Cognis' H1 Results for 2009: Sales Volumes down by 15.8 Percent

Aug. 26, 2009 - Cognis has released the first half-year results for 2009: lower sales volumes but stable operating result due to successful cost management, cash position further improved.

• Sales volumes down by 15.8 percent on H1 2008 (highest decrease in Europe)
• Compared to Q1 2009, sales volumes increased by 3.8 percent in Q2
• Net external sales down 15.1 percent to 1,302 million euros (down
  15.6 percent on an organic basis)
• Lower sales prices compensated by lower raw material prices and successful cost optimization
• Operating result (Adjusted EBITDA) of 168 million euros – down only
  8.3 million euros or 4.7 percent on H1 2008 (compared to Q1 2009, operating result improved by 22.1 million euros or 30 percent)
• Return on sales of 12.9 percent (up 1.4 percentage points)
• Operating cash flow up by 157 million euros to 229 million euros
• Cash position increased to 256 million euros
• Net debt of Cognis Group, including Cognis Holding GmbH, reduced by
  296 million euros to 2,026 million euros compared to June 30, 2008

In the first six months of 2009, Cognis operated in an extremely difficult market environment and sales volumes declined by 15.8 percent compared with the same period in 2008. Europe and especially Germany and France suffered most from these volume declines. The total net external sales figure of 1,302 million euros represented a fall of 15.1 percent compared to the first half of 2008. On an organic basis (excluding foreign currency effects and the effects of acquisitions and divestments), sales fell by 15.6 percent. However, Cognis experienced a stabilization of its worldwide businesses in the second quarter. Global sales volumes rose by 3.8 percent in the second quarter compared to the first quarter of 2009. This was mainly driven by a pick up in growth in Asia-Pacific as well as Central and South America, whereas the market environment in Europe remained difficult.

Cognis’ operating result (Adjusted EBITDA) fell by 4.7 percent to 168 million euros compared to the same period in 2008. The second-quarter operating result of 95 million euros was up 22.1 million euros compared to the first-quarter of 73 million euros. The negative impact of decreased volumes and continuous price pressure was mainly compensated by lower raw material cost and the results of Cognis’ global cost optimization program, contributing already 47 million euros in the first half of 2009.

Return on sales (Adjusted EBITDA as a percentage of sales) was 12.9 percent for the first half year of 2009. Earnings before interest and taxes (EBIT) decreased by
25 million euros to 78 million euros, mainly impacted by lower operating results and higher exceptional items, mainly restructuring charges, which summed up to 26 million euros. This resulted in a net loss including exceptional items of 20 million euros for the period (net profit without exceptional items was 4 million euros). Operating cash flow in the period improved significantly and was up by 157 million euros to 229 million euros, primarily due to a positive change in working capital. Overall, Cognis’ cash position increased substantially to 256 million euros.

Cognis took advantage of the recent conditions in capital markets to further buy back PIK loans. PIK loans with a face value of 198 million euros have been purchased in a series of open-market transactions until June 30, 2009. As a result the Cognis Group, including Cognis Holding GmbH, was able to improve its net debt, which was cut in total by 296 million euros to 2,026 million euros compared to June 30, 2008.

Cognis CEO Antonio Trius comments: “We are now benefiting from our comprehensive cost reduction program and in the light of the challenging economic environment this year, we are satisfied with what we have achieved so far. Both sales volumes and operating results are moving in an upward direction compared to the first quarter of 2009, and our wellness and sustainability-based strategy remains a strong driver of growth for our business.”

Outlook for 2009
“We had a good start into the third quarter, but the trading environment remains highly uncertain and volatile,” says Trius. “We will continue our efforts to make further cost savings and maintain our healthy cash position.”

Sales by strategic business unit
Care Chemicals recorded sales of 729 million euros, a decrease of 15.3 percent
(15.5 percent on an organic basis). This was due to lower sales volumes across all business segments, especially those offering industrial applications. However, the personal and home care market segments proved to be more resilient, with strong growth reported in Asia-Pacific and Central and South America. Compared to the first quarter of 2009, sales volumes of Care Chemicals increased by 3 percent in the second quarter.

Nutrition & Health saw its sales decrease by 8.0 percent (7.7 percent on an organic basis) to 167 million euros. Especially sales of plant sterols and the Pharmaceuticals & Healthcare business as a whole, proved to be robust. Overall, Nutrition & Health’s sales volumes remained stable in the second quarter of 2009, indicating the continuation of the gradual recovery already observed in the first quarter.

Functional Products achieved sales of 398 million euros, representing a fall of
17.1 percent (18.6 percent on an organic basis). Businesses related to housing, construction and automotive sectors such as Coatings & Inks and Synlubes were particularly affected by the ongoing weakness of demand. Sales of agrochemicals and mining technology solutions were also lower. Nevertheless, in the second quarter of 2009, sales volumes increased by about 5 percent compared to the first quarter.
 

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 5,600 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, as well as agriculture and mining.
Cognis is owned by private equity funds advised by Permira, GS Capital Partners, and SV Life Sciences. In 2008, Cognis recorded sales of about 3 billion euros and an Adjusted EBITDA (operating result) of 351 million euros.

Cautionary Statement
The statements we make in this release may include statements about our plans and future prospects for the company and the industry that are forward-looking statements. Our actual performance may differ materially from performance suggested by those statements. We urge you to review the cautionary statements in our financial statements for information on factors that could cause those differences.