Cognis reports a successful year 2007 in a challenging economic environment

In 2007, global specialty chemicals supplier Cognis increased its net external sales by 4.3% in 2007 to 3,518 million euros. Organic sales growth (excluding foreign currency effects and the effects of acquisitions and divestments) stood at 6.5%. All three of the company’s core business areas – Cognis Care Chemicals, Nutrition & Health, and Functional Products – reported substantial increases in sales and contributed to this growth.

The company’s operating result (Adjusted EBITDA) rose by 4% to 410 million euros due to the partial offsetting of the increases in raw material costs and  successful cost management in all areas of the company. Return on sales (Adjusted EBITDA as a percentage of sales) remained unchanged at 11.7%. Cognis’ earnings before interest and taxes (EBIT) increased by 19 million euros or 9.2% to 225 million euros.

Cognis’ net profit before special items rose by 28 million euros to 30 million euros. These special items turned the net profit into a net loss of 120 million euros. The reasons for this are depreciation of financing fees relating to the refinancing transactions before 2007, revaluation of deferred tax assets due to the tax corporate reform in Germany, depreciation of certain assets and expenses for a current cost optimization project.

“Our sales figures for 2007 prove that our strategy in being committed to the wellness and sustainability trends significantly enhances the value of our company,” comments Cognis CEO Antonio Trius. “We achieved these good results despite various extraordinary challenges in 2007, such as a massive rise in raw material costs and a weak US dollar. Furthermore, we were able to conduct a successful refinancing and completed the carve-out of Pulcra Chemicals – two important strategic steps towards ensuring the long-term competitiveness of Cognis.”

Outlook for 2008

“In 2008, we will focus even more on our three core business areas and continue to optimize our operations and processes to equip ourselves for the market challenges that lie ahead. As one example, we established a company-wide cost optimization program,” says Trius. “Cognis will continue to develop highly innovative solutions and strengthen its portfolio of natural-source products, creating the basis for further success in the global growth markets of wellness and sustainability.”

Sales by business unit

Care Chemicals recorded a 6.7% rise in sales to 1,447 million euros (organic sales were up 7.9%), reflecting the growth of both its performance ingredients and primary surfactant businesses.

Nutrition & Health saw its sales rise by 4.7% to 331 million euros (organic sales were up 3.9%), mainly driven by higher sales of ingredients for baked goods and desserts, and products for the pharmaceutical and healthcare industries.

Functional Products achieved growth of 4.0%, with total sales of 874 million euros (organic sales were up 8.1 percent).

Since July 1, 2007, what was formerly Cognis’ Process Chemicals SBU has been trading under the name of Pulcra Chemicals, a wholly owned subsidiary of the Cognis group. Its sales fell by 4.7% to 246 million euros (organic sales were down 2.5%). Although Pulcra Chemicals did achieve growth in China, volumes in all other regions were lower, due to the adverse market conditions in both the textiles and leather industries. At the same time, higher raw material costs affected the business negatively.

The 50:50 joint venture between Cognis and Sime Darby, Cognis Oleochemicals, recorded growth of 8.3% to 599 million euros (organic sales were up 11.0%). This result was primarily due to solid demand and higher prices.

Sales by region

In Germany, sales increased by 8.9% to 1,126 million euros, while the Rest of Europe saw a slight fall of 1.1% to 890 million euros. In North America sales decreased by 4.0% to 766 million euros, due to the weakness of the dollar.The most significant growth was achieved in Central and South America (189 million euros, up 16.1%) and Asia-Pacific (547 million euros, up 14.6%).

Courtesy:Cognis GmbH