Paris, France-based speciality chemicals company Rhodia has reported a disappointing set of first quarter figures that reflects what the firm describes as "a difficult economic and geopolitical environment" and "a trough in the business cycle." Contributing to the performance were the high price of raw materials, particularly petrochemicals, a weakening in demand and the negative impact of the rise in the value of the euro, according to the firm.
Despite the poor results, Rhodia's besieged chief executive, Jean-Pierre Tirouflet, survived a vote to oust him from his position at the company's recent annual general meeting. The shareholders rejected a motion calling for Tirouflet's removal by a margin of 67 per cent to 31 per cent. Another resolution to ratify the nomination of rebel shareholder Edouard Stern as a Rhodia board member was rejected by 65 per cent to 32 per cent.
The company posted a net loss of €52 million, compared to a net profit of €7 million in the first quarter of 2002. In a note on the results, analyst Owen Dwyer of Merill Lynch said this was worse than his forecast of a €24 million loss, although earnings before income tax, depreciation and amortization, at €112 million, were in line with his projections. Unfavourable tax effects also contributed to the net loss.
First-quarter revenues fell 16.5 per cent to €1.43 billion year-on-year, although a large chunk of this decline was due to currency effects and disposals. Stripping out these effects, Rhodia claims a 4.4 per cent sales hike over the same period of 2002, split between 3 per cent volume growth and 1.4 per cent from price increases.
"The high level of raw material prices constituted a major brake on this quarter's performance and significantly depressed the group's operating income with a negative impact estimated at €51 million compared with the same period in 2002," said Rhodia in a statement.
The company's Pharma & Agrochemicals division put in the most lacklustre performance. It made an EBITDA loss of €3 million, well down on Merrill Lynch's forecast of a €15 million profit. Mr Dwyer acknowledged the effects of currency and raw materials pricing on this business, but also noted that the overall pharmaceuticals market remained tough due to product disappointments, mainly related to delayed regulatory approvals by the US Food and Drug Administration.
Rhodia's Intermediates division was also hit by €7 million in costs relating to the delayed re-commissioning of a production plant (which has no been completed).
Despite the disappointing first-quarter performance, Rhodia believes its outlook going forward is hopeful. The firm expects the gradual decline in raw materials, and a gradual increase in selling prices, to result in a slight increase in margins in the second quarter, but stopped short of giving any predictions for the full year.