04 November 2004 12:09 [Source: ICIS news]
LONDON (CNI)--Degussa’s third quarter operating profits improved 11.4% to Euro196m ($249m) on sales up 3.4% to Euro2.86bn, the German speciality chemicals group reported on Thursday.
Revenues from Degussa’s core businesses were up 4.3% to Euro2.79bn compared with July to September last year. Selling prices were unchanged from the 2003 third quarter, but currency fluctuations wiped 3% off revenues.
Earnings before interest and taxes (EBIT) from core operations rose 7.3% to Euro265m for the quarter.
At pre-tax level, Degussa made a profit of Euro176m compared with a loss last year of Euro281m. However, the 2003 quarter was distorted by a massive Euro406m write-down charge related to Degussa’s fine chemicals business. After discounting this charge, pre-tax profit was significantly higher.
|Utz Hellmuth Felcht|
Much of the improvement came from the economic upturn, which generated “strong volume growth” of 6%, the company said. Degussa chairman Utz-Hellmuth Felcht said the company’s cost-cutting drive had also played a key role.
However, he warned that higher raw material costs and the dollar's weakness were curbing performance improvements.The continuing rise in raw material prices would cause EBIT to grow more slowly in the coming months despite the good business trends, he added.
For the first nine months of 2004, core business sales were up 3% to Euro8.26bn, generating nine-month EBIT of Euro751m, up 9% on the same period in 2003. Total group EBIT jumped 12% to Euro747m.
The improved cash flow this year to date (Euro841m compared to Euro354m in the same period of 2003) has enabled the company to reduce its net debt, which at the end of the third quarter stood at Euro2.19bn - Euro443m lower than a year ago.
Degussa’s largest division, the construction chemicals business, improved Q3 EBIT from Euro64m to Euro74m on higher demand and reduced costs. Quarterly sales were up 4% to Euro498m.
Higher demand also helped the fine and industrial chemicals division to raise EBIT by 18% to Euro65m for the quarter, on sales up 5% to Euro704m. The company singled out its C4 chemistry business unit as reporting a good result, while the feed additives unit performed well though could not match last year’s level.
The performance materials division boosted EBIT by 15% to Euro47m with the oligomers and silicones unit showing a considerable improvement, and care specialties and food ingredients also up. However, a sharp price rise in raw materials dragged the superabsorbants unit below its year-ago figure. Total division sales were up only 2% to Euro508m for the quarter.
Operating profits in the coatings and advanced fillers division leapt by 43% to Euro83m on sales up 5% to Euro546m. Increased demand, particularly, helped the coatings and colorants, aerosol and silanes, and advanced fillers and pigments business units.
Speciality polymers boosted EBIT by 42% to Euro44m, with earnings from high-performance polymers and Plexiglas well ahead. Cost reductions and higher earnings helped raise earnings in the speciality acrylics and methacrylates units. Division sales were 8% ahead at Euro355m for the quarter.
The non-core businesses – Oxxynova, Goldschmidt’s industrial chemicals business, and the undivested rump of Degussa’s metallurgy operations – reported an EBIT of Euro1m compared to a loss of Euro9m in the 2003 third quarter. Sales fell 23% to Euro70m.
Regionally, revenues from Europe for the Degussa group were up 7% to Euro2.7bn while NAFTA (North America Free Trade Area) sales slid 5% because of the dollar’s weakness.
Felcht reaffirmed previous predictions of a slight increase in both full year sales and full year EBIT for core businesses. Sales growth is expected to fall in the lower single digit percentage range and EBIT growth in the upper single digit range.
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