Cognis positive over sterols, but mulls overall options

By Jess Halliday

- Last updated on GMT

Related tags Cognis

Cognis is counting on phytosterols and branded ingredients like
Tonalin CLA to drive its nutrition and health business unit, while
at the same time investigating strategic options for the company as
a whole

The Germany chemical company released its 2005 results this week, and nutrition and health was seen to be one of the best performing of the five strategic business units (SBU). Sales increased 5.6 percent from €287 in 2004 to €303.

Nutrition and health also accounted for 63.4 per cent of operating profit (EBIT) - even though its own profits slipped somewhat from €42m to €36m.

In sales terms however, nutrition and health is the smallest SBU, accounting for just 9.5 percent of overall revenue in 2005.

Across the company as a whole, sales were up 3.7 per cent on the previous year, to €3.18bn - but operating profit (EBIT) took a dive from €99m to €57m.

Commenting on the results for the group, CEO Dr Antonio Trius said: "While higher raw material and energy costs had a negative impact on results, we benefited from our investments in product innovations, capacity and customer relationships in attractive, targeted markets."

Although Dr Trius did not betray any overriding concern about the future in his remarks, this week Cognis announced that is exploring and pursuing various strategic options "in light of an attractive market environment". It has mandated investment banks Goldman Sachs and JP Morgan to assist with the review.

The private-equity funded company has revealed nothing about what the potential options may entail, but some press reports have speculated that they could include putting itself up for sale.

For now, though, one of the attractive targeted markets Trius identified were phytosterols for functional food applications.

Indeed, he was not merely doing lip service to sterols. Last year Cognis put its money where its mouth is and commissioned a €20m esterification plant at its Illertissen site in Germany. This represents the greatest single investment the company has made in its seven-year history.

For nutrition and health, the dent in operating profit was attributed to the US market. Although America was a major force behind 21 percent sales growth for the fat-reducing product Tonalin CLA on a global scale, lower vitamin E sales dragged down the performance of the whole SBU in the region by 21 per cent.

"Vitamin E sales…together with the vitamin E market as a whole, have been affected by discussions in the media and scientific community about the risks and benefits of vitamin E,"​ said the company.

Cognis has devoted much effort to marketing Tonalin CLA this year, and it seems to be paying off.

The new Illertissen facility will also produce Cognis' body fat-reducing product Tonalin CLA, another area that the company regards as a target growth market for the SBU.

For the SBU's food technology subsegment of the SBU (producing and distributing emulsifiers, whisking agents, enzymes, fats and fat powders) sales maintained at their 2004 level in most regions. The exception was Asia Pacific, where sales grew by 5.8 per cent over 2004.

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