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TheStreet Open House

Ferro Reports 2012 Fourth Quarter And Full-Year Results

Stocks in this article: FOE

Value Creation Strategy

The Company is executing on a clearly defined strategy to create shareholder value by focusing on historical core competencies and reducing costs. The strategy has the following three distinct components:

  1. Improve Return on Invested Capital
  2. Streamline Core Operations and Reduce Operating Costs
  3. Pursue High-Return Growth Investments

Improve Return on Invested Capital

Each of Ferro’s product lines is being reviewed and analyzed to determine its current and future potential to create value and generate cash. The Company is implementing action plans to enhance returns, including rationalization of product portfolios and improving working capital and fixed asset utilization. Assets that cannot generate sufficient returns are being redeployed, divested or curtailed. Examples of successful execution on this component of value creation include the sale of the Company’s solar paste assets, as previously reported, and further optimization of facilities and leases, which has already generated proceeds of approximately $7 million and annual costs savings of $4 million.

Streamline Core Operations and Reduce Operating Costs

The Company plans to reduce operating costs by more than $50 million over the next two years by simplifying the organizational structure, streamlining processes to make operations more efficient, and substantially reducing infrastructure and support costs. To facilitate this cost reduction, the commercial and manufacturing organizational structures are being reconfigured, reducing the need for regional management and eliminating redundancies across product lines. The back office infrastructure also will be overhauled, with functional support organizations moving from a local to a regional or global model. Where applicable, transaction processing will be migrated to a global shared service center to leverage processing technology, improve controls and reduce costs.

Pursue High-Return Investments

The Company will continue to pursue prudent and profitable growth opportunities with high return potential. The Company’s investments in digital inks and glazes for the tile market and expansion into Northern Africa, Eastern Europe and Asia are examples of such opportunities. Future growth initiatives likewise will focus on migrating our product technologies into higher value applications and expanding into developing markets. Each business will be required to earn, through its performance, opportunities for future growth capital. Growth opportunities will be stringently assessed on their ability to generate significant returns and create shareholder value.

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