Degussa, the world's largest speciality chemicals company, today joined its peers in the industry by posting interim sales and earnings before interest and taxes (EBIT) that fell short of last year's figures.
The company blamed its weak figures on currency factors, higher raw materials costs and a drop in demand for some products as customers are hit by the downturn in the global economy. "Although we took prompt action to cut costs, we were not able to offset these factors in full," said Prof Utz-Hellmuth Felcht, Degussa's chairman.
Moreover, the group said that the situation was unlikely to improve in the second half of the year, so it is expecting full-year sales and EBIT to fall below the levels achieved in 2002.
The company saw a 6 per cent decline in sales at its core businesses (fine and industrial chemicals, construction chemicals, performance materials, coatings and polymers) to €2.7 billion in the second quarter, dragging the first half revenues down 3 per cent to €5.5 billion.
Meanwhile, the company's non-core businesses (SKW Metallurgie, Oxxynova, the C3-based oxo chemicals business and Goldschmidt's industrial chemicals operations), which are earmarked for divestment, experienced a 6 per cent decline to €390 million in the first half.
EBIT fell 22 per cent in the second quarter to €220 million, although the first-half figure showed only a 9 per cent decline to €468 million.
Net income soared to €33 million, or 16 cents a share, from €5 million or 2 cents in second-quarter 2002, but still did not meet analysts' expectations and included a gain from the sales of Degussa's half of the PolymerLatex joint venture with Bayer and a site in Hythe, UK.
The Fine & Industrial Chemicals division, which includes Degussa's activities in pharmaceuticals and life sciences, was unable to match the good trend reported in the first three months of this year.
Sales slipped 4 per cent to €729 million in the second quarter, but a stronger result in the first three months of the year meant that first-half sales rose 5 per cent to €1.5 billion. EBIT was down 40 per cent in the second quarter but managed a €2 million hike to €126 million. Sales and EBIT were also down in the second quarter for all Degussa's other core units.
Meanwhile, cost-cutting measures in the first half included a slashing of capital expenditures by 27 per cent to €318 million.