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“NOVA Chemicals’
entire organization has proven that we understand what it
takes to be successful in the highly cyclical and competitive
commodity chemicals business. We have built a strategy, a
set of policies and tactics that provide clear focus and priorities
for everyone in the company.”
Jeffrey
M. Lipton
President and Chief Executive Officer |
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In last year’s letter I wrote that NOVA
Chemicals’ employees understand the cyclicality of the commodity
chemical business and know they can continue to improve our company
even in the worst of times. In 2002, they more than proved me right.
The past six quarters for most petrochemical producers have been
the worst I’ve experienced since 1964, when I began working
in the industry. Demand has been weak and customers have kept inventory
levels abnormally low. The business segments that NOVA Chemicals
works in operated at about 85% of theoretical capacity. At those
utilization levels, customers have much more power than producers
and force producers to sell at very low margins. The combination
of low volumes and low margins in our capital-intensive industry
generally leads to operating losses and low levels of cash flow.
Two consecutive years in this kind of environment have had a big
impact on the chemical industry. In general, balance sheets have
weakened, investors have lost faith in the future of the industry,
management teams have had their confidence shaken and growth plans
have been put aside as companies focus on survival.
NOVA Chemicals, like the general industry, suffered from the extended
downturn. We showed improvement from the previous year, but lost
money in 2002—$106 million or $1.24 per share before unusual
items and $112 million or $1.30 per share including unusual items.
Although we reported large losses, I am prouder than ever to be
associated with NOVA Chemicals, more so than any organization I’ve
been part of at any time in my career. We did a lot more than persevere
in 2002. We substantially reduced our debt; continued investing
in new products and technology to ensure profitable growth; enhanced
our credibility with suppliers, customers, creditors and investors;
maintained the focus and enthusiasm of our workforce and generally
outperformed the industry in most important areas of our business
that we can control. As a result, we continued to make strong progress
towards our goal of being the best commodity chemical company in
the world. |
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