Cognis First Quarter Results 2008: Strong Sales Growth of 7.1 Percent

28/05/08 In the first three months of 2008, global specialty chemicals supplier Cognis increased its net external sales to 953 million euros, up 7.1 percent compared with the same period in 2007. On an organic basis, sales grew by 11.3 percent. All three strategic business units – Cognis Care Chemicals, Nutrition & Health and Functional Products – increased sales by focusing on the innovation-driven growth markets of wellness and sustainability.

The operating result (Adjusted EBITDA) was at 109 million euros (down 1.9 percent). This is primarily due to further increases in raw material and energy costs and unfavorable exchange rates. Cognis improved its position in key markets and partially passed on raw material cost increases. On an organic basis, the operating result was up 0.4 percent (excluding foreign currency effects and the divestment of Functional Products’ G-Cure business). Return on sales (Adjusted EBITDA as a percentage of sales) meanwhile stood at 11.4 percent. Due to lower restructuring costs earnings before interest and taxes (EBIT) increased by 6.1 percent to 68 million euros. For the same reason net profit increased to 10 million euros, representing an increase of about 12 percent despite slightly higher income taxes.

“Considering the challenging situation we have been facing, we achieved our expectations. We performed well in the first quarter of 2008, with increased sales across all our core business areas,” comments Cognis CEO Antonio Trius.

Outlook
“As 2008 continues, we expect the market environment to stay challenging,” says Trius. “But we are well prepared: We are confident that further price increases and stringent cost management will support us to remain on track and to achieve our targets.”

Sales by business unit
Care Chemicals saw its sales rise by 9.6 percent to 398 million euros (organic sales growth of 12.3 percent). This can be attributed to higher demand coupled with selling prices that largely reflect increases in raw material prices. Not only innovative and specialty products, but also fatty alcohols and surfactants contributed to this growth.

Nutrition & Health recorded sales of 91 million euros, a 5.8 percent rise (organic sales growth of 7.8 percent). The result was largely due to strong sales for its innovative products in the functional foods and dietary supplements markets.

Functional Products achieved total sales of 229 million euros, an increase of 2.6 percent (organic sales growth of 9.9 percent). The slow-down of the US economy affected certain businesses. Especially the PCI business was affected by the slow-down in the housing and construction sector. Nevertheless, the businesses for synthetic lubricants and agrochemical solutions performed particularly well.

Since July 1, 2007, what was formerly Cognis’ Process Chemicals strategic business unit has been trading under the name of Pulcra Chemicals, a wholly owned subsidiary of the Cognis Group. Its sales fell by 9.6 percent to 56 million euros (organic sales were down 7.3 percent). This decrease is due to lower demand for products from the leather and the textile industries and market conditions were adverse in all regions.

Cognis Oleochemicals, the 50:50 joint venture between Cognis and Sime Darby, recorded sales of 175 million euros, an increase of 16.5 percent (organic sales growth of 21.8 percent). The company saw its revenues grow substantially, partly thanks to a higher selling price for fatty acids/glyercin globally.