10 May 2012 11:03 [Source: ICIS news]
LONDON (ICIS)--Despite a 14% year-on-year increase in sales in the first quarter of 2012, Arkema's earnings before interest, tax, depreciation and amortisation (EBITDA) fell by 12.5% to €253m ($329m) during the period, according to results published by the company on Thursday.
In the case of the French company's acrylate business, strong volume offtake and buyer activity has been offset by competitive pricing challenges in the market and sharp increases for feedstocks that acrylate sellers have struggled to keep pace with.
While recording a 33.8% year-on-year decline to €100m in its first-quarter net profit, the specialty chemicals firm issued a statement that was overwhelmingly positive about the first quarter of 2012.
“First-quarter results represent by far the second-best performance recorded in a first quarter by our Group,” said chairman and CEO Thierry Le Henaff. “Industrial Chemicals show a significant improvement compared to the last quarter of last year, albeit below the very high base of the same quarter in 2011, as expected.”
Industrial chemical sales were supported by the acquisition of specialty resins (Sartomer and Cray Valley), and the company also reported a strong performance in acrylic specialties in the first quarter. Nevertheless the EBITDA margin for industrial chemicals fell to 15.7% during the period, compared with 24% in the first quarter of 2011.
The theme of the acrylates market since the end of 2011 is one that illustrates how strong volume offtake and buying interest can still result in lower earnings. The widespread panic among buyers of acrylic acid and acrylate esters due to the wider economic malaise towards the end of last year saw prices in the market fall to what one seller termed "disastrous" levels.
While feedstock prices also came down during this period, the reductions were slight in comparison, and since January 2012 the trend for propylene, and to a lesser extent oxo-alcohols, has been one of continued price rises.
Propylene costs have moved up by €235/tonne since January 2012, and the acrylates sector has struggled to pass on these increases amid lower-than-expected demand.
Looking ahead to the second quarter, Arkema is positive about market conditions. While the second quarter of 2011 provides a very high basis of comparison, the company affirmed its confidence in being able to fully offset the recent raw material rises over the course of the second quarter.
($1 = €0.77)
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