5 April 2006 - Global specialty chemicals supplier Cognis achieved net external sales of 3.176 billion euros between January 1 and December 31, 2005, representing a rise of 3.3 percent. Adjusted EBITDA (earnings before net financial result, income taxes, depreciation, amortization and exceptional items) stood at 356 million euros, which was moderately lower than in 2004.

Comments Cognis CEO Dr. Antonio Trius: “Our 2005 performance reflects a mixture of challenging conditions in certain markets – namely textiles, vitamin E and glycerin – and strong personal and home care markets. While higher raw material and energy costs had a negative impact on results, we benefited from our investments in product innovations, capacity and customer relationships in attractive, targeted markets such as phytosterols for functional food applications, performance ingredients for the personal care industry, and products for the pharmaceutical and health industries.”

All Strategic Business Units (SBUs) except Process Chemicals posted sales that exceeded the 2004 figures, with Care Chemicals and Nutrition & Health achieving the most significant rises. Looking at the figures by region, Asia-Pacific (+11.6 percent), Mercosur (+9.7 percent) and Europe (+2.9 percent) all experienced considerable sales growth, while NAFTA (-1.0 percent) reported a fall in sales.

Cognis’ Adjusted EBITDA fell moderately from 362 million to 356 million euros (-1.7 percent), mainly as a result of significant increases in raw material and energy costs. These factors were only partially offset by savings in production and administration costs. This meant that Cognis’ profit margin (Adjusted EBITDA as a percentage of sales) decreased from 11.8 percent to 11.2 percent.

Sales by strategic business unit (SBU)
The company’s largest SBU, Care Chemicals, reported the highest growth among the five Strategic Business Units, with a rise in sales of 9.3 percent to 1.262 billion euros. This was mainly driven by strong fatty alcohols and surfactants markets, product innovations, and stronger relationships with key customers.

With sales up 5.5 percent to 303 million euros, Nutrition & Health also achieved a significant rise in sales. This is largely due to strong sterols sales and growing demand for functional food ingredients. This growth was partially offset by lower sales in the Vitamin E business. To capitalize on the strong growth of the sterols business and the opportunity presented by the potential use of sterol esters in new food applications, a new high-performance esterification plant was commissioned in July at the Illertissen site in Germany. Costing a total of 20 million euros, the new facility represents the greatest single investment Cognis has made since its foundation in 1999.

Functional Products’ total sales amounted to 792 million euros, up 2.6 percent on 2004. This rise is mainly attributable to an increase in sales of synthetic lubricants and mining chemicals, which was driven by 2005’s strong base metal markets, as well as increases in selling prices to recoup increased material and energy costs.

Process Chemicals’ sales fell by 10.4 percent to 359 million euros. This was partially due to the divestment of the PVC stabilizer business, part of the Plastics Technology segment, which took place on July 1, 2004. The challenges faced by the Textile Technology business are another reason for the decrease. On an organic basis, Process Chemicals’ sales decreased by 6.4 percent.

With total sales of 436 million euros, Oleochemicals achieved sales growth of 1.5 percent. This was largely due to growth in fatty acid sales, as glycerin sales continued to decline, partially as a result of prices pressure caused by the ongoing oversupply in the market from biodiesel production. In February 2006, Cognis transferred its global oleochemicals and plastics technology businesses to its existing 50:50 Malaysian joint venture with Golden Hope Plantations Berhad, Cognis Oleochemicals (M) Sdn. Bhd. This makes Cognis Oleochemicals one of the world’s largest oleochemical companies, with total annual revenues (including sales to Cognis) of around 700 million euros and a workforce of around 1,100 employees. Cognis and Golden Hope will continue to hold equal stakes in the new company, which, since Cognis retains operational control, remains fully consolidated in Cognis’ accounts.

Overview of 2005 results

Sales in millions of euros	2004	2005	Change
Cognis Group	3,073	3,176	+3.3%
Care Chemicals	1,155	1,262	+9.3%
Nutrition & Health	287	303	+5.5%
Functional Products	772	792	+2.6%
Process Chemicals	401	359	-10.4%
Oleochemicals	430	436	+1.5%
Earnings in millions of euros (Cognis Group)	2004	2005	Change
Adjusted EBITDA	362	356	-1.7%