Cognis in 2008: stable operating result

03-26-2009: In 2008 Cognis increased its net external sales by 5.5 percent to 3.001 billion euros. On an organic basis (excluding foreign currency effects and the effects of acquisitions and divestments), sales grew by 9.2 percent.

The operating result (Adjusted EBITDA) slightly fell by 2.6 percent to 351 million euros. This was due to higher raw material and energy costs, as well as unfavorable exchange rates and a decline in volumes which started in the fourth quarter. On an organic basis, the operating result was almost at the same level as 2007 (down by 0.3 percent). Cognis was able to offset its increased raw material costs to a large extent by raising selling prices and by continuing to optimize its cost structures and improve efficiency in all areas.

Return on sales (Adjusted EBITDA as a percentage of sales) was at 11.7 percent. Due to lower restructuring charges, earnings before interest and taxes (EBIT) increased by 5 million euros to 209 million euros. Earnings before tax and special items decreased by 55 million euros to -3 million euros due to non-cash effective revaluation of interest derivatives and US dollar debts. Net loss including special items stood at 63 million euros, representing an improvement of 57 million euros compared to 2007. The net loss of 2007 had been influenced by refinancing costs and the German tax reform. Overall, Cognis’ cash position increased substantially to 226 million euros, mainly due to cash proceeds from the divestments of Cognis’ 50-percent-stake in the Cognis Oleochemicals joint venture, and the sale of its former wholly owned subsidiary Pulcra Chemicals. The company additionally has a revolving credit facility of which 221 million euros were undrawn. Cognis also took advantage of the current conditions in the capital markets. So far, Cognis bought back PIK loans amounting to a face value of 112 million euros in open market transactions, resulting in an improvement of Cognis’ financing costs, net debt and equity.

“The benefits of our wellness and sustainability-driven growth strategy, our improved efficiency and the focus on our core business areas which target less cyclical growth markets are clearly visible and will support our development in 2009,” says Trius, Cognis CEO. “It is difficult to predict what will happen for the rest of the year. One thing that is certain, however, is that Cognis is constantly implementing optimization measures to ensure that it is well prepared for the challenges that lie ahead. To counteract the ongoing weak demand in some of our markets, we recently expanded our cost optimization measures targeting total savings of 70 million euros in 2009. Additionally we expect positive effects of lower energy and transportation prices. We will take the chance to strengthen our position in our key markets during these times of economic uncertainties, by leveraging our customer orientation to develop innovative products which help our customers to gain genuine advantages.”