Refinancing pays off for Cognis

By Alex McNally

- Last updated on GMT

Cognis has announced an increase in sales for the first half of the
year - up 6.2 per cent - with profits reaching €39m despite
rises in raw materials.

The group recorded overall sales of €1,821m with an operating result of €214m despite a "massive rise​" in costs, especially for natural oils and fats. Despite earnings before interest and taxes falling by 1.4 percent to €119m, the group remained confident that its refinancing earlier this year was successful. In May Cognis completed a major refinancing, which was aimed at bringing a considerable reduction of financing costs and improves its liquidity position. At the time Cognis said it took advantage of favourable conditions in the capital markets to issue notes and loans with a face value of €1.65bn. The funds raised have been used to redeem existing bank facilities, second lien loans and rates, and around €350m of outstanding PIK notes at parent level. The result was predicted to bring an interest savings of around €60m per year, no scheduled amortization, and an annual cash benefit of around €100m a year. Chief executive Antonio Trius said: "We are pleased with the first half-year. Our Care Chemicals, Nutrition & Health and Functional Products strategic business units, with their focus on innovation-driven growth markets, have made particularly important contributions to our encouraging figures​. "Furthermore, we were able to conduct a successful refinancing. In doing so, we achieved a considerable reduction in financing costs of about 74 million euros on average per year, and improved our liquidity position going forward."​ The outlook for the rest of the year is good, the company said, and hopes to build on the growth in sales seen in the first half of this year. Trius added: "The good results show that we could partly make up for the higher raw material costs and give us particular reason to look ahead to the rest of 2007 with confidence."​ However, sales of branded ingredients like sterol esters and CLA have slightly slowed down. Nutrition and Health recorded sales of €174m, a 6.2 per cent rise on the first half year of 2006. The growth was largely attributable to products for the pharmaceutical and healthcare industries, and the carotenoids and vitamin E businesses. Raw material prices for natural oils are on historically high level, the group said this morning. Functional Products achieved growth of 7.8 per cent, with total sales of €465m. This result shows the benefits of previous restructuring activities and a successful sales strategy. The sales of the polymers, coatings, and inks business were affected by a slowdown in the US housing and construction market. Cognis employs about 8,000 people, and operates production sites and service centers in 30 countries. In 2006, Cognis recorded sales of €3.37bn and an adjusted operating result of €394m. Cognis' largest business unit is the Care Chemicals section which saw a rise in sales (excluding currency effects) up 6.9 percent to €728m, due mostly to strong sales of primary surfactants and silicates. Fatty alcohol sales remained under pressure, due to the intense competition in this market. Selling price increases to counter higher raw material cost could be achieved successfully.

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