Volume gains, price hikes spur performance: 1995 prospects are almost as strong. (Adhesives & Sealants) (Cover Story) (Industry Overview)

Domestic adhesive and sealant makers can only dream about a replay of 1994, a year that is already shaping up to be a tough act to follow. The $5.6-billion industry, which usually grows faster than GDP, increased revenues by about 5%-6% in 1994, almost twice the historic rate. While all major end markets were vibrant, producers of specialty items such as pressure-sensitive adhesives had an exceptional year and report double-digit volume gains. Meanwhile, demand for solvent-based adhesives continues to decline, albeit modestly, replaced by hot melts and waterborne products.

An added sweetener for most manufacturers was their success in deferring or recovering from customers the bulk of last year's 7%-10% average increase in raw material prices, bolstering profit margins.

"Last year was a substantially above-average year for most. The industry prospered," buoyed by a strong economy, says Stephen Einhorn, president of Einhorn Associates (Milwaukee). "I don't think there will be many years as good as 1994," adds Ken Rittenhouse, marketing manager/adhesives and films for Elf Atochem North America (Philadelphia).

This year's worry, however, is higher interest rates, which probably will crimp sales of new homes, cars, and consumer …