• Organic sales growth of 9.2 percent
• Increased and volatile raw material and energy prices largely compensated by selling price increases
• Volume decline due to falling demand, especially in fourth quarter
• Lower operating costs
• Operating result (Adjusted EBITDA) of 351 million euros – stable on an organic basis
• EBIT up 5 million euros to 209 million euros
• Earnings before tax and special items (-3 million euros) decreased by 55 million euros due to non-cash effective revaluation of interest derivatives and US dollar debts
• Net loss including special items (including discontinued operations) 63 million euros, improved by 57 million euros
• Portfolio optimized by divestment of Pulcra Chemicals and Cognis Oleochemicals, resulting in stronger focus on less cyclical growth markets
• Cash position increased to 226 million euros, unused credit facility (revolver) of 221 million euros
In 2008, global specialty chemicals supplier Cognis increased its net external sales by 5.5 percent to 3.001 billion euros. On an organic basis (excluding foreign currency effects and the effects of acquisitions and divestments), sales grew by 9.2 percent. All strategic business units – Cognis Care Chemicals, Nutrition & Health, and Functional Products – contributed to this growth.
The operating result (Adjusted EBITDA) slightly fell by 2.6 percent to 351 million euros. This was due to higher raw material and energy costs, as well as unfavorable exchange rates and a decline in volumes which started in the fourth quarter. On an organic basis, the operating result was almost at the same level as 2007 (down by 0.3 percent). Cognis was able to offset its increased raw material costs to a large extent by raising selling prices and by continuing to optimize its cost structures and improve efficiency in all areas.
Return on sales (Adjusted EBITDA as a percentage of sales) was at 11.7 percent. Due to lower restructuring charges, earnings before interest and taxes (EBIT) increased by 5 million euros to 209 million euros. Earnings before tax and special items decreased by 55 million euros to -3 million euros due to non-cash effective revaluation of interest derivatives and US dollar debts. Net loss including special items stood at 63 million euros, representing an improvement of 57 million euros compared to 2007. The net loss of 2007 had been influenced by refinancing costs and the German tax reform. Overall, Cognis’ cash position increased substantially to 226 million euros, mainly due to cash proceeds from the divestments of Cognis’ 50-percent-stake in the Cognis Oleochemicals joint venture, and the sale of its former wholly owned subsidiary Pulcra Chemicals. The company additionally has a revolving credit facility of which 221 million euros were undrawn. Cognis also took advantage of the current conditions in the capital markets. So far, Cognis bought back PIK loans amounting to a face value of 112 million euros in open market transactions, resulting in an improvement of Cognis’ financing costs, net debt and equity.
Comments Cognis CEO Antonio Trius: “Despite an extremely difficult environment in 2008, we successfully managed to strengthen our position in our key markets. Consumers’ growing desire for personal well-being and heightened awareness of environmental sustainability are increasingly converging in the New Green lifestyle, which in turn is reaffirming and validating our strategy. By consistently focusing our core businesses on serving these market demands, Cognis has systematically laid the groundwork for future success.”
Outlook for 2009
“The benefits of our wellness and sustainability-driven growth strategy, our improved efficiency and the focus on our core business areas which target less cyclical growth markets are clearly visible and will support our development in 2009,” says Trius. “It is difficult to predict what will happen for the rest of the year. One thing that is certain, however, is that Cognis is constantly implementing optimization measures to ensure that it is well prepared for the challenges that lie ahead. To counteract the ongoing weak demand in some of our markets, we recently expanded our cost optimization measures targeting total savings of 70 million euros in 2009. Additionally we expect positive effects of lower energy and transportation prices. We will take the chance to strengthen our position in our key markets during these times of economic uncertainties, by leveraging our customer orientation to develop innovative products which help our customers to gain genuine advantages.”
Sales by strategic business unit
Care Chemicals reported strong sales growth of 7.1 percent to 1.684 billion euros
(9.8 percent on an organic basis), primarily reflecting the growth of both its performance ingredients and primary surfactant businesses, particularly in the Asia-Pacific, North and Central America regions. The strategic business unit also successfully focused on the rapidly growing market for “green” and natural-source solutions for personal and home care products, and this strategy was well received by its customers. Sales of fatty alcohols were lower than in the previous year.
Nutrition & Health achieved sales of 346 million euros, a 4.4 percent rise (6.3 percent on an organic basis). Overall, the business unit benefited from higher demand led by the global trend towards products based on natural ingredients. Natural-based vitamin E showed excellent growth rates, especially in the North America and Asia-Pacific regions. The Food Technology business achieved a sales increase as a result of higher sales volumes in the business segments of baked goods and desserts. The businesses for plant sterols, omega-3 fatty acids and solutions for the pharmaceutical industries also contributed to the growth.
Functional Products saw its sales rise by 4.4 percent to 948 million euros (10.3 percent on an organic basis). All business segments contributed to the sales growth, which was mainly driven by strong worldwide demand for environmentally sound agricultural solutions and synthetic lubricants. Sales of the polymers, coatings and inks business grew mainly in South America, while North America and Europe saw their sales decrease, mainly due to the slowdown in the US housing and the global automotive markets. Sales of the mining technology business continued to grow, mainly because of a higher number of new copper-producing installations.
Sales by region
In Europe, sales increased by 4.1 percent to 1.806 billion euros. In North America, sales increased by 3.1 percent to 590 million euros, despite the weak US dollar. The most significant growth was achieved in Central and South America (197 million euros, up 20.9 percent), and Asia-Pacific also recorded a significant growth
(408 million euros, up 9.2 percent).
Cognis is a worldwide supplier of innovative specialty chemicals and nutritional ingredients, with a particular focus on the areas of wellness and sustainability. The company employs about 5,900 people, and it operates production sites and service centers in 30 countries. Cognis has dedicated its activities to a high level of sustainability and delivers natural source raw materials and ingredients for food, nutrition and healthcare markets, and the cosmetics, detergents and cleaners industries. Another main focus is on products for a number of other industries, such as coatings and inks, lubricants, as well as agriculture and mining.
Cognis is owned by private equity funds advised by Permira, GS Capital Partners, and SV Life Sciences. In 2008, Cognis recorded sales of about 3 billion euros and an Adjusted EBITDA (operating result) of 351 million euros.
The statements we make in this release may include statements about our plans and future prospects for the company and the industry that are forward-looking statements. Our actual performance may differ materially from performance suggested by those statements. We urge you to review the cautionary statements in our financial statements for information on factors that could cause those differences.