08 March 2005 11:20 [Source: ICIS news]
LONDON (CNI)--German specialty chemicals company Degussa reported on Tuesday a 6% rise to Euro977m ($1.29bn) in 2004 earnings before interest and tax (EBIT) from its core businesses and forecast a slight rise in profits this year.
Core business sales rose 3% to Euro10.96bn from Euro10.65bn in 2003. However, revenue growth was undermined by the weakness of the US dollar against the euro; excluding currency effects, sales were up 6%.
Group EBIT last year was up 8% to Euro965m on overall sales up 1% to Euro11.24bn. Net income after minority interests totalled Euro298m, a Euro559m improvement from the Euro261m loss made last year. Return on capital employed was up 1.1 percentage points to 10.3%.
The improvement in group earnings reflected a reduction to Euro12m in losses from non-core businesses compared with a deficit of Euro31m in 2003.
Degussa said it all divisions reported significant increases last year in sales volumes. Selling prices were unchanged in 2004 with competitive price erosion offset by slight price rises. However, Degussa said it was able to lift selling prices by 1% in the fourth quarter.
A slight improvement was forecast in 2005 sales on the assumption that it will be able to raise prices modestly this year.
All divisions reported double-digit rises in EBIT last year, apart from fine and industrial chemicals, where profits were down 2% to Euro253m on sales 1% lower (up 4% after currency adjustments) at at Euro2.83bn.
Degussa's specialty polymers business delivered the biggest divisional improvement in profits, with earnings up 22% to Euro178m on sales 8% (11% after adjustment for exchange rate effects) ahead at Euro1.42bn. Degussa said cost-containment and high capacity utilisation more than offset the impact of a sharp rise in the cost of raw materials, especially acetone and butadiene.
The coatings and advanced fillers division also delivered a major profits increase last year, with EBIT up 19% to Euro330m on sales 5% (8% at constant exchange rates) ahead at Euro2.19bn. Higher demand enabled Degussa to offset most of the impact of the weak dollar, higher raw material prices (especially for acetone and propylene) and increased energy costs.
The construction chemicals business reported a 16% rise to Euro201m in 2004 EBIT on sales 4% (8%) up at Euro1.79bn. Degussa said a substantial reduction in costs was the main reason for the improvement, aided by higher overall demand.
Substantial increases in volumes and successful cost-cutting measures enabled Degussa to report an 11% rise to Euro197m in EBIT from its performance materials division. Sales rose 1% (5%) to Euro2.04bn. Degussa confirmed plans to sell the division's food ingredients business, which it said is unable on its own to achieve global market leadership. Water chemicals, which is also up for sale, has been transferred to the performance chemicals division because of its close links with the superabsorbers business unit at sites in Krefeld, Germany and Greensboro, US.
In forecasting further improvements in group net income and earnings per share this year, Degussa chairman Utz-Hellmuth Felcht said return on capital invested should be 11%, which would be in line with the company's cost of capital.
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