Rhodia targets 15% price increases as costs soar

22 November 2007 12:26  [Source: ICIS news]

By Nigel Davis

Rhodia targets 15% worldwide price hikesLONDON (ICIS news)--Rhodia will aim to secure worldwide product price increases of between 7% and 15% to help defend profit margins hit by rising costs, the Paris-based specialty chemicals group said on Thursday.

The company was targeting higher prices as it and its European counterparts were battered by higher priced oil-based energy and feedstock and distribution costs.

“The price increases announced today are required to help respond to the dramatic and simultaneous rising cost of energy, raw materials and transport,” the polyamide, cellulose acetate and specialty chemical maker said.

Margins needed to be defended at a time when specialty chemicals demand is strengthening worldwide, it added.

Rhodia did not give further details of the particular cost pressures it was facing or the business lines in which it wanted to press for the greatest price increases.

The company, however, has appeared to be more successful than other Europe-based specialty chemicals makers at pushing product prices higher in the face of rising costs.

The price increases were required even though a number of plans had been put in place over the past few years to improve productivity and reduce costs, Rhodia said in a press statement.

Analysts said last week that Rhodia was exposed alongside all European chemical companies to increased raw material prices and the weak US dollar.

“Rhodia is particularly affected in its Acetow business [which sells cellulose acetate for cigarette filters], where prices are always in US dollars,” Credit Suisse said in a 16 November note to clients.

The bank added, however, that Rhodia’s polyamide business - its largest - is one of the strongest globally with a number two position in nylon 6.6 and a very strong position in more complex intermediates, whose supply should remain tight until at least 2012.

Opportunities were also seen in the Silcea silicas and rare earths business thanks to global emissions legislations and growing demand for LCD and plasma televisions. 

Some of the company’s Organics segment businesses such as isocyanates and fine organics were, however, seen as exposed.

Rhodia is organised into seven business segments or ‘enterprises’ and has customers in the automotive, electronic, pharmaceuticals agrochemicals, consumer care, tyres and paints and coatings markets.

The $6.4bn turnover company has been turned around over the past three years and widely reorganised.

Its share price soared on 6 November on the news that a healthy profits increase had been achieved in the third quarter on the back of what the company called “strong volumes and solid pricing power”.

Third-quarter operating profits were up 2.7% year on year to €115m ($166.6m) and sales up 7% at €1.26bn.

Rhodia said that its third-quarter volumes were 19% higher and prices up 3% but that negative currency conversions had depressed sales by 4.4%.

($1 = €0.67)

By: Nigel Davis
+44 20 8652 3214

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