Rhodia looks to technology and market for expansion

12 March 2007 00:00  [Source: ICB]

Rhodia is in a position to consider acquisition-led growth, CEO Jean-Pierre Clamadieu has revealed.

In London last Thursday, he told journalists that the company is interested in market- and technology-led growth opportunities, although no deals were imminent. "Clearly we are looking at [growth]," he said.

Clamadieu said that Rhodia's portfolio reshaping was largely complete, although he suggested that the company would have to look hard at the remaining businesses in the organics cluster. These include analgesics and some intermediates.

"We are not very optimistic about these businesses," Clamadieu said, adding that competition from China and India was strong.

"We are not yet at the position where we can be more specific," he said, adding that the businesses would be further restructured this year.

Rhodia's position is worse in paracetamol than it is in aspirin.

Last Wednesday, the French specialty chemicals group reported a return to net profit and considerably stronger underlying results as restructuring efforts paid off. The company raked in an operating profit of €88m ($115.8m) in the fourth quarter from a €42m loss in the same period a year ago.

Recurring earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 65.3% to €195m on strong volumes, pricing and first certified emissions reductions (CER) sales. The recurring EBITDA margin was at 16% from 10% in the fourth quarter of 2005.

The company has refocused its portfolio in the past three years by divesting €1.4bn worth of investments, including European industrial fibres, the silicones business and its 50% stake in nylon fibres joint venture Nylstar, which it sold last week for €1.

Clamadieu said 2007's goal was to generate free cash flow, and he was confident that it could be achieved, given relaxation on working capital controls and the Rhodia businesses' expected performance.

The firm is expected to invest €330m in 2007 to bolster poly- amides, which includes an Asian project, to develop Novecare, and to optimise the industrial network in the US and Europe.

He said the year had started well with good volume growth. Despite still-high raw material and energy prices, he forecast strong gains in earnings before EBITDA.

This would improve in the chemicals business and from the company's Eco Services as CERs from the company's carbon abatement projects were monetised, he suggested.

The company will take the opportunity in 2007 to refinance a portion of its debt as bonds come to maturity, he added.

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