The company has reported full-year nominal revenues increased to $4.2 billion, led by organic annual growth of 7.8%. Organic revenue increased on par with the company’s best performance this decade and included nearly 9% growth in the fourth quarter.

Earnings per share, adjusted for a goodwill impairment charge, business restructuring charges and a divestiture gain grew 29.2% to $1.24 from the year-earlier $0.96. A fourth-quarter $544 million non-cash goodwill impairment charge drove reported results to a net loss of $343 million, or $2.44 per share. This impairment charge eliminates from the company’s balance sheet all goodwill allocated to the Paper Services business during Nalco’s 2003 leveraged buyout.

Adjusted EBITDA increased 3.7% to $732 million from a base of $707 million in the prior year that excluded earnings from a synfuel waste coal agglomeration business that ended in 2007. Adjusted EBITDA is used to determine compliance with the company’s debt covenants. With the synfuel business included, Adjusted EBITDA in 2007 was $730 million.

Free Cash Flow ended the year at $142 million. Among items that held cash generation to this level were a $90 million increase in inventories and an optional $30 million pension contribution following a third-quarter divestiture. In 2007, Free Cash Flow was $201 million.

The year’s organic sales gain of 7.8% was matched only once in the past decade. Currency effects added 1.5% to results for the year, effectively offsetting divestiture and acquisition activity including the loss of the synfuel business to produce nominal sales growth of 7.7%.

Energy Services led organic sales growth, improving 17.5% as the global downstream business grew almost 10% organically while upstream oil field and drilling-related businesses each grew nearly 24%. Direct contribution nominally increased $22 million to $308 million, with direct contribution margins dropping from 22.4% in 2007 to 20.5% on higher product and freight costs.

Industrial and Institutional Services (I&IS) sales grew 5.0% organically, with water-focused business units up in every region. Within I&IS, the Europe, Africa and Middle East (EAME) region increased organic sales 4.7% in 2008. On a nominal basis, direct contribution dollars held nearly flat at $373 million as growth in the business was nearly enough to offset lost synfuel earnings. Margins moved from 21.4% in 2007 to 20.5% in 2008.

Paper Services revenues declined 2.3% organically for the year — with the biggest decline occurring in the fourth quarter. This deterioration in paper market conditions and the current general economic environment led to the write-off of goodwill in this segment. The goodwill impairment has no effect on cash generation. Only Latin American paper revenues grew organically for the year. Nominally, direct contribution dollars declined 23.5% to $93 million, with direct contribution margins falling from 15.7% in 2007 to 12.0% in 2008.

Looking across all businesses, Latin America and North America delivered the most rapid organic revenue increases for the year, up 12.9 and 11.0%, respectively. Asia Pacific organic revenues ended up 6.3% with EAME delivering 1.7% organic growth for the year.

Direct product purchase and freight costs increased by $170 million compared to 2007 levels. Price capture totaled $159 million, leaving an $11 million gap for the year.

Against the top priorities we established when I joined, we delivered strong results in 2008. Energy Services grew sharply. Results in EAME improved meaningfully. Our water businesses grew nicely thanks to improving technology penetration. Our BRIC+ focus delivered better than 20% nominal sales growth in those countries. At $94 million, productivity gains exceeded our target. Even on the price capture front, where we fell short of our goal, we improved results as the year went along, stated Nalco chairman, president and chief executive officer J. Erik Fyrwald.

However, Fyrwald added, the company is not yet operating at peak levels. We still have substantial room to improve. We clearly suffered as customers faced market declines in the pulp and paper markets, and we did not hit our targets on inventory management during 2008, leading to a shortfall in Free Cash Flow from what this business should deliver, he said. The past year was one of the most volatile I have seen in my business career, with economies careening quickly from rapid acceleration to substantial global decline. In this context, I believe we again proved the stability of this business model as we quickly shifted focus to meet changing market conditions.

Fourth Quarter Results:

Nalco’s organic revenue grew 8.7% in the fourth quarter. Nominal sales, however, were flat at $1.03 billion as organic growth was fully offset by a 7.4% negative currency impact and the net effect of divestiture and acquisition activity.

Earnings per share, excluding the impacts of the goodwill impairment and restructuring charges, increased 50% to $0.36 per share from the year-earlier fourth quarter result of $0.24. Impairment charges, along with restructuring expense, created a net loss of $473 million, or $3.45 per share. Adjusted EBITDA increased 3.1% from last year’s synfuel-adjusted base to $198 million.

Free Cash Flow generation of $45 million in the quarter was restrained by higher receivable days outstanding compared to third-quarter levels, reduced accounts payable due to raw material purchase timing, and slow response to inventory control efforts.

Energy Services contributed heavily to fourth-quarter growth, increasing organic sales 23.4% its fastest pace of the year. Direct contribution dollars increased a more modest 9.9% nominally to $86 million due to gross margin pressures and currency impacts.

In I&IS, fourth-quarter sales were up 2.8% organically, all essentially price gains, as the quarter saw an acceleration of plant closings by customers in key global industries, including chemicals and manufacturing. Largely offsetting this pressure was continued double-digit organic growth in the power industry and in primary metals markets. Water treatment sales in primary metals remained strong even as a number of steel and other customers shut facilities during the quarter. Direct contribution margins improved from prior-year results, but dollars generated were lowered to $92 million on discontinued businesses and currency impacts.

Paper Services sales dropped 9.4% organically in the fourth quarter as paper industry production declined sharply in EAME, Asia and North America. On a nominal basis, direct contribution dollars dropped 44.7% to $18 million.

Fourth-quarter economic conditions were among the most challenging I have ever seen. We faced the expected operating challenges and clearly benefited from the diverse and defensive nature of our business portfolio. While generally pleased with most aspects of what we accomplished during the quarter, we clearly have to get better at working capital management — particularly inventory, stated Fyrwald. In January, we put supply chain management directly under the control of our business leaders to ensure that our supply chain and business operations decisions are fully connected. We also combined the Paper and I&IS segments into a new Water and Process Services Division to further drive operating efficiencies. I expect our integrated business management approach to yield results starting in 2009.