Global demand for cellulose acetate fiber was estimated to be approximately 700,000 tons, with approximately 85% comprising cigarette filter tow and the remaining 15% textile filament, according to the Company’s 2003 estimates. While filter tow demand is expected to grow 1% per annum, acetate filament is expected to decline by 4 to 6% per annum.

The acetate products business line produces acetate tow, which is used primarily in filter products. The acetate tow market continues to be characterized by stability and slow growth. The acetate filament business line is a supplier to the textile industry. Demand for acetate filament is dependent on fashion trends and the world economy.

Sales in the acetate filter products industry are principally to the major tobacco companies that account for a majority of worldwide cigarette production.

The Company’s Chemical Products segment produces and supplies acetyl products, including acetic acid, acetate esters, vinyl acetate monomer polyvinyl alcohol and emulsions. The Company is a leading global producer of acetic acid, the world's largest producer of vinyl acetate monomer and the largest North American producer of methanol, the major raw material used for the production of acetic acid. The Company is also the largest polyvinyl alcohol producer in North America. These products are generally used as building blocks for value-added products or in intermediate chemicals used in the paints, coatings, inks, adhesives, films, textiles and building products industries. Other chemicals produced in this segment are organic solvents and intermediates for pharmaceutical, agricultural and chemical products.

The Company’s Technical Polymers Ticona segment develops, produces and supplies a broad portfolio of high performance technical polymers for use in automotive and electronics products and in other consumer and industrial applications, often replacing metal or glass. Together with the Company’s 45%-owned joint venture Polyplastics, the Company’s 50%-owned joint venture Korea Engineering Plastics Company Ltd., and Fortron Industries, the Company’s 50-50 joint venture with Kureha Chemicals Industry of Japan, the Company is a leading participant in the global technical polymers business. The primary products within the Ticona segment are Hostaform/Celcon, the Company’s polyacetal, or POM, offerings, and GUR, an ultra-high molecular weight polyethylene. Hostaform and Celcon are used in a broad range of products including automotive components, electronics and appliances. GUR is used in battery separators, conveyor belts, filtration equipment, coatings and medical devices.

The Company’s Acetate Products segment primarily produces and supplies acetate tow, which is used in the production of filter products and acetate filament, which is used in the apparel and home furnishing industries. The Company’s acetate products are sold into a diverse set of end market applications, including filter products, fashion apparel, linings and home furnishings. The Company is one of the world's leading producers of acetate tow and acetate filament, including production by the Company’s joint ventures in China. The Company’s Acetate Products segment primarily produces and supplies acetate tow, which is used in the production of filter products, and acetate filament, which is used in the apparel and home furnishing industries. The Company is one of the world's leading producers of acetate tow and acetate filament, including production by the Company’s joint ventures in China. In October 2004, the Company announced plans to consolidate the Company’s acetate flake and tow manufacturing by early 2007 and to exit the acetate filament business by mid-2005. This restructuring is being implemented to increase efficiency, reduce over-capacities in certain manufacturing areas, and to focus on products and markets that provide long-term value.

The Performance Products segment operates under the trade name of Nutrinova and produces and sells a high intensity sweetener and food protection ingredients, such as sorbates, for the food, beverage and pharmaceuticals industries

Operating profit declined to $77 million from $197 million in the prior year mainly due to significantly higher insurance recoveries of $102 million associated with the plumbing cases in the 2003 period. Higher raw material and energy costs as well as purchase accounting inventory adjustments of $49 million also contributed to the decrease in operating profit in 2004.

Earnings from continuing operations before tax and minority interests decreased mainly due to lower operating profit and higher interest expense, resulting from fees of $71 million associated with the senior subordinated bridge loan facilities as well as higher debt levels resulting from the Transactions. As of June 30, 2004, net debt rose to $1,684 million from $489 million at December 31, 2003.