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Cognis 2009 results: strong earnings and cash flow Resilient, innovative product portfolio defies global downturn

Published on 2010-03-25. Author : SpecialChem

MONHEIM -- In 2009, global specialty chemicals supplier Cognis proved its resilient operating performance in a challenging environment. Due to the global economic crisis and the consequent weak demand in some end markets in the first half of 2009, sales volumes decreased by 7.8 percent compared to the previous year. Sales decreased by 13.9 percent to 2,584 million euros. In the second half of 2009, Cognis observed a continuing recovery in global demand - and as a result, in its own sales volumes - across most of its markets.

Compared to 2008, Cognis' operating result (Adjusted EBITDA) increased by 13 million euros to 364 million euros (plus 3.6 percent). Return on sales (Adjusted EBITDA as a percentage of sales) increased by 2.4 percentage points to 14.1 percent. This positive development was mainly attributable to Cognis' resilient, innovative product portfolio. The company also benefitted from the increasing importance of the global green trend, successful product launches, and effective cost management. These factors compensated for the decline in volume. A fall in selling prices was driven by lower raw material costs.

Earnings before interest and taxes (EBIT) increased by 3 million euros to 195 million euros. Net profit from continuing operations improved significantly to 25 million euros.

Operating cash flow in 2009 increased by 260 million euros to 488 million euros, due to strong operating performance and effective working capital management. Overall, Cognis' cash position improved substantially to 324 million euros.

Cognis took advantage of favorable conditions in capital markets to buy back PIK loans in open-market transactions since 2008, with a total face value of 284 million euros. As a result, the net debt of the Cognis Group (including Cognis Holding GmbH) decreased to 1,866 million euros, which is 396 million euros less than on December 31, 2008.

Cognis CEO Antonio Trius:"Our strategy and the restructuring of our portfolio have really paid off during this time of crisis: amid the uncertainty of 2009, our business model and our new organizational structure with the three business units Care Chemicals, Nutrition & Health, and Functional Products have proven themselves highly resilient and agile. We reacted swiftly and decisively to the global downturn. Our portfolio of innovative products and concepts aligned with the wellness and sustainability trends, strengthened by the launch of about 50 new products, has enabled us to leverage our strong position in dynamic markets effectively. This, combined with our systematic efforts to improve efficiency and productivity, meant that we were able to improve our operating result despite the decrease in sales volumes seen last year."


"We expect the markets to remain volatile in 2010, although we have made an excellent start to 2010. Assuming global economic conditions continue to recover, we expect to achieve an increase in sales volumes in 2010, and continue to exploit the growth potential offered by the wellness and sustainability trends, in both mature and emerging markets," says Trius."We also expect to further improve our operating result by providing added value to our customers through innovative products, and as a result of continuing efficiency improvements."

Sales by strategic business unit

Care Chemicals recorded sales of 1,457 million euros in 2009, a decrease of 13.4 percent (down 12.6 percent on an organic basis) compared to the previous year. This was due to 4 percent lower sales volumes, reflecting weak global economic conditions and demand, especially from business segments with industrial applications. The personal and home care market segments proved more resilient, with volumes remaining stable. Care Chemicals' Adjusted EBITDA increased by 4.0 percent to 212 million euros in 2009. The key factors in this improvement were the strong and innovative product mix, growing consumer awareness of the green trend, and a reduction in operating costs.

Nutrition & Health saw its sales decrease by 6.3 percent to 325 million euros in 2009 (down 5.5 percent on an organic basis), mainly due to weak consumer demand. Businesses serving the dietary supplements and food ingredients markets were particularly affected by the global downturn. However, the Pharma & Health business performed well and achieved significant sales growth, thanks in part to its successful acquisition of new customers. Nutrition & Health's Adjusted EBITDA fell by 17.9 percent to 54 million euros in 2009. This was mainly due to the lower sales, higher raw material costs, as well as negative one-time effects.

Functional Products achieved sales of 786 million euros, representing a fall of 17.1 percent (down 16.7 percent on an organic basis). The global downturn affected all its business segments, but especially Coatings & Inks, and synthetic lubricants for industrial, construction and automotive applications. However, in the fourth quarter these businesses showed signs of a recovery in volumes. Functional Products' Adjusted EBITDA increased by 13.6 percent to 100 million euros. The main drivers of this improvement were higher sales of specialty products, positive development in emerging markets and successful cost management.

About Cognis:

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 5,600 people, and it operates production sites and service centers in 30 countries. Cognis has dedicated its activities to a high level of sustainability and provides value adding solutions and products based on renewable raw materials. The company serves the 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.

Cognis is owned by private equity funds advised by Permira, GS Capital Partners, and SV Life Sciences. In 2009, Cognis recorded sales of about 2.6 billion euros and an Adjusted EBITDA (operating result) of 364 million euros.

Forward-looking Statement

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, which you should consider only in connection with the cautionary statements in our financial statements. These contain information on factors that could cause those differences. We urge you to review these cautionary statements.

Source: Cognis

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