The unfavorable effects of lowervolumes, higher raw material costs, and foreign currency translation more thanoffset the favorable impact of price increases and operating expense controls.Operating margin in the first quarter was 6.0% compared with 10.0% in the prioryear quarter. Corporate Operating CostsCorporate costs related to core operations were $19.5 million in the firstquarter of 2009 compared with $20.8 million in the prior year quarter, adecrease of 6.2%. Increased sales volumes were more than offset by theunfavorable effect of foreign currency translation.Pre-tax operating income of Grace Construction Products for the first quarterwas $12.3 million (excluding restructuring costs) compared with $26.3 millionfor the prior year quarter, a 53.2% decrease. * Europe - sales of products to customers in Eastern and Western Europe, theMiddle East, Africa, and India were $62.9 million in the first quarter, down35.6% from the prior year quarter. Revenues were unfavorably affected bysignificantly lower sales volumes across the region and by foreign currencytranslation. * Asia - sales of products to customers in Asia (excluding India), Australia,and New Zealand were $29.6 million in the first quarter, down 7.5% from theprior year quarter. Sales of thisoperating segment are reported by geographic region as follows:* Americas - sales of products to customers in North, Central, and South Americawere $111.8 million in the first quarter, down 15.6% from the prior yearquarter.

Lower sales volumes of specialty construction chemicals and specialtybuilding materials were partly offset by the favorable impact of 2008 pricingactions across all product lines in the region. Sales in the first quarter were unfavorablyaffected by the global construction slowdown, particularly in Europe and NorthAmerica, and by foreign currency translation, partly offset by higher sellingprices in all major geographic regions and product lines. Operating margin was 8.4% compared with 14.9% in the prior yearquarter. Grace Construction ProductsFirst quarter sales for the Grace Construction Products operating segment, whichincludes specialty chemicals and building materials used in commercial,infrastructure and residential construction, were $204.3 million, down 22.1%from the prior year quarter. The unfavorable effects of selling higher-costinventories produced in the fourth quarter of 2008 and lower sales volume morethan offset the favorable effects of price increases and lower operatingexpenses. First quarter sales inthe product group were unfavorably affected by significantly lower customerdemand and by foreign currency translation, partially offset by higher sellingprices.Pre-tax operating income of Grace Davison for the first quarter was $40.0million (excluding restructuring costs) compared with $74.3 million in the prioryear quarter, a 46.2% decrease. * Specialty Technologies - sales of highly specialized catalysts and materialsused in unique or proprietary applications and markets were $67.1 million in thefirst quarter, down 25.4% from the prior year quarter.

Molybdenum prices were significantly lower in thefirst quarter of 2009 than in the prior year quarter. * Materials Technologies - sales of engineered materials, coatings and sealantsused in numerous industrial, consumer and packaging applications were $134.0million in the first quarter, down 21.3% from the prior year quarter. Sales were unfavorably affected by foreign currencytranslation, and a decrease in the cost of molybdenum passed through tohydroprocessing customers. We improved our operational effectiveness,reduced our workforce, and decreased our working capital by almost $90 million.I`m pleased with the progress we have made." CORE OPERATIONSGrace DavisonFirst quarter sales for the Grace Davison operating segment, which includesspecialty catalysts and materials used in a wide range of industrialapplications, were $477.8 million, down 3.9% from the prior year quarter.

"We planned for a toughoperating environment this quarter and implemented the actions needed to betterposition our business for the future. Grace expects these actions,together with cost reduction and restructuring actions completed in 2008, toproduce over $40 million of annualized cost savings by 2010. Grace remainscautious in its outlook for customer demand in 2009, and is continuing its focuson reducing operating costs and working capital requirements. * Operating free cash flow was positive $76.2 million in the first quartercompared with negative $14.5 million in the prior year quarter. Raw materials and energy costs in the first quarter of2009 were below their fourth quarter 2008 peak, though such costs remained abovetheir first quarter 2008 levels. * Grace recorded a pre-tax charge of $19.1 million in the first quarter relatedto cost reduction and restructuring actions in our manufacturing operations andadministrative functions. These actions are expected to improve earnings andcash flow beginning in the second quarter and are targeted to save approximately$22 million in operating costs in the current year.