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Ciba reports weaker than expected start to 2008
FINANCIALS
for its Crodamide™ additives to offset significant increases in natural feedstock costs. The company says that market prices for natural oils have almost doubled in the past 12 months and there is continued pressure on availability. Ferro Corp’s (www.ferro.com) new Engineered Polymer Products unit has increased prices for plastic colorants products from 15 June. For natural resin and additive compounds the increase is $0.11/lb; for speciality pre-colour compounds and salt-and-pepper blends $0.15/lb; and for speciality colour concentrates up to $0.20/lb. And AOC, LLC (www.aoc-resins.com) brought in a US$0.10/lb (C$0.22/kg) price increase on all pigments, colorants and additives sold in the USA and Canada effective for all shipments from 30 June. Eastman Chemical (www.eastman.com) has implemented several rounds of price increases affecting plasticizers. From 1 June, the global off-list price of DOA, DOA Kosher, DOP, 168, 168-CA, 168 Xtreme, 425, TOTM, DBP, DEP and DMP plasticizers was raised by $0.05/lb ($0.11/kg). This followed a $0.03/lb increase in North and Latin American off-list prices for DOP, 168, 168-CA, 168 Xtreme, DOA, DOA Kosher, 425 and TOTM from 15 May. North and Latin American prices for 2ethylhexanol and 2-ethylhexanoic acid have also been increased. The rising cost of tin [ADPO, May 2008] continues to have a knock-on effect. From June, Rohm and Haas (www.rohmhaas.com) is applying an indexed surcharge in the Asia Pacific region to its tin heat stabilizer products. The index will be adjusted monthly. And Evonik Goldschmidt’s (www.evonik.com) Polyurethane Additives business line increased prices for its Kosmos® 29 stannous octoate by 20% in North America from 6 June. Prices of dilutions of Kosmos 29 as well as Kosmos 19 di-butyl tin di-laurate are also increasing in proportion to their tin content. North American prices for all other polyurethane additives sold by the company have been increased by 5–7% from 1 July. Parent company Evonik Industries also implemented a 10% price increase on pigment carbon blacks from 15 May. Finally, Dow Europe GmbH (www.dow.com) increased the price of its Affinity™ and Engage™ polyolefin elastomers by 150/tonne from 1 June. Applications for these products include impact modification.
July 2008
FINANCIALS Ciba reports weaker than expected start to 2008
A
ccording to Ciba’s CEO Brendan Cummins, dramatic changes in the currency and raw material environment had a more adverse effect on the company’s first quarter results than predicted, with sales in Swiss francs down 6% to CHF1.56 billion and net income of CHF37 million, less than half the 1Q 2007 figure of CHF76 million. Although good underlying growth continues in many of Ciba’s markets, the impact of the economic slowdown on overall sales growth is clearly apparent in NAFTA and in Europe, Cummins says. Asia and the Middle East are proving to be more resilient.
Sales in local currencies were 1% lower overall for 1Q 2008, with Europe 2% down, the Americas flat and Asia (which includes Africa and the Middle East) 1% higher. Sales in Asia were boosted by Plastic Additives and Coating Effects but these segments showed slightly weaker performance in the Americas compared to 1Q 2007. Raw material costs surged in the middle of the quarter at an unprecedented rate and the increases were significantly higher than anticipated, up 4.5% over 1Q 2007, Ciba reports. However, this impact was partially offset by a 3% drop in production costs compared to the previous year. A number of price increases have already been initiated to mitigate this impact. Operating income (EBIT) before restructuring was CHF107 million (CHF134 million in 1Q 2007) resulting in an EBIT margin of 6.9% (2007: 8.1%). This lower result was mainly related to a 5% negative currency impact, as well as the absorption of higher raw material costs and some temporary production shutdowns in Plastic Additives. Net financial expenses increased by CHF12 million compared to the same period of 2007, mainly the result of unfavourable currency developments, while restructuring charges from the Operational Agenda programme increased from CHF3 million in 1Q 2007 to CHF18 million this year. The programme delivered savings as expected of CHF26 million in 1Q 2008 representing an overall net reduction in the cost base of about 1%.
