Kemira GrowHow in Euro18.4m Q1 EBIT loss

28 April 2006 09:35  [Source: ICIS news]

LONDON (ICIS news)--Kemira GrowHow slumped to an Euro18.4m ($22.7m) loss in the first quarter on high natural gas costs, ammonia plant closures and postponed deliveries of fertilisers, the Finnish agrochemicals group said on Friday.

The loss at earnings before interest and tax (EBIT) level compared with a Euro21.2m profit in the year-earlier period and a Euro1.3m operating loss in the fourth quarter.

Kemira GrowHow said its first quarter results were burdened by very expensive natural gas and resulting shutdowns of ammonia plants.

"Increases in market prices of fertilisers did not compensate [for] the drastic increases in costs," the company said in a statement.

It also said that the cold spring postponed fertiliser deliveries to the second quarter and probably also decreased overall total deliveries.

Kemira GrowHow, which signalled in February that high gas prices might result in a first quarter deficit, warned that its second quarter operating profits would be clearly lower than Q2 last year.

In January to March this year it made a Euro21.1m pre-tax loss, a Euro40.1m reversal compared with the Euro19m profit in Q1 last year. Sales were down 11% to Euro265.2m.

The crop cultivation unit recorded a Euro17.8m operating loss, against a Euro18.9m profit in Q1 last year and a Euro5.9m deficit in Q4. It was hit by the closure of ammonia plants in the UK and Belgium due to high gas costs - on average double the level of Q1 last year. The cost of shutdowns and restarts of ammonia plants, including lost ammonia production, was about Euro10m, said Kemira GrowHow.

Profits were also affected by the deferment of fertiliser deliveries. Sales were down 14% to Euro201.2m compared with Q1 last year and were 25% down on the preceding quarter, despite higher prices for nitrogen and NPK (nitrogen/phosphorous/potassium) fertilisers.

About 7% of the year-on-year decrease was due to the sale of Kemira GrowHow's Baltic sales and marketing companies. Fertiliser sales volumes in Q1 totalled 881,000 tonne, down from 1.09m a year earlier.

The industrial solutions business at least managed to make a profit in Q1 but of only Euro0.9m against Euro5.2m a year previously and Euro4.8m in Q4. High gas prices cut profits by about Euro2m and plant closures also reduced earnings by the same amount, said Kemira GrowHow.

Sales, however, were up 3% year-on-year to Euro75.8m and 3.3% ahead of Q4. Feed phosphate volumes in Europe were about 10% above Q1 last year and prices were up by an average of 3%. Sales volumes of process chemicals, however, decreased due to the ammonia plant shutdowns.

In its market overview, Kemira GrowHow said global consumption of fertilisers was expected to rise by about 2% a year on average over the longer term but Western Europe demand was projected to decline ant an annual rate of 1% with Eastern Europe consumption forecast to grow at nearly the same rate.

By: Neil Sinclair
+44 20 8652 3214

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