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MacDermid Shareholder Letter 1998

|Includes:Platform Specialty Products Corp (PAH)


Dear Shareholders,

Fiscal 1998 marked our seventh consecutive year of record performance. Per share earnings, our primary focus, increased 41% to $1.20 from $0.85 in 1997. Net earnings increased 39% to $30 million, from $22 million. Sales increased 7% to $314 million, from $294 million. Both Europe and Asia had a record year in spite of well publicized negative currency comparisons and macroeconomic problems. Sales to our printed circuit, printing and metal finishing customers all increased.

Nineteen ninety-eight was an eventful year. After 60 years of inspirational leadership Harold Leever, our Chairman, has chosen to become Chairman Emeritus. He will continue as a Director. What a ride! In 1959 Harold, with a number of employees, bought out MacDermid's founder, Archie MacDermid. In the early '60s, in what turned out to be a brilliant strategic move, he led a tiny metal finishing cleaner company into the electronic chemical business. This was a huge bet at the time, and we are still enjoying its fruits today. Perhaps more importantly, Harold established the MacDermid Philosophy. It is printed as usual on the inside front cover of this report (before the numbers). Today the "Clan MacDermid" with over a thousand members in 19 countries around the world is as focused as ever on the Philosophy's core principles:

  • focus on the customer
  • honesty and integrity
  • supreme worth of the individual
  • challenging and demanding environment
  • entrepreneurship
  • teamwork and cooperation.

Harold has been our spiritual leader for 60 years and will continue to be forever. I hope you can join us to celebrate this milestone with Harold and Ruth Ann at our annual meeting on July 22.

Another important event in 1998 was a non-event which we believe defines who we are as clearly as what did occur. We entertained acquiring a fairly large company that would have immediately added to earnings per share. But, given our optimism about our internal growth prospects, we felt the acquisition would dilute per share results several years out and thus turned it down. We are focused on building long-term shareholder value. While acquisitions can be and have been important, we will issue shares only when we receive at least as much in business value as we give. Tomorrow becomes today rather quickly. Not only is that our responsibility to you, but it is in our own self interest. Your employees, through our investment plans and options, own 35% of the company. Many, like myself, have the vast majority of our net worth invested in the company. In the early '90s when restructuring was our first priority, we under- invested in product development. As a result, internal growth suffered. In the mid '90s we reversed that trend. In 1998 our investment in R&D and product development was at an all time high of nearly $14 million, up 18% from the prior year. In addition, last year we reorganized our R&D effort making it more responsive to the needs of the product lines. In 1998 we began to see results with the introduction of several new products to our customers in printing, metal finishing and printed circuits. We believe one new product, ViaTek holds unusual potential. It is a process technology we believe significantly reduces the cost for our customers to produce printed circuit boards. We have never been more optimistic about our internal growth prospects. At last year's Annual Meeting we unveiled our vision of the future. We want to build one of the world's greatest industrial enterprises which we define as performance at the top one percent of all industrial companies: i.e., per share earnings growth of 25% compounded over ten years and return on equity of 25%. We know this is a stretch. Can we achieve these very high standards? Is the success of the past few years repeatable? Predicting the future is difficult if not

impossible. Markets can change. Global recessions happen. Competitors introduce new technologies. Nevertheless, that remains our goal, our par. It is what everyone at MacDermid is working toward. We know we cannot achieve this level of performance by following "the herd", as the herd by its very nature produces average results. We also must fund growth opportunities at the right time, not when it's necessarily convenient. As a result, our annual performance may be uneven. We therefore may not be an appropriate investment for typical short-term oriented shareholders. We fit best with investors who think like we do, as partners in a business focused on building long-term shareholder value. Our goal for 1998 was per share earnings of $1.06. We earned $1.20. Our goal for fiscal 2002 remains $2.74. As fellow shareholders, you should know that the Clan MacDermid is having fun, and we remain excited about and focused on building one of the world's greatest industrial companies. Thank you.

A Message from Harold Leever

Sixty years ago I was hired as our first chemist. I've had a lot of fun. Who could have dreamed the future could be so bright. I have decided to retire as Chairman of the Board and accept the title of Chairman Emeritus. I am proud of the way the Clan MacDermid has met the challenges over the years and how they have increased the value of your shares. We had the "guts to fail", to go where others feared, and we triumphed.

To all the many clan members who have touched me over the years, thanks for the ride. To the new generation, I hope you have as much fun as I did. Who knows what is possible, the future is even brighter for you than it was for me 60 years ago.

I'm not saying good-bye as I will remain a Director and will maintain my office in Waterbury. I invite anyone to stop by as I love to see old friends. "Lang mae your lum reek" (Scottish toast, translation; Long may your chimney smoke, or long life)

Disclosure: I am long PAH.

Stocks: PAH