Additives for Polymers
9
FINANCIALS
In the Plastic Additives segment, 1Q sales of CHF528 million were down 5% in Swiss franc terms from CHF553 million for 1Q 2007, impacted by the relatively strong Swiss franc and some product shortages from temporary production shutdowns. Sales in local currencies were 1% higher than the previous year, with Europe 2% higher, the Americas 1% lower and Asia 2% higher. This reflected a change in sales mix from the previous year. Overall, however, the underlying business is performing well, particularly in Europe, Ciba says. Segment profitability was somewhat impacted by unrelated technical problems at three major sites, which resulted in disruption to customer supply before normal production levels could be resumed. In addition, the segment had some start-up costs for the Singapore antioxidant plant which began test production in March. Customer orders for antioxidants, which are currently being supplied from other regions, will move to the new plant in the next few months. Operating income before restructuring was CHF51 million, down from CHF87 million in 1Q 2007, resulting in a margin of 9.8% (15.7%). The result was also impacted by higher raw material costs, as well as the relative strength of the Swiss franc. The company says it expects the segment’s profitability levels to recover going forward. Looking ahead, Ciba is planning to bring all its plastics-related additives and pigments businesses together to further strengthen its industry focus and better exploit its ‘strong position’ in the plastics industry. Contact: Ciba Inc, Basel, Switzerland. Tel: +41 61 636 4444, Web: www.ciba.com
Clariant achieves improved margin in first quarter 2008 but sales & income decline
S
wiss-based speciality chemicals major Clariant posted sales of CHF2.112 billion for the first quarter of 2008, representing a 3% sales growth in local currencies but a 2%
10
Additives for Polymers
decline in Swiss francs due to adverse currency effects. Net income for the quarter declined to CHF41 million from CHF86 million in 1Q 2007 as a result of higher restructuring costs and unfavourable currency effects, which wiped CHF44 million from the net result.
The operating margin before exceptionals improved to 7.9% from last year’s 7.1%. This translates into an increased operating income before exceptionals of CHF167 million compared to CHF152 million in 1Q 2007, the company reports. Clariant experienced a 9% increase in raw material costs during the quarter but says it was able to fully offset this with a 4% increase in prices. The company reduced its headcount by a further 400 positions in 1Q 2008 as part of the ongoing restructuring measures, while sales, general and administration costs declined to 20.7% from 21.8% in the first quarter of 2007. According to CEO Jan Secher, the measures initiated to improve operational performance have started to show a positive impact, with the focus on increased pricing and strict cost control in particular contributing to the improved operating margin. All four divisions achieved higher prices in the first quarter; following Clariant’s price over volume approach, the divisions have tackled customers with unsatisfying profitability by price increases, utilization of alternative low-cost distribution channels or giving up on unprofitable business. These measures had a slightly negative effect on volumes without having materially impacted capacity utilization. The Pigments & Additives division achieved good 1Q growth in both sales and margin. Sales at CHF527 million were up 6% in local currencies (1% in Swiss francs) compared to the previous year, mainly as a result of good demand. The main growth driver was the Coatings business but the Plastics business and other sectors also saw good growth in terms of price and volume, the company says. Geographically, demand in Asia and Latin America gained momentum, whilst sales in Europe were slightly lower. The weakness of the US market had only limited impact on the division’s top line due to the relatively small exposure of Pigments & Additives to this market. The division significantly improved profitability due
July 2008
for its Crodamide™ additives to offset significant increases in natural feedstock costs. The company says that market prices for natural oils have almost doubled in the past 12 months and there is continued pressure on availability. Ferro Corp’s (www.ferro.com) new Engineered Polymer Products unit has increased prices for plastic colorants products from 15 June. For natural resin and additive compounds the increase is $0.11/lb; for speciality pre-colour compounds and salt-and-pepper blends $0.15/lb; and for speciality colour concentrates up to $0.20/lb. And AOC, LLC (www.aoc-resins.com) brought in a US$0.10/lb (C$0.22/kg) price increase on all pigments, colorants and additives sold in the USA and Canada effective for all shipments from 30 June. Eastman Chemical (www.eastman.com) has implemented several rounds of price increases affecting plasticizers. From 1 June, the global off-list price of DOA, DOA Kosher, DOP, 168, 168-CA, 168 Xtreme, 425, TOTM, DBP, DEP and DMP plasticizers was raised by $0.05/lb ($0.11/kg). This followed a $0.03/lb increase in North and Latin American off-list prices for DOP, 168, 168-CA, 168 Xtreme, DOA, DOA Kosher, 425 and TOTM from 15 May. North and Latin American prices for 2ethylhexanol and 2-ethylhexanoic acid have also been increased. The rising cost of tin [ADPO, May 2008] continues to have a knock-on effect. From June, Rohm and Haas (www.rohmhaas.com) is applying an indexed surcharge in the Asia Pacific region to its tin heat stabilizer products. The index will be adjusted monthly. And Evonik Goldschmidt’s (www.evonik.com) Polyurethane Additives business line increased prices for its Kosmos® 29 stannous octoate by 20% in North America from 6 June. Prices of dilutions of Kosmos 29 as well as Kosmos 19 di-butyl tin di-laurate are also increasing in proportion to their tin content. North American prices for all other polyurethane additives sold by the company have been increased by 5–7% from 1 July. Parent company Evonik Industries also implemented a 10% price increase on pigment carbon blacks from 15 May. Finally, Dow Europe GmbH (www.dow.com) increased the price of its Affinity™ and Engage™ polyolefin elastomers by 150/tonne from 1 June. Applications for these products include impact modification.
