A word from our CEO and President, John Quinn

Agility. That's the word circulating around Excel Polymers.

Our commitment to you is that we will move more quickly, be more flexible and do our best to anticipate, ensuring you receive the best possible response to your needs.

2004 was a healthier year than the past few for the elastomers industry. The growth we all experienced helped fill open capacity, improving bottom-line results. The productivity-focused efforts many of us undertook in a survival mode during this same period paid dividends as we moved production through our "LEANed" facilities. The inflation we saw in the back half of the year dampened what could have been a great year. But, with 2004 now behind us, what do we foresee for 2005?

We enter 2005 with continuing feedstock issues fueling inflation and supply-demand imbalances creating sporadic allocations. We see price increase notices shortening to one week from the traditional period of one month. We see suppliers rationalizing product lines (either total elimination of "unprofitable" products or consolidation of products within product lines). As an example, we entered 2005 being notified that one of our key strategic suppliers (DuPont Dow Elastomers) was going to dissolve by mid-year, with the respective portfolios going back to the parents.

Excel monitors feedstocks, and we buy accordingly. We created a network of warehouse services to help us buy in the best available economic order quantities. We are attempting to contract for volume with our suppliers. We hired a sourcing manager in Shanghai to help us find new suppliers who offer economic benefits. We continue our LEAN Kaizen events at our plants to drive down our conversion and capital costs and improve quality and service.

Many of our global suppliers have finally recognized the weak U.S. dollar and, therefore, increases on imported materials are at a higher rate than what we see from domestic suppliers. On the other hand, most suppliers have rapidly adjusted the 20-30 percent differential we saw in China in 2004. In most cases, prices of materials are at parity to those in North America.

Domestic companies who moved production to China for the materials advantage alone will struggle to justify that move going forward. China will continue to be an advantage location with labor on assemblies, the costs of molds, tools and capital equipment and in a consumer economy that is growing at an 8-10 percent a year rate.

What can we do together? Because of the volatility of the materials supply chain, we need to continue open communications in regard to your market dynamics, including new business. We need to continue supporting you with accurate data regarding materials economics to help you justify this pressure to your customer base. We are open to deploying our "LEAN" resources along with yours on mutually beneficial projects.

We appreciate the business you award us. Our primary goal is to get us all through this time of turbulence with a stronger bond for mutual success in the future.

© 2004 EXCEL Polymers LLC.