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Cognis Q1 Sales Volume Down 18% as Customers Destock Inventory

Cognis, one of the largest raw material and ingredient supply companies serving the nutrition industry, saw its sales volume decline 18% during the first quarter of 2009 compared to the same period last year, as falling consumer demand and a subsequent customer destocking effect negatively impacted company performance, Cognis reported May 27. When excluding the impact of foreign currency and company acquisitions, net sales were down 13.9% for the quarter on a year-over-year basis.

The company’s three main divisions all turned in poor results for the quarter, with the largest decline coming from the functional products division, which was down 16.9% and which services a number of industries, including the automotive, housing and engineering sectors. The company’s nutrition & health division saw its sales decrease 8.3% to 84 million euros for the quarter, as poor consumer demand contributed to weaker sales. The care chemicals division reported a sales decline of 13.8% to 370 million euros.

As rough as the first quarter was for Cognis, total sales volume for the quarter increased 5% over the fourth quarter of 2008—a period which may prove to be the trough in the consumer spending recession. The nutrition & health division was up 4% compared to Q4 of 2008. “We are starting to see a few positive signs, with the rate of volume decline slowing appreciably in March,” Cognis CEO Antonio Trius said in a prepared statement. “Our goal is to further strengthen the leading position we enjoy in growth markets driven by the wellness and sustainability trends.” Trius said Cognis remains cautiously optimistic that performance will improve in 2009. “We expect our cost-saving measures to counteract lower sales. Most of the initiatives will materialize from April onwards,” he said. “Together with our efforts on optimizing our costs, we will also stay focused on maintaining our healthy cash position.” The company also expressed hope that its strategy of investing in global wellness and sustainability trends will help the company better withstand the recession.

Cognis recorded sales of about 3 billion euros in 2008. The company is owned by private equity funds advised by Permira, GS Capital Partners and SV Life Sciences. Cognis appears to be well positioned for success within the nutrition industry as the company has made a number of strategic acquisitions in recent years, including the purchase of WILD Flavors Inc. and InterMed Discovery GmbH. However, only about 10%-15% of Cognis’s total business is devoted to the nutrition & health division, thus, the company is reliant on other sectors to improve total business performance. NBJ expects the nutrition & health division to turn in progressively more favorable results as the year progresses and the company’s cost savings measures have had a chance to take hold.

Related Links:

Cognis Achieves NSF International GMP Registration for Natural Vitamin E, Phytosterols and CLA – Complies with New FDA Regulations

Cognis Nutrition & Health Increases North America Prices

2007 Proved Lucrative for Ingredient Suppliers. Will 2008 and 2009 Offer More of the Same?

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