W.R. Grace & Co. manages a portfolio of businesses to balance growth and profitability. It generates $1.98 billion in annual revenue across construction chemicals, catalysts, and performance chemicals. Grace uses processes like PRISM and acquisitions to drive internal and external growth, focusing on high-growth segments. It aims to strengthen productivity through initiatives like Six Sigma while maintaining leadership in foundation businesses.

1. W. R. Grace & Co.
Balancing Growth and Profitability:
Managing Today for Tomorrow
CDMA 2004 Spring Meeting
March 16, 2004
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2. ~ Business Profile
Net Revenues $1.98B Operating EBIT $227M
Performance
Chemicals
Construction Building Performance
Chemicals Materials 48%
48% 25% Chemicals
Sealants & 48%
Silicas Coatings
29% 27%
Davison
Davison Catalysts
52%
52% 71%
Global Mix
? Operations on 6 continents in nearly 40 countries
EU
? Over 6,000 employees worldwide
34% AP ? Davison
16%
? 16 facilities
LA 5% ? Grace Performance Chemicals
NA
45% ? 62 production facilities
? 70 sales offices
Specialty Chemical and Materials Enterprise 2

3. ~ Strategic Themes
Environmental, Health & Safety Foundation Businesses
? Approaching World Class ? Maintain technology and market
? Management focus leadership
? Cultural integration ? Strong business performance
? Extend safety culture beyond operations ? Platforms for future growth
? Develop culture of environmental awareness
Growth Productivity
? Resource for growth ? Six Sigma
? PRISM stage gate process to manage ? Materials management
internal development ? Energy
? High growth segments ? Census management
? Accretive and strategically compelling ? Discretionary expense control
acquisitions ? Business model changes
Strategy for Value Creation
3

4. ~ Productivity
Productivity Performance Productivity Targets
High Expectations Productivity Benefits in Plan (Amts in millions)
in 2004
? GPC (150 specific projects) $24
? Davison (150 specific projects) 36
? Savings in Plan 60
? Less Inflation at a Blended 2.0% (35)
? Net Productivity in Plan $25
2000 2001 2002 2003 2003 2004 390 Active Projects in Hopper
RR 1,471 Trained Employees
Strong Process and Performance
4

5. ~ Productivity Goal Trees
GRACE $60
GPC $24 Davison $36
Catalysts
Silicas
SCC SBM SSC
FCC Hydro Polyolefin Chemical
Driving Accountability
5

6. ~ Growth and Investment
% Change '01 % Change '02 vs.
($ amounts in millions) vs. '02 '03
Revenue Growth
Growth Segments 12.3 % 14.9 %
Foundation Segments 2.7 % 0.1 %
2002 2003
Capital Expenditures $99.7 $99.5
Research & Development $51.1 $52.0
Segments that
provide high growth
FCC Catalyst Solutions
Polyolefin Catalysts
Distillate Hydroprocessing GROWTH
Digital Media Solutions SEGMENTS Business platforms that support
27% of 2004 Sales future growth
ns
Separations
Coatings 54% of R&D Spend
itio
Fibers Fluid Cracking Catalysts
uis
Self Consolidating Concrete Silica Gel, Precipitated, Colloidal
Underlayments North America Construction Chemicals
Acq
FOUNDATION
Structural Envelope Systems Waterproofing
SEGMENTS Fire Protection
73% of 2004 Sales Can Sealants
46% of R&D Spend
Product Initiatives and Investments Weighted Toward Growth Segments
6

7. ~ Strategic Growth Process
Growth Products
Geographic Expansion
Bolt on
Acquisitions
Strategic Products New
Existing
PRISM
New
Existing
Customer Service
Tunneling
Foundation EO/PO
SEAGULL
Elevated Deck
Base Custom Technology Platforms
Flooring High-Solids TDA
for Cement
Base Optimize Architectural
cast-in-place
ORIOLE
Precast
Liquid Fiber
Base Avantium
Architectural precast
Dispersants STRUX STEALTH HTEM Pieri
GDP + 2.5 - 3.0 x GDP 7

8. ~ Internal Growth Processes
PRISM – Robust Ongoing Process
Business Development
Planning
Test
Marketing &
PIP Feeding Ideas
Commercialization
Express Projects
“NEXT” “Express”
A process to identify • Modified product
Process the “NeXt” large for existing customer Initiative
growth opportunity • Produce products
in different plant
Strategic Technical Service/
Application Resources
New focus on test marketing
Build a barrier to entry
“STAR”
Initiative
8

9. ~ Internal Growth Process
PRISM
PRODUCT/
PRODUCT/
IDEA TEST
TEST COMMERCIAL-
COMMERCIAL-
IDEA BUSINESS
BUSINESS DEVELOPMENT
DEVELOPMENT
EVALUATION MARKETING
MARKETING IZATION
IZATION ONGOING
EVALUATION PLANNING
PLANNING
BUSINESS
STAGES
IDEA COMPLETE-
MERIT FEASIBILITY READINESS WRAP-UP
GENERATION NESS
REVIEW REVIEW REVIEW REVIEW
REVIEW
GATES
HOLD NO-GO NO-GO NO-GO NO-GO
EXTERNAL
EXTERNAL ACQUISITIONS
DEVELOPMENT
DEVELOPMENT ALLIANCES
Strong Marketing/Technical Interface
9

