15 August 2000 11:49 [Source: ICIS news]
LONDON (CNI)--German specialty chemicals company Degussa-Huls said Tuesday that first half pre-tax profits excluding extraordinary items soared 35% to Euro354m ($320m), aided by a strong rise in volumes, higher prices and changes in exchange rates.
Total pre-tax profits rose 82% to Euro350m because of much lower extraordinary expenses this year. Last year's extraordinary expense of Euro69m included costs relating to the merger of Degussa and Huls. This year's Euro4m expense is the net effect of income from divestments plus expenses mainly related to the planned restructuring of Degussa-Huls' pharmaceutical subsidiary Asta Medica.
Degussa-Huls said it expects a substantial rise in full year sales and earnings, driven by improvements in the specialty products, performance materials and polymers and intermediates segments. However, growth rates for the second half of the year will be lower than for H1 because of the high reference base, it added. Last year the company generated total pre-tax profits of Euro509m on sales, excluding precious metals trading, of Euro10.42bn.
Operating profits for the first six months gained 32% to Euro355m, with the specialty products and polymers and intermediates segments delivering the strongest growth.
Degussa-Huls, which is to combine with compatriot SKW Trostberg as part of the recent merger of their respective former parent companies Veba and Viag to form E.ON, posted a 23% rise in first half sales, excluding precious metals trading, to Euro6.1bn. After adjusting for the divestment of Vestolit and Neuber and considering other changes in the group of consolidated companies, sales were up 28%.
The company attributed nearly half the sales increase to higher volumes and the remainder to price improvements and exchange rate effects. It said the price rises largely resulted from sharp increases in raw materials costs, which were partly passed on to customers.
Chief executive officer Utz-Hellmuth Felcht commented: "We were exceptionally successful. Our growth rates are impressive proof of positive business trends and a profitable performance across the board."
Operating profits from the health and nutrition division fell 26% to Euro45m because of lower contributions from the Stockhausen unit and Asta Medica. Sales increased 12% to Euro1.2bn. Degussa-Huls reported the successful start-up of its new Biolys 60 plant at its joint venture Midwest Lysine in Blair, Nebraska, US.
Specialty products posted a 62% hike in first half operating profits to Euro103m, thanks to improvements at Creanova and the industrial chemicals division. Increased volumes led to a 14% rise in sales to Euro1.2bn. After adjusting for the Neuber disposal last year, the increase was 22%.
Operating profits from the polymers and intermediates division more than doubled to Euro62m from Euro29m, driven by strong performances from Rohm, Oxeno and Phenolchemie. Sales grew 32% to Euro1.4bn, and adjusted for the Vestolit divestment last year the increase was 50%.
Strong earnings from the precious metals, automotive catalysts and ceramic pigments unit dmc2 enabled Degussa-Huls' performance materials division to lift first half operating profits by 21% to Euro142m. Earnings from Sivento slipped slightly because of one-off charges, and earnings from the advanced fillers and pigments business were also down. Performance materials sales, excluding precious metals trading, increased 25% to Euro2.0bn.
Degussa-Huls' service units, which comprise the infrastructure firm Infracor, the research firm Creavis and Degussa Bank, registered first half operating profits of Euro3m compared with a Euro1m loss last time. Sales soared 54% to Euro334m.
The merger with SWK to form the new entity Degussa AG is expected to take effect on 1 January 2000. Over the next few years, Degussa AG will divest non-core operations including, from Degussa-Huls: the precious metals activities (which were transferred to dmc2 on 1 January 2000); Asta Medica; the dental division; Phenolchemie; and Degussa Bank.
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