformed the Standard and Poor's 500 Index,
one of the broadest market measures, which ended 2000 down
10 percent. Therefore, on a relative basis, Ferro stock performed
fairly well in 2000.
Our long-term strategic growth plan remains solid and by executing
that plan, we are confident we will be rewarded with a higher
stock price. We made significant progress with our plan for
growth in 2000. Recent acquisitions have improved our position
in growing businesses. Continued strength in many of our core
businesses has contributed to internal growth. We are expanding
our manufacturing capacity in several key markets around the
world. And, under the management strategy we call our "Leadership
Agenda," we are aggressively reshaping our portfolio
to provide greater returns to shareholders.
Growth
Initiatives.
Our Leadership
Agenda targets investments in faster-growing markets
and businesses, promoting the growth of these high-potential
businesses in the Company's portfolio while managing
our more mature businesses to generate maximum levels
of profits and cash flow.
Among our rapidly growing - or springboard - businesses,
Electronic Materials now produces more than $200 million
in annual revenue, up from $90 million at the beginning
of 1999, and is well positioned to become an even more
significant factor in our overall performance. As long
as consumers continue to demand computers, wireless
communications devices, cellular phones, automotive
electronics, smart toys and other electronic products,
manufacturers will continue to turn to Ferro for materials
used in electronic components for those products.
The pharmaceutical market
is another long-term growth
opportunity. Our Performance
and Fine Chemicals business
is capitalizing on the trend
of Pharmaceutical companies
to outsource chemical production.
It is a market with high profitability,
clear differentiation of product,
patent protection and other
barriers to entry. Pharmaceutical
manufacturers place a high
premium on speed to market,
which Ferro provides. We are
building this business around
key strengths and capabilities,
such as the manufacture of
high-potency chemicals for
pharmaceuticals, to serve
niche markets based on differentiated
technology.
Acquisitions
Broaden Product Lines.
Acquisitions
are playing a major role in Ferro's growth and in reshaping
our portfolio. In 2000, we completed the integration
of Advanced Polymer Compounding (APC) and TAM Ceramics
Incorporated (TAM), both of which were acquired the
previous year. The APC acquisition has broadened our
product line in plastic compounding, while the addition
of TAM has helped solidify our leadership as a supplier
of ceramic materials for the electronics industry.
Additionally,
we announced three important acquisitions in the past
year. With the purchase of the Polymer Modifiers business,
we have added new technologies to the previously existing
strengths of our Polymer Additives business. Our acquisition
of Pfanstiehl Laboratories, Inc., enhances our capabilities
in manufacturing chemicals for use in the pharmaceuticals
industry. And our most recent acquisition, EMCA-Remex,
complements our existing product line in Electronic
Materials as we continue to build that business.
Over the past two years, acquisitions have added approximately
$275 million to our annual base revenue.
Also,
as part of our effort to reshape our portfolio to
focus on the best opportunities for our Company, we
completed the sale of the Pyro-Chek flame retardant
business in June 2000.
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