LONDON (ICIS)--Ercros’ profit and earnings jumped in the first half of the year as caustic soda and chlorine derivatives prices in Europe rocketed on the back of reduced production capacities, the Spanish producer said on Monday.
Sales for the period, however, remained practically unchanged as the producer coped with reduced chlorine output after the EU banned mercury technology from December 2017 to produce these products, mandating companies to switch to membrane technology.
“As expected, the rhythm of entry into operation of the new production capacity of chlorine-caustic soda plants with membrane technology has led to a temporary reduction in Ercros’ production of these products,” said the firm.
However, it added it was confident it could offset lower production by the sale of external caustic soda and the acquisition of intermediate products like ethylene dichloride (EDC) and vinyl chloride monomer (VCM) for the production of polyvinyl chloride (PVC).
|Ercros financial statement January-June 2018|
|H1 2018||H1 2017||Change|
*Earnings before interest, taxes,
depreciation and amortisation|
**Earnings before interest and taxes, also called operating income
“These results are mainly attributable to the sharp increase in the prices of caustic soda and chlorine derivatives (sodium hypochlorite and hydrochloric acid [HCL]), which have hit record highs owing to strong demand and the reduced production capacity of chlorine and caustic soda in the sector,” said the company.
“The lower chlorine production and higher efficiency of membrane electrolysis plants facilitate the achievement of one of Ercros’ main operational objectives: reducing its dependency on electrical energy.”
By reducing its electricity bill, Ercros said it had cut the costs of supplies by 23.3% during the January-June period year on year, or €13.5m, “despite the considerable" increase in electricity prices in Spain year to date.
The reduction in chlorine production also took its toll on workforce, which as of 30 June stood at 1,302 employees, 90 less than a year ago.
Ercros' bumper first-half financial results, however, may not be repeated in the second half. Coming off their end-of-2017 peak, caused by the capacity closures, prices for caustic soda in the Mediterranean have been decreasing since the beginning of 2018.
Additional reporting by Chris Barker