Ciba Specialty Chemicals posts higher sales and profits
Ciba Specialty Chemicalsannounced that results in the first half of 2004 in Swiss francs were higher than the comparable 2003 period in sales, gross profit, operating income, EBITDA and net income. Sales (+1 percent) totaled CHF 3.405 billion. Operating income and EBITDA both rose by 1 percent (respectively, to CHF 330 million, or 9.7 percent of sales, and to CHF 513 million, 15.1 percent). Net income was 4 percent higher (CHF 201 million, or 5.9 percent of sales) and earnings per share were 8 percent higher, at CHF 3.03.
While economic conditions improved, the upswing was volatile and only visible in selected markets, with sizeable swings noted between individual months.
Sales in Swiss francs rose by 4 percent in Asia-Pacific, primarily on strength in China and Japan, and by 1 percent in Europe. In the Americas, the further weakening of the United States dollar against the Swiss franc masked an otherwise solid performance in the U.S. (+3 percent in local currencies) and a continuing strong performance in South America.
The segments Plastic Additives (+3 percent), Coating Effects (+4 percent) and Water & Paper Treatment (+2 percent) grew above average, while Textile Effects (-5 percent) still faces challenging market conditions and the comparably smaller Home & Personal Care Segment (-7 percent) saw good growth in new products but shrinking sales in hygiene effects and whiteners.
Product margins were slightly better than during the first half of 2003. Selling, general and administrative expenses were kept well under control. Spending on research and development, at CHF 140 million, matched last year's high level.
Net current operating assets were sharply lower than year-ago levels, with inventories, receivables and payables, as a percentage of sales, dropping from 30.4 percent to 26.8 percent.
Roughly CHF 1.1 billion in cash was spent during the first half, with the largest outlays coming for the cash portion of the Raisio Chemicals acquisition (CHF 655 million), the share capital reduction (CHF 197 million) and the share buy-back program (CHF 163 million). Correspondingly, net debt increased by close to CHF 1.1 billion, as debt levels remained steady. Compared to the first half of 2003, however, net debt rose by only CHF 602 million due to lower net current operating assets and lower total debt. CHF 1.3 billion in cash remains on the balance sheet. Free cash flow, which is traditionally lower in the first half, was minus CHF 121 million.
To continuously improve the Company's portfolio, Ciba Specialty Chemicals will establish a small group to oversee strategic development and portfolio management. This group will be under the leadership of Tim Schlange. Schlange, currently Head of the Home & Personal Care Segment, will become Ciba's Chief Strategy Officer, reporting directly to the Chief Executive Officer, and will leave the Executive Committee.
To further streamline its Group structure, Ciba Specialty Chemicals will integrate the Home & Personal Care Segment into two other existing segments, creating a Group with four strong segments. This saves the cost of a support structure for a segment, which lacked critical mass and had limited opportunities for external growth. By transferring specialty effects products to Plastic Additives, and whiteners and hygiene effects to Water & Paper Treatment, the businesses can also benefit from existing technology and production synergies with the larger segments, while enhancing their future development prospects within Ciba.
For 2004, assuming that business conditions remain at least at the levels experienced during the first half of this year, that currency levels do not worsen and excluding the effects of acquisitions, the Company expects sales in local currencies, the EBITDA margin and net income in Swiss francs to exceed last year's levels. The Company expects free cash flow for the full year to be close to the lower end of its target range of between CHF 400 million and CHF 500 million. Should a more sustainable economic recovery begin to take shape during the second half of the year, including in Europe, the Company would expect a rapid and substantial improvement in net income and margins.
Other news from the department business & finance
Get the chemical industry in your inbox
From now on, don't miss a thing: Our newsletter for the chemical industry, analytics, lab technology and process engineering brings you up to date every Tuesday and Thursday. The latest industry news, product highlights and innovations - compact and easy to understand in your inbox. Researched by us so you don't have to.