10. ~ Upgrading PRISM
PIP Idea Evaluation Business Planning Development Test Marketing Commercialization
PIP Rating QFD/KJ DFSS STAR TARGET
Customer Need Proof of Concept Introduce
Function Scale-up Follow-Up
Properties Transfer Assess
Strong Marketing/Technical Interface
10

11. ~ Average Time (mos) for PRISM Projects per Stage
08/2002 05/2003 10/2003
01/2001 07/2001 11/2001 03/2002 04/2002 08/2002 MEDIAN MEDIAN MEDIAN
Stage 1
4.5 3 3 3 1.5 1.4 0 0 0
Idea Eval.
Stage 2
6 6 7 6 6 5 6 5 5
Bus. Plan
Stage 3
10 8 12 11 11 10 7 7 11
Develop.
SUBTOTAL 21 17 22 20 19 16.5 13 12 16
Stage 4
11 9 12 12 12 12 10 7 3
Test Marketing
Stage 5
8 8 7 7 7 10 7 7 12
Commercial
TOTAL 40 34 41 39 38 38 30 26 33
Faster – But Not Fast Enough
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12. ~ STAR
A process to provide Grace with a more differentiated, proactive, and customized service offering
Optimization of PRISM Six Sigma and Other Utilization of
Annual Sessions
Process Technical Training Technology
Goals
• Survey given at annual • Six Sigma training and
roundtable participation on project
• Brainstorming at annual Technical teams
roundtable
Structured
Training • Information available
• Online satisfaction
Feedback from more sources
survey
& Information
• Opportunity to provide
• Annual roundtable input to Grace product
discussions on development efforts
Annual Real Influence
technology and business • Opportunity to receive
developments Roundtable on new Grace products
• Forum for complex issue New Products before market
resolution introduction
Driving Commercialization Faster!
12

13. ~ Project Overview
Tech Building Idea Eval. Prod/Bus Plan. Development
Test Marketing Commercial Plant Relo Outside PRISM
ity
04
'06 rtun
n'
er
Pla
TD
tus
po
ad
Sta
$Y
Op
Op
Le
2003 2004
J F M A M J J A S O N D J F M A M J ($MM) ($MM) ($MM) Comments
Project charter complete & approved.
Project A G Leader 1 $0.3 $0.0 $0.0
Resources assigned.
Project B G
Leader 2 $12.0 $1.94 $0.1 North America Sales training completed.
Project C Y Leader 1 $2.0 $0.21 $0.06 Feedback pending.
Project D G Leader 1 $3.0 $0.12 $0.01 Technical approval, goal: line trial this year.
Project E G Leader 3 $35.0 $0.0 $0.0 New project.
Project F G Leader 2 undefined $0.0 $0.0 New project initiated at Martech.
Project G Y Leader 4 $7.8 $0.45 $0.04 Plans more trials.
Project H G Leader 4 $5 $0 $0 Test marketing has started.
J F M A M J J A S O N D J F M A M J Totals $102.8 $2.7 $0.16
2003 2004
Disciplined Process
13

14. ~ Express Projects
Short Projects which leverage existing know-how
er
tus
ad
Sta
Le
? Reach sales run rate in less
Product A G Leader 1
than 1 year
Product B
G Leader 2
? Target opportunities greater
than $500M
? Typically existing customers
Product C G Leader 3
Product D G Leader 1 ? Know requirements for
J F M A M J J A S O N D J F M A M J Totals
process change
2003 2004
Tech Building Idea Evaluation Prod/Bus Planning Development
Test Marketing Commercial Plant Relo Outside PRISM
Work With Selected Customers To Achieve Revenue Quickly
14

15. ~ External Growth Process
Strategic Stage 1 Stage 2 Stage 3 Stage 4 Stage 5
Growth Screen & Approach Full Acquire Integrate Completed
Process Prioritize Target Assessment Target Target
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16 ACQUISITIONS (since 2000) RESULTS
Good Strategic Mix Good Business Mix ? Incremental revenues over $250 million
? Average cash returns of 21%.
? Geographic Expansion - 4 ? Davison – 8
? Significant progress on key strategic initiatives
? Technology/Material Science - 6 ? Performance Chemicals –8
• Geographic expansion in Specialty Construction Chemicals
? Product Line/Market Expansion - 5 • Product line expansion in Polyolefin Catalysts and Silica Products
? Joint Venture - 1 • Technology and market expansion in Separations
Investments Accretive Within First 12 months 15

16. ~ Summary
? Maintain Strong Position in Foundation Businesses
? Balance Resources Between Growth and Productivity
? Strengthen Contemporary Processes
? Drive Accountability through Performance Metrics
People, Processes, Performance
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