Sydsvenska Kemi Q1 op pfts nearly double to SKr270m

10 May 2005 18:11  [Source: ICIS news]

LONDON (CNI)--Swedish specialty chemicals producer Sydsvenska Kemi on Monday said its operating profits during the first quarter this year nearly doubled to SKr270m ($37.8m/Euro29.4m) from SKr150m on higher prices and the impact of rationalisation costs on results in the same three months last year  .

 

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 54.7% to SKr362m. Excluding exceptional items, including Euro67m of rationalisation costs in Q1 2004 and a Euro28m acquisition-related gain in Q1 2005, profits were up 11% at Euro334m.

 

Sales during January to March this year were up 5.2% at SKr1.69bn. Adjusted for exchange rate effects, the sales increase was 8%. Net profits including minority interest trebled to SKr133m.

 

Sydsvenska said a decrease in customers’ inventories led to 7% weaker sales volumes during the first quarter. The company added that it will “pursue a margin-based rather than a volume-based strategy for certain products”.

 

Although raw material costs were significantly higher compared with the same period last year, the group was able to pass on the price increases to customers for most of its products. Capacity utilisation was high, it said.

 

Consolidated sales and earnings were adversely affected by a lower exchange rate for the US dollar, amounting to a total of about SKr100m. Sydsvenska added that currency hedging contracts were made on “significantly more favourable terms during the first quarter of 2004”.

 

Operating profits in the specialty chemicals business were up 27.9% to SKr312m compared with the first quarter last year. Excluding a Euro42m non-recurring charge in Q1 2004, earnings were up 10.6%.

 

Sales increased 8.3% to SKr1.45bn (up 11% when adjusted for exchange rate effects). Prices increased 18%, while volumes fell by 7%.

 

Capacity utilisation was high for most products and Sydsvenska said fixed costs were reduced as a result of the rationalisation measures implemented during 2004 and previous years.

 

Good demand for polyols continued, although stockpiling and competition from Asia affected sales volumes. Volumes also fell for its subsidiary Perstorp’s oxo alcohols and plastisisers. Demand continued to grow for organic acids, in particular for feed chemicals ahead of the European Union (EU) ban on the use of antibiotics in feed. Demand for catalysts for formalin production was also strong.   

The company is investing in a new propionic acid plant in Stenungsund, Sweden and in new plants and increased capacity for hexanoic acid, formic acid, TMP, Neo and aldehydes in Perstorp and Stenungsund on forecast increases in demand. Sydsvenska will also invest in a major biofuel-based energy production site at Perstorp “in order to increase the supply of energy at competitive prices”.

 

The materials technology unit suffered a 34% fall to SKr21m in operating profits before depreciation and amortisation during the first quarter. Sales were down 10% to SKr251m. Volumes dropped 12%, while prices rose 5%.

 

Sydsvenska said demand for mouldable composites products for the US market remained good, while sales in Europe weakened due to a decline in the European automotive industry. In the advanced composites unit, healthy demand for carbon fibre reinforced composite materials for the aerospace and aviation industries continued. Compounds sales were adversely affected by a decline in the European construction sector, particularly in Germany. The company's mouldable composites business (Vyncolit), with annual sales of SKr550m, was recently sold to Japan’s Sumitomo Bakelite.

 

The company said that, based on considerable investments and productivity programmes, it will be “well equipped” to meet increased demand as the outlook for the global economy “appears favourable”.  

By: Hilde Ovrebekk
+44 20 8652 3214

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