03 March 2005 11:31 [Source: ICIS news]
LONDON (CNI)--Steep increases in monomer feedstock costs, adverse exchange rate effects and the impact of generic competition on its pharmaceutical and fine chemicals business were blamed by Yule Catto on Thursday for a major slump in full year profits.
The UK specialty chemicals group reported a 48% decline to £31m ($59m/Euro53m) in 2004 pre-tax profits before goodwill amortisation on sales virtually unchanged (up 5% at constant exchange rates) to £549m. Profit on ordinary activities before tax plunged 68% to £15.5m from £49.2m in 2003.
Harlow, Essex-based Yule Catto said operating profits before amortisation fell 40% to £44m, with earnings in its performance chemicals and pharma/fine chemical divisions plummeting by more than half.
Foreign exchange rate movements caused an adverse translation effect of almost £2m and the weak US dollar an unfavourable impact of nearly £8m.
Operating profits in the polymer chemicals business were down 9% to £26.9m on sales (including joint ventures) up 7% to a record high of £316m. Yule Catto said the division did well to keep profits within £3m of 2003 in the face of a £25m rise in total raw material costs. European operations were also affected by disruptions in feedstock supply following cracker outages and other plant production problems. Yule Catto said margins declined because it was unable to pass on quickly enough the sharp increases in its monomer feedstock costs.
Pharma and fine chemicals operating profits more than halved to £16.2m from £36.2m on sales down 13.5% to £96.9m. Generic competition for omeprazole, for which Yule Catto supplies the active ingredient, inevitably hit both earnings and revenues.
Operating profits in the performance chemicals business fell 54% to £5.4m on sales down 4.4% at £136.5m. Yule Catto said margins were affected in the second half by the sharp drop in the US dollar's value against sterling and the euro. Profits were also hit by increasing competition in sulphur derivatives.
Yule Catto chairman Anthony Richmond-Watson attempted to put a brave face on the results by describing it as "a solid performance in the testing environment of 2004".
He said Yule Catto remained well positioned to deliver volume growth this year but warned that short-term operating results may be constrained by the impact of tightness in the raw material supply chain. Richmond-Watson also conceded that delays in approving new drugs plus adverse publicity surrounding some products already in the market were creating uncertainty for Yule Catto's contract manufacturing business.
The City reacted poorly to Yule Catto's results and outlook for this year; by about 10:30 hours GMT the company's shares were down 5% to £2.88.
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