The following letter appeared in the
2010 Annual Report.
April 11, 2011
Dear Fellow Shareholders, Customers, Colleagues and Business Partners,
An important test of the quality and strength of any business is how it finds opportunities
in weak economic times. Over the last two years, the economy has been more challenging than
any time in my memory. We made important decisions to improve the long-term growth and
profitability of Grace. We acted quickly to match our operations to our markets; revisited
and reinvigorated our strategies; and, maintained focus on improving our core business.
I am proud of what we accomplished and I believe we are well positioned for success in 2011.
As 2009 came to a close, we worked hard to understand how our markets would perform in 2010 and then
selected the best strategies for our businesses. We owe much of our success to the way we executed
on that effort. For Grace Davison, the markets were stabilizing and excellent growth opportunities
were beginning to emerge. Grace Davison did a great job anticipating and capturing these opportunities.
Their execution was nearly flawless.
For Grace Construction Products, the massive overhang from the construction bubble and other external
forces in North America and Europe were still quite challenging. Consequently, we entered 2010 with plans
to improve profitability in the core business, rapidly accelerate growth in emerging regions and tightly
control expenses. We delivered on all three elements of our strategy. Today, we are improving our position
in emerging markets, moving resources around the globe to capture the best growth opportunities and not
adding resources unless we have absolute clarity around market performance. As a result, Grace Construction
Products is in a good position to grow profitably as underperforming regions recover.
The cover of this year’s Annual Report says a lot about Grace today. Although we have always had operations
around the world, we made a decision several years ago to invest more aggressively in emerging economies.
The mature economies of the U.S. and Europe are still important to us, but growth is slowing in these regions.
We are seeing the fruit of that decision now.
Today, we have 34 manufacturing facilities, five technology centers and strong sales and technical support
in the emerging regions, as defined by the International Monetary Fund. In 2011, Grace Davison plans to
expand capacity to supply polypropylene catalysts to the Middle East and silica gel in Asia and South
America to support our renewable fuels effort, a growth platform for our future. Grace Construction
Products added new facilities in Brazil, China, Saudi Arabia and Vietnam in 2010 and expects to open
at least four new plants in 2011. We believe that these investments and others in emerging regions will
make increasingly significant contributions to our growth for many years to come. Today, many of
our sales outside of North America come from products manufactured here. In 2010, over $450 million worth
of products were exported from the U.S. to over 50 countries. Many Grace jobs in the U.S. depend on exports
continuing to grow. I am hopeful that the U.S. Administration will continue pursuing trade agreements that
open more markets to our products.
In addition to investing in new facilities, we also continued to make small bolt-on acquisitions to extend
our product lines, increase our geographic reach and expand our manufacturing capacity. In 2010, we
acquired Synthetech, Inc. as a way to quickly add new capacity for single site and polypropylene specialty
catalysts and extend our discovery sciences offerings to the pharmaceutical sector. In China, we acquired a
building materials business to increase the footprint of Grace Construction Products in Asia, shorten our
supply lines and give us a portfolio of new products. And, as the year came to a close, we acquired RS
Solutions, a U.S. company engaged in the design and manufacturing of quality control systems for ready mix
We continue to rely on our productivity efforts to deliver cost savings and revenue enhancements.
Grace Construction Products focused on improving their manufacturing to make products with equal
or better quality at lower costs. Grace Davison worked to improve the volume of products manufactured
on existing equipment without sacrificing quality. In 2010, these efforts—and many others like
them—generated a productivity gain of $92.1 million.
Among the things that impress me most about Grace is the way people respond to adverse conditions—not just
those faced by the business. Last year, many of our colleagues experienced natural disasters that threatened
them, their families and our facilities. Whether it was in Chile, Tennessee or Southeast Asia, Grace employees
stepped forward with donations of money, materials and, most importantly, their hearts, hands and energy to help
affected communities get back on their feet again. It is humbling to watch our people come together in this
way, not because their managers told them to, but because it’s the Grace way.
Before closing, I wanted to update you on the status of our Plan of Reorganization under Chapter 11 of the
Bankruptcy Code. On January 31, 2011, our Plan was confirmed by the Bankruptcy Court; it will now be
considered by the U.S. District Court, the next step in the legal process before we may emerge with the
cloud of asbestos liability removed. This is a major step in our bankruptcy proceedings. We look forward to
completing the process as quickly as possible.
Much has changed over the last two years because of global market conditions. Yet, in some respects, nothing
has changed. We still believe that safety comes first and we are doing a better job at looking out for each
other. Our customers around the world still bring us their problems to solve. We have stayed true to our
vision, purpose and values. We are just as focused as ever on being the world’s premier specialty chemicals
and materials company. Our purpose, to do everything we can to help our customers, still drives us. Our
values continue to unite us, whether we are in Dammam, Buenos Aires or Baltimore. Unknown challenges lie
ahead for sure, but with our common vision, purpose and values guiding us, we believe we are well positioned
to continue enriching lives, everywhere!
Chairman, President and Chief Executive Officer