22 August 2007 - In the first six months of 2007, global specialty chemicals company Cognis increased its net external sales by 6.2 percent to 1,821 million euros on a comparable currency basis. Currency effects reduced the sales growth to 3.5 percent, reaching 1,775 million euros. The operating result (Adjusted EBITDA) of 214 million euros could match the high level of the first half year in 2006 in spite of a massive rise in raw material costs, especially for natural oils and fats. Together with a successful cost management, the necessary selling price increases could be achieved in many areas, but will show effect with the usual time delay. Return on sales (Adjusted EBITDA as a percentage of sales) stood at 12 percent. Earnings before interest and taxes (EBIT) fell slightly down 1.4 percent to 119 million euros. Excluding exceptional items, Cognis recorded a net profit of 39 million euros. It was distorted by one-time effects as a result of the company's refinancing transactions in May and June. The early redemption of the existing bonds and loans lead to a depreciation of connected financing fees, resulting in a net loss of 17 million euros.
“We are pleased with the first half-year. Our Care Chemicals, Nutrition & Health and Functional Products strategic business units, with their focus on innovation-driven growth markets, have made particularly important contributions to our encouraging figures,” says Cognis CEO Antonio Trius. “Furthermore, we were able to conduct a successful refinancing. In doing so, we achieved a considerable reduction in financing costs of about 74 million euros on average per year, and improved our liquidity position going forward.”
Outlook
“We expect to achieve further growth in sales and earnings in the second half of the year,” says Antonio Trius. “The good results achieved in July show that we could partly make up for the higher raw material costs and give us particular reason to look ahead to the rest of 2007 with confidence.”
Sales by strategic business unit (SBU)
Exluding currency effects, sales went up 6.9 percent to 728 million euros at Care Chemicals, Cognis’ largest SBU (including currency effects: up 5.2 percent to 717 million euros). The main drivers of this were the continuing increase in sales of innovative specialties, and strong sales of primary surfactants and silicates. Fatty alcohol sales remained under pressure, due to the intense competition in this market. Selling price increases to counter higher raw material cost could be achieved successfully.
Nutrition & Health recorded sales of 174 million euros, a 6.2 percent rise on the first half year of 2006 on a comparable currency basis (up 4.1 percent to 171 million euros). The growth was largely attributable to products for the pharmaceutical and healthcare industries, and the carotenoids (antioxidants) and vitamin E businesses. Sales of branded ingredients like sterol esters and CLA have slightly slowed down.
Functional Products achieved growth of 7.8 percent, with total sales of 465 million euros excluding currency effects (up 3.9 percent to 448 million euros). This result shows the benefits of previous restructuring activities and a successful sales strategy. Adding to this performance were stronger global demand for agrochemical solutions and in the mining technology sector. The sales of the polymers, coatings, and inks business were affected by a slowdown in the US housing and construction market.
Process Chemicals posted sales of 135 million euros adjusted for currency effects, a plus of 3.2 percent compared to the first half of 2006 (130 million euros, same level as 2006). The textiles segment continued to benefit from strong demand for our products in the Asia/Pacific region. The result shows that the business could successfully hold ground against the intense competitive pressures in the markets. Since July 1, the former Process Chemicals SBU has been trading independently as Pulcra Chemicals, a wholly owned subsidiary of Cognis.
Cognis Oleochemicals, the 50:50 joint venture between Cognis and Golden Hope, reported an increase in sales of 9.5 percent to 308 million euros on a comparable currency basis (up 5.9 percent to 298 million euros). Sales of fatty acids/glycerin in Europe and Asia, and of plastics and ozone products in Europe grew particularly strongly.
Overview of results for the first half year of 2007
Sales by strategic business unit (incl. joint venture)
1) The 2006 figures have been changed to reflect the new transfer pricing agreements between inter-company affiliates in place since January 1, 2007. Except where explicitly stated, the impact of the restatement is not material. As such, these figures are the same as those published last year.
2) Since July 1, the Process Chemicals SBU has been trading independently as Pulcra Chemicals, a wholly owned subsidiary of Cognis.
About Cognis
Cognis is a worldwide supplier of innovative specialty chemicals and nutritional ingredients, with a particular focus on the areas of wellness and sustainability. The company employs about 8,000 people, and it operates production sites and service centers in 30 countries. Cognis has dedicated its activities to a high level of sustainability and delivers natural source raw materials and ingredients for food, nutrition and healthcare markets, and the cosmetics, detergents and cleaners industries. Another main focus is on products for a number of other industries, such as coatings and inks, lubricants, textiles, as well as agriculture and mining. The subsidiary Pulcra Chemicals offers specialized chemical products and process expertise to customers in the fiber, textile, and leather industries. Cognis also holds a 50-percent stake in the joint venture Cognis Oleochemicals, one of the world’s leading manufacturers of oleochemicals. Cognis is owned by private equity funds advised by Permira, GS Capital Partners, and SV Life Sciences. In 2006, Cognis recorded sales of 3.37 billion euros and an Adjusted EBITDA (operating result) of 394 million euros.