OK
The Universal Selection Source:
Coatings Ingredients
Industry News

Ciba Specialty Chemicals Sees Pick Up in Demand

Published on 2004-04-29. Author : SpecialChem

Ciba today announced that following an especially weak period during the fourth quarter of 2003 and the early part of 2004, there was a noticeable improvement in sales, operating income and EBITDA towards the end of the first quarter of 2004. Sales in Swiss francs for the first quarter reached last year's levels. There was accelerated improvement in all segments, suggesting the view that a certain market recovery is developing. The quarterly EBITDA margin was higher than in 2003.

Sales in the first quarter of 2004 totaled CHF 1.671 billion, flat in Swiss francs and 1 percent lower in local currencies than the first quarter of 2003 (CHF 1.678 billion). Gross profit (CHF 555 million, 33.2 percent of sales) was higher in both Swiss francs and local currencies than the first quarter of last year (CHF 545 million, 32.5 percent). Also, both operating income (CHF 170 million, 10.2 percent of sales) and EBITDA (CHF 261 million, 15.6 percent of sales) exceeded year ago levels (CHF 169 million, 10.1 percent and CHF 259 million, 15.4 percent, respectively). Net income (CHF 102 million, 6.1 percent of sales) was 6 percent lower in Swiss francs than the first quarter of 2003 (CHF 108 million, 6.5 percent), reflecting a slightly negative shift in net financial expenses. Thanks to the continued share buy-back program during the first quarter, diluted earnings per share were only 3 percent lower, at CHF 1.52.

For 2004, assuming that business conditions are at least comparable to last year and that currency levels do not worsen, and excluding the effects of acquisitions, the Company continues to expect sales in local currencies, the EBITDA margin and net income in Swiss francs to exceed last year's levels. The target for free cash flow remains between CHF 400 million and CHF 500 million. Should a sustainable economic recovery take shape, the Company would expect a rapid and substantial improvement in net income and margins.

Armin Meyer, Chairman and Chief Executive Officer, commented: "We had a slow start to the year, however the trends we observed in March give us reason to believe that we may be seeing the beginning of a recovery in the markets. We have started to see good growth in all of our segments and in both the United States and parts of Europe. Asia- Pacific remains strong. While it's too soon to call this a full recovery, recent signs are positive. The steps we have taken to reduce our cost base, streamline our organization, strengthen our balance sheet, generate cash and focus our personnel on profitable growth put us in a very strong position to benefit quickly and substantially from an upturn. This also applies for the growth business paper, which we want to substantially strengthen with the acquisition of Raisio Chemicals."

Sales in Swiss francs reach last year's level

Sales in Swiss francs totaled CHF 1.671 billion, essentially equal in Swiss francs and 1 percent lower in local currencies. Sales started off slowly in 2004 and then began to accelerate towards the end of the quarter, with improvements seen in all segments during the course of the quarter. Considerable improvements were seen in the United States and parts of Europe, while Asia-Pacific remained strong.

Compared to the first quarter of 2003, there were no major currency impacts during the first quarter of this year. Volumes were 3 percent higher than the first quarter of 2003, and noticeably higher than the fourth quarter of last year. Prices for most segments were between 2 percent and 4 percent lower than a year ago, while secondary changes in currency pricing in Home & Personal Care caused a more pronounced reduction.

EBITDA margin, gross profit and operating income at higher level than 2003

Gross profit for the first quarter of 2004 reached CHF 555 million, or 33.2 percent of sales (32.5 percent a year ago). That was 2 percent higher in Swiss francs and 1 percent higher in local currencies. Improved product margins, coupled with efforts to reduce both raw material and production costs, contributed to the improvement.

Operating income increased by CHF 1 million to CHF 170 million (10.2 percent of sales), compared to the first quarter of 2003. EBITDA was 1 percent higher in Swiss francs, at CHF 261 million, reaching 15.6 percent of sales, higher than any quarterly level in 2003. EBITDA was also noticeably higher than the fourth quarter of 2003, even when the negative effects of the one-time net current operating asset reduction program in the fourth quarter are excluded.

Net income exceeds CHF 100 million; share buy-back contributes to EPS of CHF 1.52

Net income for the first quarter of 2004 totaled CHF 102 million (-6 percent in Swiss francs), or 6.1 percent of sales, due to a slightly negative shift in net financial expenses. As a result of the share buy-back program, introduced in 2003 to increase shareholder value, diluted earnings per share were CHF 1.52, just 3 percent lower than year ago levels.

Active management of assets continued throughout the first quarter as the Company maintained its focus on the global optimization of inventory levels.

Acquisition to support growth in the paper business

The planned acquisition of Raisio Chemicals is on schedule. Following the signing of the sales and purchase agreement in March, the necessary filings have been made with merger control authorities. The Company still anticipates a closing in the second or third quarter of 2004. With sales exceeding Euro 400 million, the acquisition is expected to substantially strengthen the business in the area of paper.

Improvement in all segments during the course of the first quarter

Plastic Additives improved its sales, slightly improved product margins and effectively controlled costs, leading to an EBITDA margin of 18.7 percent of sales, well above the levels in the latter part of 2003. All Coating Effects businesses, except Imaging & Inks, improved sales compared to a year ago, and the segment again delivered a strong EBITDA margin of 22.9 percent of sales. The Water & Paper Treatment Segment saw an improvement in first quarter sales in its Water Treatment business and, later in the quarter, in its Paper business. The segment's EBITDA margin improved from 12.4 percent of sales to 12.7 percent. The EBITDA margin for Textile Effects returned to double-digits (11.1 percent of sales), compared to the very low level in the fourth quarter of 2003. Compared to a year ago, its EBITDA was higher in both Swiss francs (+6 percent) and local currencies (+12 percent). In Home & Personal Care, volume was 4 percent higher, however the secondary effect of currency effects on certain customer contracts (caused primarily by the weakening U.S. dollar / Swiss franc exchange rate) caused an 8 percent decline in prices, leading to lower sales overall. Despite tight cost controls, the segment's EBITDA was CHF 4 million lower than year ago levels. Given the relatively small size of this segment, this small decrease resulted in a noticeable drop in the segment EBITDA margin to 13.1 percent of sales, but does not have a noticeable impact on overall Group profitability.

Outlook 2004 maintained: Company on track - fast improvement in case of sustainable economic recovery

After a slow start, Ciba saw a noticeable improvement in demand towards the end of the first quarter, particularly in March. It is still too soon to refer to these increasing signs of a recovery as a conclusive trend, so the Company will continue its firm measures to control costs globally as well as restrict hiring in lower-growth markets specifically.

For 2004, assuming that business conditions are at least comparable to last year and that currency levels do not worsen, and excluding the effects of acquisitions, the Company continues to expect sales in local currencies, the EBITDA margin and net income in Swiss francs to exceed last year's levels. The Company's free cash flow target remains at between CHF 400 million and CHF 500 million. Should a sustainable economic recovery take shape, the Company would expect a rapid and substantial improvement in net income and margins.

Ciba (SWX: CIBN, NYSE: CSB) is a leading global company dedicated to producing high-value effects for its customers' products. We strive to be the partner of choice for our customers, offering them innovative products and one-stop expert service. We create effects that improve the quality of life - adding performance, protection, color and strength to textiles, plastics, paper, automobiles, buildings, home and personal care products and much more. Ciba is active in more than 120 countries around the world and is committed to be a leader in its chosen markets. In 2003, the Company generated sales of 6.6 billion Swiss francs and invested 281 million in R&D.

Source: Ciba


Channel Alerts

Receive weekly digests on hot topics

Back to Top