July 2008
FINANCIALS Ciba reports weaker than expected start to 2008
A
ccording to Ciba’s CEO Brendan Cummins, dramatic changes in the currency and raw material environment had a more adverse effect on the company’s first quarter results than predicted, with sales in Swiss francs down 6% to CHF1.56 billion and net income of CHF37 million, less than half the 1Q 2007 figure of CHF76 million. Although good underlying growth continues in many of Ciba’s markets, the impact of the economic slowdown on overall sales growth is clearly apparent in NAFTA and in Europe, Cummins says. Asia and the Middle East are proving to be more resilient.
Sales in local currencies were 1% lower overall for 1Q 2008, with Europe 2% down, the Americas flat and Asia (which includes Africa and the Middle East) 1% higher. Sales in Asia were boosted by Plastic Additives and Coating Effects but these segments showed slightly weaker performance in the Americas compared to 1Q 2007. Raw material costs surged in the middle of the quarter at an unprecedented rate and the increases were significantly higher than anticipated, up 4.5% over 1Q 2007, Ciba reports. However, this impact was partially offset by a 3% drop in production costs compared to the previous year. A number of price increases have already been initiated to mitigate this impact. Operating income (EBIT) before restructuring was CHF107 million (CHF134 million in 1Q 2007) resulting in an EBIT margin of 6.9% (2007: 8.1%). This lower result was mainly related to a 5% negative currency impact, as well as the absorption of higher raw material costs and some temporary production shutdowns in Plastic Additives. Net financial expenses increased by CHF12 million compared to the same period of 2007, mainly the result of unfavourable currency developments, while restructuring charges from the Operational Agenda programme increased from CHF3 million in 1Q 2007 to CHF18 million this year. The programme delivered savings as expected of CHF26 million in 1Q 2008 representing an overall net reduction in the cost base of about 1%.
Additives for Polymers
9
FINANCIALS
In the Plastic Additives segment, 1Q sales of CHF528 million were down 5% in Swiss franc terms from CHF553 million for 1Q 2007, impacted by the relatively strong Swiss franc and some product shortages from temporary production shutdowns. Sales in local currencies were 1% higher than the previous year, with Europe 2% higher, the Americas 1% lower and Asia 2% higher. This reflected a change in sales mix from the previous year. Overall, however, the underlying business is performing well, particularly in Europe, Ciba says. Segment profitability was somewhat impacted by unrelated technical problems at three major sites, which resulted in disruption to customer supply before normal production levels could be resumed. In addition, the segment had some start-up costs for the Singapore antioxidant plant which began test production in March. Customer orders for antioxidants, which are currently being supplied from other regions, will move to the new plant in the next few months. Operating income before restructuring was CHF51 million, down from CHF87 million in 1Q 2007, resulting in a margin of 9.8% (15.7%). The result was also impacted by higher raw material costs, as well as the relative strength of the Swiss franc. The company says it expects the segment’s profitability levels to recover going forward. Looking ahead, Ciba is planning to bring all its plastics-related additives and pigments businesses together to further strengthen its industry focus and better exploit its ‘strong position’ in the plastics industry. Contact: Ciba Inc, Basel, Switzerland. Tel: +41 61 636 4444, Web: www.ciba.com
Clariant achieves improved margin in first quarter 2008 but sales & income decline
S
wiss-based speciality chemicals major Clariant posted sales of CHF2.112 billion for the first quarter of 2008, representing a 3% sales growth in local currencies but a 2%
10
Additives for Polymers
decline in Swiss francs due to adverse currency effects. Net income for the quarter declined to CHF41 million from CHF86 million in 1Q 2007 as a result of higher restructuring costs and unfavourable currency effects, which wiped CHF44 million from the net result.
The operating margin before exceptionals improved to 7.9% from last year’s 7.1%. This translates into an increased operating income before exceptionals of CHF167 million compared to CHF152 million in 1Q 2007, the company reports. Clariant experienced a 9% increase in raw material costs during the quarter but says it was able to fully offset this with a 4% increase in prices. The company reduced its headcount by a further 400 positions in 1Q 2008 as part of the ongoing restructuring measures, while sales, general and administration costs declined to 20.7% from 21.8% in the first quarter of 2007. According to CEO Jan Secher, the measures initiated to improve operational performance have started to show a positive impact, with the focus on increased pricing and strict cost control in particular contributing to the improved operating margin. All four divisions achieved higher prices in the first quarter; following Clariant’s price over volume approach, the divisions have tackled customers with unsatisfying profitability by price increases, utilization of alternative low-cost distribution channels or giving up on unprofitable business. These measures had a slightly negative effect on volumes without having materially impacted capacity utilization. The Pigments & Additives division achieved good 1Q growth in both sales and margin. Sales at CHF527 million were up 6% in local currencies (1% in Swiss francs) compared to the previous year, mainly as a result of good demand. The main growth driver was the Coatings business but the Plastics business and other sectors also saw good growth in terms of price and volume, the company says. Geographically, demand in Asia and Latin America gained momentum, whilst sales in Europe were slightly lower. The weakness of the US market had only limited impact on the division’s top line due to the relatively small exposure of Pigments & Additives to this market. The division significantly improved profitability due
July 2008