US Nalco braces for slower growth - CEO

29 October 2008 16:57  [Source: ICIS news]

TORONTO (ICIS news)--US water chemicals company Nalco is preparing to cope with expected slower growth amid a volatile and gloomier economic outlook, CEO Erik Fyrwald said on Wednesday.


“In the tumultuous market conditions that exist today we must be prepared for much slower market conditions ahead,” Fyrwald told analysts during Nalco’s third-quarter results and outlook briefing.


Nalco was seeing slower growth around the world, including the BRIC economies - Brazil, Russia, India and China, he said.


While the impact of the slowdown on Nalco with its value-added offering would be much less than on other industrial firms, the company was taking additional steps to drive its profit and cash flow growth as it heads into 2009, he said.


First of all, Nalco expected to see a net reduction in staff levels in the fourth quarter. 


“We will continue with very tight controls on head count as we head into 2009,” Fyrwald said.


So far this year, Nalco had added to staff in selected growth areas.


Furthermore, Nalco was aiming at further boosting productivity.


Expected productivity savings in 2009 would be $100m (€79m), up from the $75m Nalco targets for 2008, Fyrwald said.


Nalco would also seek to further boost product prices in the fourth quarter.


Even though raw material costs were starting to trend down as oil and natural gas prices were falling, Nalco had not yet recaptured all the cost surges it was exposed to year-to-date.


“Our target is to have price increases exceed the cost run-ups for the first time this year in the fourth quarter and continue that trend well into 2009,” Fyrwald said.


Nalco is aiming to grow adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) by 8% from 2007. The comparison excludes a discontinued synfuels business.


However, it may find it hard to achieve that target as the third-quarter hurricane impacts added substantially to its challenge and the global economy keeps worsening, Fyrwald said.


Year-to-date for the first nine months through 30 September, EBITDA was up 4% from the year-earlier period.


Hitting the 8% full-year target would require $230m in adjusted EBITDA in the fourth quarter, Fyrwald said. In the just-completed third quarter adjusted EBITDA was $193m, up 2% year-on-year.


“We continue to stretch ourselves to try to approach our full-year EBITDA growth objective but this is clearly increasingly challenging with each day’s news about slowing global economic conditions and currency headwinds,” said Fyrwald.


($1 = €0.79)


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By: Stefan Baumgarten
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