Degussa rides out economic downturn
during 2003 and lower volumes continue to drag down food
ingredients business. A one-off charge to restructure the fine
chemcials unit impacts profits.
Sales have continued to slide at German chemicals firm Degussa during 2003 but the company said it could restrict its fall in sales and operating profit to a single digit percentage.
"The overall economic trend in recent months has been disappointing and the anticipated upturn has not materialised. Nevertheless, we have managed to keep the decline in the operating profit in check," said Professor Utz-Hellmuth Felcht, chairman of Degussa's management board.
Sales in the first nine months reached € 8.6 billion, down 3 per cent compared with comparable period of 2002, while profit on sales fell by 8 per cent. The operating result (EBIT after interest) fell 6 per cent to €491 million (previous year: € 524 million), thanks to an improvement in the net interest position as a result of a reduction in total debt and lower interest rates in major currencies.
Results in the Performance Materials unit, which includes food ingredients activities, followed the rest of the group, with sales dropping 8 per cent over the nine months to €1394 million. EBIT fell by a significant 25 per cent to €138 million in this period, impacted by exchange rates and lower volumes in Food Ingredients and other segments. The operating result is therefore down 23 per cent.
Income at the group was hit by a €500 million impairment charge for the fine chemicals operations, related to goodwill from mergers and acquisition. The company posted a loss of €230 million for the nine months.
Recent months' performance has not lived up to the positive outlook offered by Professor Felcht after a good first quarter. The fine chemicals impairment charge will affect full year results and Degussa is concentrating on keeping the year-on-year decline in sales, EBIT and operating result in the single-digit range.