Cognis Profits Soar in Q2

Nutrition & Health achieved sales of 178 million euros, a 6.3 percent rise compared to the first half of 2009 (up 3.1 percent on an organic basis). The business unit benefited from higher demand in all market segments.

Aug 26 2010 --- In the second quarter of 2010, global specialty chemicals supplier Cognis continued its excellent performance from the first quarter, and achieved the best half-year results in the company’s history. Sales rose by 16.3 percent to 1,514 million euros, due to a steady improvement in demand. Sales volumes increased by 12.6 percent, reaching the level of the first half of 2008. All regions contributed to this positive development, with Asia-Pacific showing the most dynamic growth rates.

Cognis is currently owned by private equity funds advised by Permira, GS Capital Partners, and SV Life Sciences. At the end of June it emerged that BASF SE has reached an agreement to acquire the specialty chemicals company Cognis for an equity purchase price of €700 million.

Cognis achieved an operating result (Adjusted EBITDA) of 281 million euros in the first half of 2010. This represents an increase of 113 million euros (67.5 percent) on the previous year. Return on sales (Adjusted EBITDA as a percentage of sales) reached 18.5 percent. These excellent figures were largely due to higher sales volumes, a further shift in the product portfolio towards high-value specialties and better capacity utilization. The company’s ability to keep operating costs stable also played an important role, as the cost management activities initiated in 2008 and 2009 continued to pay off. In addition, recent foreign exchange movements had a positive effect on the operating result.

Earnings before interest and taxes (EBIT) increased by 148 million euros to 226 million euros, resulting in a return on sales of 14.9 percent. Net profit for the period also improved by 129 million euros due to this strong operating performance and stood at 109 million euros, compared to a net loss of 20 million euros in the first six months of 2009.

The company generated a strong operating cash flow of 119 million euros, although investment in working capital amounted to 129 million euros due to the substantially higher level of commercial activity in the first six months 2010. Overall, Cognis’ cash position improved to 334 million euros in the first half of 2010.

The net debt of the Cognis Group (including Cognis Holding GmbH) slightly increased to 1,930 million euros at the end of Q2, due to an increase in the euro value of debts denominated in US dollars as a result of exchange rate fluctuations. However, the significantly improved operating result meant that the leverage ratio (ratio of net debt to Adjusted EBITDA) for the whole group including Cognis Holding GmbH fell from 5.1 in December 2009 to 4.0.

Comments Cognis CEO Antonio Trius: “The development we are experiencing indicates not just a recovery, but real growth in consumer and industrial markets. We were able to take full advantage of this growth due to our strategy of offering innovative products that are aligned with the wellness and sustainability trends. We strengthened our market position, and maintained our margins despite higher raw material costs. The excellent performance was again largely driven by our improved product mix, along with higher sales volumes, higher capacity utilization and stable operating costs.”

“Given the excellent performance in the first half of 2010, followed by a very strong start into the third quarter, we expect to achieve a record full-year result. However, the economic situation remains highly uncertain and trading conditions are difficult to predict. We expect that markets will remain volatile, and that the recovery will continue at a more moderate pace in the second half of 2010,” Trius added.

Care Chemicals saw its sales increase by 16.0 percent to 845 million euros (up 12.4 percent on an organic basis). This was mainly driven by higher sales in the home and personal care markets, with demand increasing in nearly all regions and across the entire product portfolio. Business segments with industrial applications experienced a strong recovery. Care Chemicals’ Adjusted EBITDA rose by 74.8 percent to 163 million euros, due to the combination of increased volumes and improved capacity utilization.

Nutrition & Health achieved sales of 178 million euros, a 6.3 percent rise compared to the first half of 2009 (up 3.1 percent on an organic basis). The business unit benefited from higher demand in all market segments, with sales in Asia-Pacific in particular significantly above last year’s levels. Adjusted EBITDA increased by 30.8 percent to 38 million euros, reflecting both higher sales volumes and improved efficiency.

Functional Products reported strong sales growth of 21.4 percent to 483 million euros (up 17.9 percent on an organic basis). This was driven by strong demand in all market segments, including automotive, housing and mechanical engineering. Adjusted EBITDA was up by 83.9 percent to 82 million euros, driven by increased sales, a good product mix and better capacity utilization.