Monheim, April 17, 2008
Cognis 2007: successful year in a challenging economic environment -- sales growth supported by focus on wellness and sustainability
-Sales up 4.3 percent to 3,518 million euros (up 6.5 percent on an organic basis)
-Higher sales in all three core business areas -- Cognis Care Chemicals, Nutrition & Health and Functional Products
-Operating result (Adjusted EBITDA) up 4.0 percent to 410 million euros
-Higher raw material costs compensated by cost reductions and selling price increases
-Return on sales stable at 11.7 percent
-Optimization of financial stability by refinancing of about 2 billion euros of debt
-Net profit of 30 million euros before special items
-Net loss of 120 million euros including special items
In 2007, global specialty chemicals supplier Cognis increased its net external sales by 4.3 percent 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 percent. 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 4.0 percent 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 percent. Cognis' earnings before interest and taxes (EBIT) increased by 19 million euros or 9.2 percent 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 percent rise in sales to 1,447 million euros (organic sales were up 7.9 percent), reflecting the growth of both its performance ingredients and primary surfactant businesses. The strategic business unit also focused on the rapidly growing market for "green" and natural-source solutions for personal and home care products, and this strategy was well received by its customers.
Nutrition & Health saw its sales rise by 4.7 percent to 331 million euros (organic sales were up 3.9 percent), mainly driven by higher sales of ingredients for baked goods and desserts, and products for the pharmaceutical and healthcare industries. Nutrition & Health also successfully completed the integration of Napro Pharma, which has been acquired in 2006, into its business, contributing to the sales growth with omega-3 fish oil products.
Functional Products achieved growth of 4.0 percent, with total sales of 874 million euros (organic sales were up 8.1 percent). Demand for the company's agricultural solutions and synthetic lubricants was particularly strong. Mining Technology's sales continued to grow, despite the fact that fewer new copper-producing installations came on stream in 2007.
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 percent to 246 million euros (organic sales were down 2.5 percent). 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 percent to 599 million euros (organic sales were up 11.0 percent). This result was primarily due to solid demand and higher prices.
Sales by region
In Germany, sales increased by 8.9 percent to 1,126 million euros, while the Rest of Europe saw a slight fall of 1.1 percent to 890 million euros. In North America sales decreased by 4.0 percent 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 percent) and Asia-Pacific (547 million euros, up 14.6 percent).
Cognis is a worldwide supplier of innovative specialty chemicals and nutritional ingredients, with a particular focus on the areas of wellness and sustainability. The company employs about 7,600 people, and it operates production sites and service centers in 30 countries. Cognis has dedicated its activities to a high level of sustainability and delivers natural source raw materials and ingredients for food, nutrition and healthcare markets, and the cosmetics, detergents and cleaners industries. Another main focus is on products for a number of other industries, such as coatings and inks, lubricants, as well as agriculture and mining. The subsidiary Pulcra Chemicals offers specialized chemical products and process expertise to customers in the fiber, textile, and leather industries. Cognis also holds a 50-percent stake in the joint venture Cognis Oleochemicals, one of the world's leading manufacturers of oleochemicals.
Cognis is owned by private equity funds advised by Permira, GS Capital Partners, and SV Life Sciences. In 2007, Cognis recorded sales of about 3.52 billion euros and an Adjusted EBITDA (operating result) of 410 million euros.
The statements we make in this release may include statements about our plans and future prospects for the company and the industry that are forward-looking statements. Our actual performance may differ materially from performance suggested by those statements. We urge you to review the cautionary statements in our financial statements for information on factors that could cause those differences.