Cognis half year results: strong sales and earnings growth
In the six months to June 30, 2004, global specialty chemicals supplier Cognis increased its net external sales by 3.0 percent to 1,559 million euros, despite negative foreign currency effects. Adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization and exceptional items) was 197 million euros in the first half of 2004, 13.2 percent up compared to 2003. Comments Dr. Antonio Trius, Chief Executive Officer of Cognis: "Cognis achieved strong sales and Adjusted EBITDA growth in the first half of 2004. While supported by an improved trading environment in America and Asia, the results also show that our restructuring initiatives are bearing fruit."
While the sales of the Nutrition & Health, Functional Products and Care Chemicals Strategic Business Units went up compared to the first half year of 2003, the Process Chemicals and Oleochemicals divisions' sales decreased slightly in 2004. The organic growth of sales (excluding currency movements, acquisitions and divestments) was 5.8 percent in the first six months of 2004.
Compared to the previous year EBITDA decreased 10.2 percent to 167 million euros in the first half year of 2004. This was due to two main factors: Firstly, the half year result of 2003 includes a gain of 24 million euros realized on the disposal of the fragrances business. Secondly, it reflects higher restructuring expenses from the implementation of restructuring initiatives in the second quarter 2004. Moreover, the negative effect of both translation and transaction currency effects accounted for approximately 6 million euros. With the Adjusted EBITDA of 197 million euros, Cognis' profit margin (Adjusted EBITDA as percent of sales) rose from 11.5 percent to 12.6 percent.
Sales by strategic business unit (SBU)
As part of the restructuring initiatives, on April 1, 2004, the Primary Surfactants and Fatty Alcohol businesses moved from the Oleochemicals SBU to the Care Chemicals SBU. For the purposes of comparison, the 2003 figures for these SBUs have been restated to reflect the new organizational structure.
Care Chemicals accounted for 577 million euros or 37 percent of the group's sales. The SBU increased its sales in the first six months by 3.0 percent. The increase was due to higher sales achieved primarily by the Skin Care and Fatty Alcohol businesses, though this improvement was partially offset by higher raw material costs.
Encouraging sales of CLA (conjugated linoleic acids) in the dietary supplements market and the pharmaceutical and healthcare market were largely responsible for the Nutrition & Health SBU registering sales of 148 million euros in the first two quarters of 2004, up 5.7 percent on the corresponding period in 2003.
Functional Products achieved strong sales growth in the first two quarters, with sales up 12.7 percent at 392 million euros. This was mainly due to higher sales volumes in the AgroSolutions and the Synlubes businesses. About 50 percent of the sales increase from the first half of 2003 to the first half of 2004 can be attributed to the acquisition of Laporte Performance Chemicals UK Limited on April 1, 2003.
Sales of Process Chemicals were slightly (1.8 percent) down on the same period last year, totaling 217 million euros in the first half year of 2004. The positive trend in Textile Technology was offset by lower sales in Leather Technology. On July 1, 2004, the SBU sold its PVC Stabilizers business, which contributed total sales of 44 million euros in 2003.
The Oleochemicals SBU's sales in the first six months 2004 fell by 2.8 percent to 211 million euros. The Fatty Acids area of the Oleochemicals business actually increased its sales, with prices remaining stable and volumes increasing. Silicates too was able to maintain its sales at the previous year's level. A decrease in sales from the Oilfield business, due to continuing low levels of offshore drilling activity, combined with a fall in the price of glycerin, resulted in a fall in the SBU's overall sales. However, in the second quarter Oleochemicals sales increased by 1.2 percent.
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