Cognis Earnings Adversely Affected by Price Rises

29/11/07 In the first nine months of 2007, global specialty chemicals supplier Cognis increased its net external sales by 3.9 percent to 2.655 billion euros. Organic sales growth (growth excluding foreign currency effects and the effects of acquisitions and divestments) reached about 6 percent to 2.704 billion euros. The company’s operating result (Adjusted EBITDA) rose by 2.5 percent or 7 million to 311 million euros, representing a return on sales (Adjusted EBITDA as a percentage of sales) of 11.7 percent. Earnings before Interest and Taxes (EBIT) grew by 2.3 percent to 167 million euros.

Cognis’ earnings were adversely affected by massive rises in the price of natural oils and milk derivatives, petrochemical raw materials, as well as unfavorable currency exchange rates. Despite these factors and excluding exceptional items, Cognis recorded a net profit of 21 million euros. However, this result is lowered by one-time effects as a result of the company’s refinancing transactions in May and June: the early redemption of the existing bonds and loans led to a depreciation of related financing fees. The result was also impacted by a revaluation of deferred tax assets and liabilities due to a tax reform in Germany enacted in July 2007, so that the company recorded a net loss of 82 million euros.

“We are satisfied with the way the business has developed over the first nine months of the year, as Cognis has achieved growth in sales and earnings across all its strategic business units,” says CEO Antonio Trius. “We are currently confronted with a number of challenging factors simultaneously, but we have been able to counteract the effect of these by improving our position in our key markets driven by the wellness and sustainability trends, by successful cost management, and by partially offsetting the increases in raw material costs.”

“We expect sales and earnings to keep increasing, in spite of the tough general market conditions,” says Trius. “Cognis’ prospects for the rest of the year are good, as we are continuing to improve our efficiency and cost structures.”

Sales at Nutrition & Health went up by 4.4 percent to 251 million euros (organic sales growth: up 2.9 percent to 248 million euros). The result was largely attributable to sales of branded ingredients while products for the pharmaceutical, healthcare, and functional foods industries also performed well.