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GRACE REPORTS THIRD QUARTER EPS OF $0.51
UP 16% FROM CONTINUING OPERATIONS
SALES UP 6% FOR THE QUARTER

COLUMBIA, Maryland, October 23, 2000 -- W. R. Grace & Co. (NYSE: GRA) today reported 2000 third quarter income from continuing operations of $34.1 million, or $0.51 per diluted share (EPS), compared to $32.8 million or $0.44 in the third quarter of 1999 - a 15.9% increase in EPS. Net income in the third quarter was also $34.1 million compared to $42.0 million in the prior year third quarter. Net income in 1999 includes a $9.2 million after-tax gain from discontinued operations.

Sales for the quarter totaled $394.7 million compared to $372.2 million in the prior year quarter, a 6.0% increase. Excluding currency translation impacts, the sales increase was 9.7%. Pretax income from core operations was $53.0 million compared to $48.9 million in the third quarter of 1999, an 8.4% increase. The quarterly operating margin on core operations was 13.4%, up slightly from 1999.

"We are pleased with our third quarter results," said Grace Chairman, President and Chief Executive Officer Paul J. Norris. "Our revenue improvement was strong due to the success of our growth initiatives. We maintained consistent margins with last year despite the negative impacts from the higher cost of petroleum-based raw materials and natural gas, and weak European currencies."

Year-to-date, Grace reported net sales of $1,144.2 million, a 4.9% increase versus 1999. Excluding currency translation impacts, sales were up 8.3%. Pretax income from core operations for the nine-month period was $151.5 million versus $126.8 million in 1999, a 19.5% increase. The year-to-date operating margin was 13.2%, up 1.6 percentage points from the prior year. Earnings and diluted EPS from continuing operations were $92.9 million and $1.36 compared to $82.0 million and $1.11, respectively, for the first nine months of 1999, an increase of 22.5% on a per share basis. Year-to-date net income was $92.9 million compared to $87.7 million for year-to-date 1999. Net income for 1999 includes a $5.7 million after-tax gain from discontinued operations.


CORE OPERATIONS

Davison Chemicals
Refining Catalysts, Chemical Catalysts and Silica Products
Third quarter sales for the Davison Chemicals segment were $192.6 million, up 8.0% from the prior year. Excluding currency translation impacts, sales were up 12.9%. Operating income of $33.5 million was up 0.9% and operating margin of 17.4% was 1.2 percentage points below the 1999 third quarter. Operating income and margins were negatively impacted by higher natural gas prices and the weak Euro during the quarter. Year-to-date, sales were $567.3 million, up 7.1% from 1999 (excluding currency translation impacts, sales were up 11.9%), with operating income of $104.0 million, up 20.5% versus the year -ago period.

Sales of refining catalysts, which include fluid cracking catalysts (FCC) and additives and hydroprocessing catalysts, were up 6.7% (11.2% excluding currency translation impacts) compared to the 1999 third quarter. Latin American and European sales increased due to hydroprocessing volume gains. Asia Pacific sales were up due to an increase in FCC volumes. Sales of chemical catalysts increased 7.9% over the third quarter of 1999 due to improved sales of Raney¨ nickel catalysts and materials for automotive exhaust catalyst systems. Sales of silica products were up 10.4% (17.1% before currency translation), primarily from the Ludox¨ colloidal silica acquisition as well as strong sales into coatings applications.


Performance Chemicals
Construction Chemicals, Building Materials and Container Products
Third quarter sales for the Performance Chemicals segment were $202.1 million, up 4.3% from the prior year. Excluding currency translation impacts, sales were up 6.5%. Operating income was $30.6 million, down 1.9% compared to the prior year quarter, which included a gain of $1.3 million on the sale of plant assets in the United Kingdom. Operating margin was 15.1%, a 1.0 percentage point decrease from the 1999 third quarter. Excluding the unusual gain in 1999, operating income was up 2.3% and operating margin was down 0.3 percentage points. Quarterly operating income and margins were affected by higher freight and petroleum-based raw material costs. Year-to-date sales were $576.9 million, up 2.8% from 1999, while operating income was $80.8 million, up 3.1% versus the year-ago period, excluding one-time gains of $1.6 million.

Sales of specialty construction chemicals, which include concrete admixtures, cement additives and masonry products, were up 3.7% versus the year-ago quarter, driven by continued penetration of high performance products. Sales of specialty building materials, which include waterproofing and fire protection products, were up 4.0% for the quarter. Sales of fire protection products remained strong, while sales of waterproofing products, largely due to a decline in Europe, were flat. European sales were impacted by weak European currencies and depressed construction activity in the United Kingdom. Sales of container products, which include container sealants, closure systems and coatings, were up 5.3% from the third quarter of 1999 (up 9.9% before the effect of currency translation). The increase relates to the positive impact of the Hampshire Polymers business acquired in July as well as market share gains by specialty coatings products, which offset decreases in can and closure sealants sales.


Other Highlights

Grace repurchased 1,753,600 common shares during the quarter at an average price of $6.96, and has purchased 4.8 million common shares year-to-date. At September 30, 2000 there were approximately 65.4 million shares outstanding.


Expectations for the Years 2000 and 2001

"We continue to target revenue growth of 5-7% and earnings growth of 12-15% for the year 2000," said Norris. "The impacts on margins of higher natural gas prices, petroleum - based raw material costs and the weak Euro are significant; but with the success of Six Sigma we are optimistic about our ability to deliver on our earnings expectations. With respect to our targets for 2001, we are projecting 5-7% growth in revenues and continued double-digit earnings growth. The margin challenges we face today will continue into 2001 and we will be focusing on our productivity initiatives to maintain earnings growth."

Norris further said: "With respect to cash flow, as planned, in 2000 we resolved a number of discrete legacy obligations such as those related to divested businesses and traditional asbestos property damage cases, while continuing to fund ongoing contingencies, primarily asbestos bodily injury claims. As a result, we have funded $205.0 million, net of insurance, for noncore liabilities through September. Based on what we know today, we project that over the rest of this year and into next year we will continue to settle legacy obligations at about the same rate. Likewise, we believe that we have the ability to fund these cash requirements with our current cash position together with cash flow generated from core operations, assets that support noncore obligations and available borrowing facilities."

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Grace is a leading global supplier of catalysts and silica products, specialty construction chemicals and building materials, and container products. With annual sales of approximately $1.5 billion, Grace has over 6,000 employees and operations in nearly 40 countries. For more information, visit Grace's Web site at www.grace.com.

Grace will be hosting an earnings conference call to discuss third quarter results and its asbestos liabilities on October 24, 2000 at 10:00am EDT. The call will be available live on our website at www.grace.com. Anyone interested in listening to a playback recording of the call may do so by calling 1-800-633-8284, reservation #16542098, beginning at 1:00pm on October 24th until 1:00pm on Friday, October 27th or by downloading it at www.grace.com.

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This announcement contains forward-looking statements that involve risks and uncertainties, as well as statements that are preceded by, followed by or include the words "believes," "plans," "intends", "targets", "will," "expects," "anticipates," or similar expressions. For such statements, Grace claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. Factors that could cause actual results to differ from those contained in the forward-looking statements include those factors set forth in Grace's most recent Annual Report on Form 10-K and quarterly reports on Form 10-Q, which have been filed with the SEC.







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