InterviewRhodia CEO confident for fourth quarter

06 November 2008 16:26  [Source: ICIS news]

By Mark Watts

 

LONDON (ICIS news)--Rhodia's CEO Jean-Pierre Clamadieu is confident the specialty chemicals producer can improve margins in the fourth quarter despite the downturn weakening demand in some markets, he said on Thursday.

 

Clamadieu was speaking  in a telephone interview with ICIS news after Rhodia reported a strong set of third quarter results.

 

Earnings in its largest business segment, Polyamide (PA), remained flat, impacted by higher raw materials prices and falling demand in automotives and textile markets.

 

“The situation will be different in the fourth quarter as raw materials prices will decrease and we should be able to expand our margin in this environment. We will have to give some off this back to customers,” said Clamadieu.

 

“Also there will be improvements in the foreign exchange, not only the euro against the dollar but also relief in the Brazilian real too. We generate 17% of our sales in Brazil,” he added.

 

However, due to the economic slowdown, Rhodia was expecting lower volumes and increased pricing pressure as demand softens in several end-user markets.

 

Rhodia’s net profit increased by 24% in the third quarter to €56m ($73m) from €45m in the same period last year, while it reported a 3.1% increase in sales to €1.22bn.

 

However investors reacted negatively to the results, as Rhodia’s shares dropped over 10% (3:15 GMT) to €7.11, less than a third of their value a year ago of over €25.

 

Clamadieu wasn’t worried that a low share price would create opportunities for rival chemicals players to acquire Rhodia.

 

“When you look at the multiples, Rhodia is trading in line with its competitors, so low share prices do not create a specific risk for the company,” said Clamadieu.

 

“Only very large players are in the position to be consolidators, especially in a closed credit market, while we have not seen any significant deals from private equities or mid-sized chemical players since the past 5-6 months,” he added.

 

Rhodia plans to expand the company in two directions, through its larger PA plastics business and its personal and home care arm.

 

“We are always looking for add-on acquisitions, maybe the crisis could make these opportunities arrive sooner. This is particularly the case in the Novecare business as personal and home care is an unconsolidated market with many players – Asia might be a key target zone,” said Clamadieu.

 

Despite the current softening of demand in PA markets, the CEO was confident there would be a need to expand PA capacity in the future.

 

In early October however, Rhodia announced the closure of its PA site in Ceriano, Italy – possibly affecting 219 jobs – due to improve competitiveness slowing market growth in Western Europe.

 

Rhodia would increase production at its sites in Lyon, France, and Gorzow, Poland, while alsp tranferring all PA R&D work in the EU to Lyon.

 

“This is in line with our current needs. We might have to come up with a new action plan if it gets worse,” Clamadieu said.

 

He said that the company confirmed its 2008 financial objectives of recurring earnings before interest, tax, depreciation and amortisation (EBITDA) within 5% of the €758m level achieved in 2007.

 

“We have not given a guidance for 2009, I see a lot of changes and it’s too soon to figure out how they will affect us,” Clamadieu added.

 

($1 = €0.77)

 

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By: Mark Watts
+44 20 8652 3214

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