Degussa takes Euro830m impairment charge on Laporte

05 October 2005 13:13  [Source: ICIS news]

LONDON (ICIS news)--Degussa is to take an impairment charge of Euro830m ($1bn) following unsatisfactory business trends and a sharp reduction in earnings prospects from its fine chemicals activities, the German specialty chemicals company said on Wednesday.

Three business units are affected - Building Blocks, Exclusive Synthesis & Catalysts and Peroxygen Chemicals. A large proportion of the charge relates to British fine chemicals group Laporte, which Degussa acquired in 2001.

Euro710m of the charge relates to goodwill and Euro120m to other assets.

Degussa said the impairment charge will “be recognised as a one-off non-cash item in the non-operating result in the third quarter of 2005 and will thus have no impact on cash flow”.

“Contrary to previous assessments, the business situation and market prospects for the group’s fine chemicals activities have deteriorated steadily this year in the wake of considerable overcapacity in the sector,” Degussa said. “At the same time, there has been a further increase in competitive pressure, especially from Asian suppliers.”

The company said it would be stepping up the restructuring of its fine chemicals activities, resulting in an additional non-operating expense of Euro20m this year. This will bring the total restructuring costs for the division this and last year to Euro100m.

However, Degussa said, on the back of good performances by its other business units it reaffirmed its outlook for 2005 of slight year-on-year growth in sales and operating profits.

Degussa bought Laporte in early 2001, in a deal which valued the UK-based company at around £1.36bn (about $1.77bn). The German company then said Laporte would allow it to consolidate its position as one of the world’s leading suppliers of fine chemicals.

By: Hilde Ovrebekk
+44 20 8652 3214

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