05 February 2003 11:50 [Source: ICIS news]
LONDON (CNI)--Structural changes and cost cutting at Rhodia boosted earnings before interest, tax, depreciation and amortisation (EBITDA) by 26.1% to Euro798m ($857m) last year compared with 2001, the French specialty chemicals company reported on Wednesday.
However, structural changes and adverse currency translation effects depressed net sales by 9% to Euro6.62bn in the same period.
Rhodia explained that structural changes relating to its divestments adversely affected sales by 3.8% and foreign currency translations had a negative impact of 3.9%.
Revenues were 1% below expectations of around Euro6.69bn made by analysts at Credit Suisse First Boston (CSFB) and slightly down on forecasts made by Commerzbank of Euro6.65bn.
Operating profits climbed to Euro351m from Euro91m (Euro16m reported after goodwill amortisation) in 2001 and Rhodia's net loss after minorities and goodwill amortisation improved to Euro4m against a deficit last time of Euro213m.
Rhodia's EBITDA/sales ratio rose 3.4 percentage points in the year to 12.1%, with all divisions increasing their ratios. Rhodia said its EBITDA/sales ratio had been hit by unfavourable currency conversion rates, the absence of economic recovery and the decision by the US Food and Drug Administration (FDA) to postpone approval of new molecules in the pharmaceutical industry. However, these factors were offset by the reduction of fixed costs by approximately Euro58m net of inflation and the implementation of its new business model.
The improvement in profitability was coupled with the announcement of plans for further operating cost savings, reductions in capital spending and proposals to seek further divestments.
In reviewing its 2002 performance, Rhodia pointed out that all divisions recorded increases in EBITDA but sales declines.
The biggest EBITDA increase was posted by the fine organics division, up 75% to Euro128m compared with last year. Rhodia attributed the increase to sales volume growth and to the decline in raw material prices. However, Rhodia emphasised that EBITDA in the division was impacted by problems encountered by its intermediates activities from the beginning of the year relating to the commissioning of one of its production plants, which led to around Euro37m extra costs for 2002 compared with 2001. Sales in the division were down 0.5% to Euro1.21bn.
In the consumer specialties division, EBITDA grew 22% to Euro225m as the division benefited from restructuring measures, which were taken at the end of 2001 in specialty phosphates and the industrial and commercial success of phosphorous derivatives. Sales fell 13.2% to Euro1.88bn as it suffered from the combined impact of structural changes and the weakening of the US dollar.
Industrial specialties unveiled 12% EBITDA growth to Euro140m but sales fell 7.5% to Euro1.13bn. Rhodia said that all industrial specialties experienced volume growth except the silicones business, which experienced sluggish growth in the second half. Profitability of silicones activity was further impacted by the closure of one of its principal production sites for debottlenecking.
Polyamide division EBITDA soared 57% to Euro209m despite a 6.3% decline in sales to Euro1.35bn. Rhodia said the gradual improvement in earnings performance started in the second quarter due to the success of the action programmes launched at the end of 2001. Fixed costs in the division were reduced significantly in 2002 due to Rhodia’s restructuring programmes, which included the closure of five production sites.
Finally, Rhodia’s services and specialties business posted a 0.6% increase in EBITDA to Euro173m as sales slid 5.8% to Euro954m. Difficulties in the Eco Services and electronics and catalysis activities were offset by the good performance achieved by the acetow operations, Rhodia said. It added that restructuring measures were taken towards the end of 2002 in an attempt to boost competitiveness.
EBITDA in other businesses, however, fell by 42.6% to a Euro77m loss while sales slumped 59.1% to Euro90m.
Rhodia also announced that it exceeded its target of reducing net debt by Euro500m through divestments and said it managed to reduce the debt by Euro516m. Divestments were achieved at an average multiple rate of almost 5.5 times EBITDA.
The group also said it had cut capital expenditure last year to Euro374m - Euro26m less than budgeted - and down substantially on the Euro483m spent in 2001.
As of 31 December 2002, Rhodia’s net debt stood at Euro2.13bn compared with Euro2.57bn at the end of the previous year. The end 2002 figure was slightly higher than forecasts made by CSFB analysts of Euro1.98bn, mainly due to top ups to the Rhodia pension fund during 2002.
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