President James L. Hambrick told stock analysts yesterday that acquisitions will play a big role in Lubrizols commitment to follow through on a growth strategy that it adopted three years ago. By its own account, the company has earned only a C grade in meeting that goal, but Hambrick said it is working on a number of attractive potential deals.

Our activity is quite high, he said during a presentation at the annual Smith Barney Chemical Conference in New York City. There are presently numerous opportunities that are attractive to us. Our pipeline is the best its been in the last two or three years.

As Hambrick noted during his presentation, Lubrizol announced near the end of 2000 that it had set a goal of doubling its size. That strategy depended on growth through several avenues and Hambrick graded performance of each.

The companys core Fluid Technologies for Transportation segment rated a C, having gained and then lost business during a difficult business environment. Hambrick claimed that Lubrizol was prepared early for GF-4, the next upgrade for passenger car motor oils, and suffered a setback by industrys decision to delay its introduction by one year. He predicted the company will benefit when the new standard becomes commercially available – now scheduled forJuly – and likewise from future upgrades to passenger car and diesel engine oils.

Lubricant quality standards planned for the next decade represent significant hurdles and we like tough standards, he said.

Hambrick said management has been pleased with the growth of Lubrizols Fluid Technologies for Industry segment, which received an A. The company expects it to continue growing, though not at the 9 to 10 percent annual rate of organic growth it has posted in 2002 and 2003.

Hambrick gave a D to the companys efforts to expand existing operations into new areas. As an example, he cited Purinox fuel additives as a money loser.

He gave management a C for its record on acquisitions, noting that the company completed six since the beginning of 2002, including Chemron, Kabo, Brose and Dock Resins. Those operations fit well with Lubrizols existing businesses, Hambrick said, and management did a good job integrating them. But quantity fell far short, he added, noting that the six pickups of this year and last had total annual revenue of $125 million. Lubrizol needed approximately $1 billion in acquisitions to meet the growth goal it set in 2000, he said.

To move more quickly toward its goal, Lubrizol is becoming more aggressive in its acquisition activities. Hambrick said the company is doing more scouting, has begun to consider deals with pieces that it would subsequently sell off and is considering bigger price tags.

We are stepping up our acquisitions in higher growth areas, Hambrick said. Does that mean were willing to pay higher multiples? The answer is yes because they offer more opportunity for growth.

At the same time, he added, the environment for acquisitions has improved, with more properties available and more reasonable valuations.