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TWST: Have any of these companies been able to pass along higher raw material costs?

Mr. Roberts: We’ve had quite a bit of price increase across the entire sector. The closer you are to the energy feed stocks, the faster the prices go up. So basic commodities like ethylene and polyethylene are near their peak prices. Although many of the derivative products such as adhesives and downstream plastic products have also been going up sharply, they may not be quite at peak levels, but I believe they’re starting to get close. Unfortunately, because energy costs are so high, margins are still not very far off of trough levels in spite of peak pricing.

TWST: Does the picture improve in the second half of the year which is when many people are hoping that the economy is going to improve?

Mr. Roberts: I think that if the economy does improve, and if energy prices don’t get any higher than what we’ve seen over the past several months, the answer has to be yes. The companies will have up volume in the second half of 2001 if the economy even just stabilizes, never mind actually recovers. And energy prices, hopefully, will be anniversaried by then, so that the margins of the companies should be slightly up as well. So I would think that we could have some very strong positive comparisons across many of the companies in the second half of this year. It’s hard to imagine things being substantially worse than what we are seeing right now. For many of the chemical products, the end markets that they serve actually look recessionary, even though the overall economy isn’t in a recession yet.

TWST: Let’s just go back to Eastman and FMC if we may. What specific guidance are you giving investors with regard to these two?

Mr. Roberts: Eastman (NYSE:EMN) has about 5 billion in sales. At 3 billion, the closest peer company would be Rohm and Haas (NYSE:ROH). FMC Corp. (NYSE:FMC) has announced and already filed the registration for a 20% IPO of their equipment business in either April or May. And, before the end of the year, they plan to distribute the remaining 80% tax-free to their shareholders. FMC’s equipment business is primarily in the oilfield area. Those stocks trade at much higher multiples than the chemical stocks. FMC today has an equity market value of about 2.5 billion and about 1 billion of debt. They’ve publicly announced that the valuation for their equipment business will be about 1.8 billion, or about half of the total 3.5 billion enterprise value for FMC. If you subtract off the value of the equipment business from the parent company, FMC’s chemical business today is being valued at about 6.5 times 2002 earnings, while the peer companies are primarily trading at 10 times and higher. FMC’s chemical business is about 50% specialty and 50% commodity. Fifty percent of the specialty business is pesticides, insecticides and herbicides. The rest of the specialties are split between lithium, which is used in batteries and pharmaceuticals, and other food and pharmaceutical ingredients. On the commodity side of FMC, the largest chemical would be soda ash, an inorganic mineral that they mine in Wyoming. It’s not particularly petroleum-intensive, yet it’s somewhat cyclical, because it goes into economic end-markets such as glass and general neutralizing chemicals. Its margins don’t cycle nearly as much as the petrochemical products, because it’s not energy-intensive. So we think that FMC on a piece-wise valuation is probably worth closer to 100 per share, while 80 is where the stock is trading today.