Kemira GrowHow Q2 profits slump on gas prices

27 July 2006 13:00  [Source: ICIS news]

LONDON (ICIS news)--Kemira GrowHow’s operating profits slumped to just €2.6m ($3.3m) in the second quarter from €17.1m in the same period last year due to higher natural gas prices, the Finnish fertiliser company said on Thursday.

Net sales were down 9% to €304.2m.

However, sales excluding the effects of the Baltic sales and marketing companies, of which 50% were sold to Danish DLA Agro Group at the end of last year, grew by 2%, Kemira GrowHow said.

Kemira GrowHow made a consolidated operating loss of €16.4m in the first half compared with an operating profit of €38.2m in the same period last year. January-June sales dropped 10% to €577.1m from the first half of 2005.

The operating loss from the crop cultivation business unit was €0.7m in the second quarter compared with an operating profit of €12.6m in the corresponding period last year. Net sales dropped 11% to €240.9m.

“During 2006 high natural gas prices have substantially decreased the first half year results, because producers have not been able to pass on the high gas price increases fully to fertiliser prices,” Kemira GrowHow said.

Results were also affected by higher prices of purchased ammonia, but were partly offset by a rise in sales of nitrogen fertilisers. However, price increases were not sufficiently high to compensate for the increase in costs.

The industrial solutions division reported second quarter operating profits of €6.4m, up from €4.3m in Q2 2005. Net sales were down very slightly at €72.2m from €72.6m.

Feed phosphate volumes in Europe were significantly higher than in Q2 2005 and prices were at the same level, Kemira GrowHow said, adding that sales volumes for process chemicals fell.

“Global market prices for straight fertilisers and their raw materials, such as urea, ammonia, diammonium phosphate and potash, remained at a high level until late spring and have slightly decreased thereafter,” the company said.

“High raw material and energy prices have put pressure on fertiliser prices in Europe,” it added. “On the other hand, the high fertiliser prices can cut down total consumption, especially in the case of nutrients other than nitrogen fertilisers. High fertiliser prices also increase the possibility of fertiliser imports from outside of Europe.”

Fertiliser prices were expected to remain high due to production costs, although raw material prices would be difficult to fully pass on to fertiliser prices.

Kemira GrowHow said operating results in the third quarter were expected to improve from the second quarter, as both feed phosphates and process chemicals were forecast to grow.

By: Hilde Ovrebekk
+44 20 8652 3214

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