Aug 27 - Cognis' half-year results 2008 show: sales up significantly, operating result affected by raw material and energy cost increases as well as unfavorable exchange rates, agreements for sale of Pulcra and Oleochemicals signed.
* Net sales up 7.0 percent to 1.533 billion euros (up 12.0 percent on an organic basis)
* Rise in raw material, energy, and transportation costs as well as unfavorable exchange rates partly compensated by optimized cost structures and sale price increases
* Higher sales across all three core business areas – Care Chemicals, Nutrition & Health and Functional Products
* Operating result (Adjusted EBITDA) decreased by 5.1 percent to 176 million euros (currency adjusted down 2.4 percent on an organic basis)
* Return on sales of 11.5 percent
* Earnings before interest and taxes (EBIT) down 5 million euros to 103 million euros
* Net profit of 11 million euros, including 6 million euros of discontinued operations
* Sales of Pulcra Chemicals subsidiary and 50-percent stake in Cognis Oleochemicals joint venture successfully agreed in July
In July, Cognis announced the sale of its 50-percent stake in the Cognis Oleochemicals joint venture and its wholly owned subsidiary Pulcra Chemicals. These transactions, which are expected to be completed in the fourth quarter of 2008, reflect the company’s strategy of concentrating on its three core businesses.
With the signing of these agreements, Cognis reports its businesses according to IFRS 5, separating the reporting into continuing and discontinued operations. The 2007 figures have been changed accordingly.
In the first six months of 2008, global specialty chemicals supplier Cognis increased the net sales of its core businesses by 7.0 percent to 1.533 billion euros compared with the same period in 2007. On an organic basis, sales grew by 12.0 percent. All three strategic business units that focus on the innovation-driven wellness and sustainability markets – Care Chemicals, Nutrition & Health and Functional Products – contributed to the sales growth. The company also benefited from various initiatives to optimize its cost structures and further improve its efficiency, and was able to partially compensate its increased raw material costs by increasing its prices.
The operating result of the core businesses (Adjusted EBITDA) was at 176 million euros (down 5.1 percent) due to a massive rise in raw material, transportation, and energy costs as well as unfavorable exchange rates. On an organic basis, the operating result was down 2.4 percent (excluding foreign currency effects and the sale of Functional Products’ G-Cure business).
Return on sales (Adjusted EBITDA as a percentage of sales) meanwhile stood at 11.5 percent. Earnings before interest and taxes (EBIT) of core businesses were down 5 million euros to 103 million euros due to the increase in operating costs mentioned above. Net profit before exceptional items (including discontinued operations) decreased by 20 million euros to 19 million due to tax effects. However, net profit including exceptional items was 28 million euros above last year which was affected by one-time effects as a result of the company’s refinancing transactions.
Comments Cognis CEO Antonio Trius: “In spite of the tough general market conditions, all our core business areas strengthened their position and recorded increased sales. Our successful efforts to optimize our processing and manufacturing costs, and more especially the sale of our Pulcra and Oleochemicals businesses, represent major steps forward for Cognis in terms of its strategic direction and prospects for further profitable growth.”
Outlook
“Cognis continues to improve its efficiency, and sees the necessity to further increase its prices in the light of high raw material costs and the weak US dollar,” says Antonio Trius. “Concentrating on highly innovative, natural-based solutions for markets driven by the global wellness and sustainability trends will help us to add further value to our company in 2008.”
Sales by core business – continuing operations
Care Chemicals recorded strong sales growth of 10.2 percent to 860 million euros (organic sales growth of 14.0 percent), primarily driven by higher sales of the specialty and innovative products in the Performance Ingredients business as well as the good performance of the Care Surfactants and Alcohols business segment, reflecting mainly higher selling prices due to increased costs of raw materials.
Nutrition & Health achieved total sales of 182 million euros, a 6.0 percent rise (organic sales growth of 8.6 percent). This was largely attributable to the growth of major product lines for the food ingredients business segment and the Vitamin E business.
Functional Products saw it sales rise by 3.3 percent to 480 million euros (organic sales growth of 11.2 percent). The result reflects good market conditions and strong demand for environmental sound agricultural products as well as for synthetic lubricants. However, sales growth in North America was mitigated by weaker housing and automotive markets as well as negative influences of the US dollar.
