Corrected: Degussa Q3 profits up; feedstock cost may rise

08 November 2005 12:19  [Source: ICIS news]

In the ICIS news story published earlier today under the headline “Degussa Q3 profits up 10%; warns of feedstock cost rise”, the nine months’ operating profits from performance materials should state “9% higher at Euro1.31bn” and not Euro1.31m.  A corrected story follows in full:

LONDON (ICIS news)--Degussa, Germany's third largest chemicals firm, recorded a 10% rise in third quarter operating profits to Euro286m ($337.9m) on Tuesday on the back of higher product prices and volumes as well as gains from recent restructuring but warned of rising raw material costs.

Sales were 11.8% up at Euro3.05bn while earnings before interest, tax, depreciation and amortisation (EBITDA) rose to Euro454m from Euro421m a year ago.

Degussa’s net results were hurt by a total impairment charge of Euro836m on three of its business units; building blocks; exclusive synthesis and catalysts; and peroxygen chemicals, leading to a net loss of Euro710m from Euro76m in July-September last year.

“Our earnings are still impacted by the massive rise in energy and raw material prices,” Degussa said in a statement. “This year we have had to contend with a double-digit rise in the cost of raw materials used as starting products for our specialty chemicals products. At the same time, our worldwide spending on electricity and natural gas has increased by 12%.” It added that energy costs were expected to rise by more than 20% in 2006.

Degussa said earnings will continue to be affected by substantially higher energy and raw material costs in the fourth quarter which will only be partially offset by recently announced price rises.

“However, thanks to buoyant demand and our successful cost-cutting drive, we still assume that we will be able to report a slight improvement in sales and EBIT for the full year,” Utz-Hellmuth Felcht, chairman of Degussa’s board of management, said.

In the fine and industrial chemicals division, operating profits in Q3 were at Euro69m, nearly unchanged from a year ago. Sales increased 10% to Euro834m. But in the first nine months of the year, operating profits fell 20% to Euro161m.

The company said it did not succeed in offsetting the impact of deteriorating market conditions for fine chemicals. “The business situation and market prospects for these activities have worsened steadily this year in the wake of considerable overcapacity in the sector. At the same time, there has been a further increase in competitive pressure, especially from Asian suppliers,” it said.

In the construction chemicals unit, operating profits were 8% higher year-on-year in Q3 at Euro80m. Sales were up 11% to Euro553m. In January-September operating profits were 6% higher than last year at Euro174m. Degussa said the impact of higher raw material costs was more than offset by a rise in demand.

Operating profits in the performance materials division rose 12% to Euro47m on sales up 14% to Euro458m in Q3. For the first nine months, operating profits were 9% higher at Euro1.31bn. Some of the division’s business units were hit by high raw materials costs, Degussa said, although a rise in demand in other areas more than offset these increases. Earnings were also affected by productions stoppages and higher logistics and energy costs in the wake of Hurricanes Katrina and Rita.  

The coatings and advanced fillers division’s operating profits fell 16% year-on-year in Q3 to Euro70m on sales at Euro568m, up 4% compared with Q3 last year. Operating profits in the first nine months of this year were 13% down at Euro222m from a year ago. Results were hit by higher raw material costs but Degussa said business trends in the specialty polymers unit were very good. It added that the high performance polymers and methacrylates divisions both reported a clear improvement in earnings compare with last year.

By: Hilde Ovrebekk
+44 20 8652 3214

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