09 August 2004 12:58 [Source: ICIS news]
LONDON (CNI)--German specialty chemicals company Degussa reported on Monday a 13% rise to Euro262m ($321m) in second quarter earnings before interest and tax (EBIT) from core businesses, with cost-cutting and global economic recovery boosting profits from all its main operating divisions.
Sales from core businesses were almost 6% up at Euro2.84bn, with high demand reported in all divisions.
Degussa's non-core businesses - Oxxynova and the industrial chemicals and metallurgical operations of Goldschmidt - also improved significantly in the three months ended 30 June. They made a profit at EBIT level of Euro2m compared with a loss of Euro10m in Q2 last year. Sales were down 44% at Euro75m.
Total EBIT rose 19% to Euro264m on sales 3.4% ahead at Euro2.91bn. Net income, including profits from non-core businesses, almost tripled to Euro102m from Euro38m in April to June last year.
Degussa said it expected the global economic recovery to continue and expressed cautious optimism about the full year outlook. However, it warned that recent hikes in raw material costs would dampen EBIT momentum in the second half. It was, therefore, sticking to its previous forecast of only a slight rise in core EBIT and sales. In 2003, Degussa recorded a 5% fall to Euro902m in EBIT from its core operations. Group sales were down 3% at Euro10.68bn.
The second quarter performance was better than the first three months of this year and boosted Degussa's first half EBIT from continuing operations by 10% to Euro486m on sales up 2% at Euro5.47bn. Net income, including earnings from discontinued operations, soared 72% to Euro191m. Losses from non-core operations in January to June fell to Euro5m from Euro12m last time.
Degussa's biggest division by sales, fine and industrial chemicals, boosted second quarter operating profits by 27% to Euro65m on sales up 5% to Euro720m. First half profits were down Euro5m at Euro123m on sales 2% lower at Euro1.40bn. The division's building blocks business reported a recovery in profits from the disappointing level in 2003, said Degussa. The C4 and feed additives units almost matched the profits achieved in H1 last year but earnings from exclusive synthesis & catalysts and peroxygen chemicals were down year-on-year.
Coatings & advanced fillers maintained its position as Degussa's most profitable business by boosting second quarter EBIT 20% to Euro90m on sales 8% ahead at Euro566m. First half profits were up 11% to Euro172m on sales 5% ahead at Euro1.10bn. The division's coatings & colorants and advanced fillers & pigments both translated appreciably higher demand into stronger first half profits. Degussa said the aerosil & silanes unit managed a slight improvement in H1 earnings as higher volumes outweighed adverse currency movements.
Second quarter EBIT from the construction chemicals division was up 25% to Euro65m on sales 6% higher at Euro476m. The improvement in first half income was even stronger - up 30% to Euro89m on sales 4% ahead at Euro861m. Degussa said all business units with the exception of admixture systems Asia/Pacific reported H1 earnings above the corresponding period last year.
Earnings from the performance materials division rose 15% to Euro51m as revenues advanced 4% to Euro527m in the second quarter. EBIT in the first half improved 17% to Euro106m, although sales were only 2% stronger at Euro1.04bn. Degussa said rising demand helped the care specialties and oligomers & silicones units to report considerably higher first half profits. Earnings from food ingredients were up slightly but higher raw materials costs were blamed for a slight decline in income from the superabsorber business unit.
Specialty polymers income leapt 37% to Euro48m in Q2 on sales 12% up at Euro373m. First half earnings were 13% ahead at Euro91m on revenues 6% higher to Euro711m. Degussa attributed the improved profits to increased demand in the high performance polymers, specialty acrylics and Plexiglas business units. Higher raw material costs and adverse exchange rates, however, resulted in lower earnings from methacrylates.
Deguss did not reveal earnings by geographical area but said first half group sales from core business in Germany rose 1% to Euro1.47bn. Sales in other European countries rose 5% to Euro1.81bn. Revenues from the North American Free Trade Area (Nafta) were down 4% to Euro1.15bn due to the dollar's weakness. Asian sales rose 4% to Euro731m despite the euro's strength, and revenues from Latin America were up 8% at Euro170m.
Capital expenditure on core businesses by the Degussa group was down 7% to Euro294m in the first half. Degussa said its biggest single project is a new methionine plant at Antwerp in Belgium. For the full year, group capital spending is budgeted at Euro825m and Degussa said it would stick to this figure.
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