Arkema Profits Down, sees Return to Normal in 2011
French chemicals company Arkema said it expects market conditions to return to normal in 2011 as it posted lower 2008 earnings and cut its dividend and spending plans to resist the global financial crisis.
The worsening crisis took its toll on customers, mainly in the car and building sectors, in the last quarter, and Arkema said on Thursday there were no signs of a recovery in demand.
Ongoing uncertainty led Arkema to aim for 20% lower capital expenditure this year from 2008 levels. However, it was confident of making positive free cash flow – a priority which its French rival Rhodia also set itself for this year.
Arkema gave no forecast for the year. It had initially aimed for 12% growth of its earnings before interest, tax, depreciation and amortisation (EBITDA) in 2010 under "normal conditions".
Chairman and chief executive Thierry Le Henaff refused to update Arkema's target, only saying circumstances were unlikely to return to normal in 2010.
"We have to be realistic, we expect conditions to normalise again in 2011," he said at a news conference.
Fourth-quarter earnings fell due to an "unprecedented collapse in demand". Clients used up their stock and dropped orders for Arkema's PVC products, used to make window profiles, and its acrylic glass products for cars or consumer electronics.
Net profit fell 18% in 2008 to €100m, and Arkema proposed cutting its dividend to €0.60 a share from €0.75 in 2007 when it offered its first after its spin off from oil company Total. Rhodia scrapped its 2008 dividend.
Sales fell 0.7% to €5.6bn ($7bn), after tumbling 10.3% in the final quarter.
Its vinyl division was hit the hardest in the quarter partly due to a significant price increase of the raw material ethylene and a drop in demand. Arkema aims to reduce the unit's part of total sales to 15% from about 25%.
Arkema's products are used in cosmetic powders, paint, high-pressure natural gas distribution pipes and running shoes.
EBITDA fell 4% to €498m in the year but more than halved in the final quarter. The full-year margin narrowed to 8.8%, in line with Arkema's estimate of around 9% and compared with 9.1% in 2007.
Debt dropped to €495m from €450m, giving the company a gearing of 25%.
Le Henaff excluded making takeovers in the first half of the year however he said that in time Arkema could decide to buy small companies mainly to add to Performance Products, which makes chemicals for hoses, toys and cosmetics, and mainly in Asia.
Arkema has cut about 4,000 jobs in the past three years to have 15,000 employees in 2008. Le Henaff left the door open on whether more jobs would go: "We have no plans, but we do it when necessary."
Arkema shares rose 2.1% to €10.98 by 12.39 GMT, yielding a market value of €664m. They recovered from a 5.15% drop earlier and outperformed a 2.9% fall in the DJ Chemical index.
"The outlook remains difficult for at least the first half...Arkema, however, has a tight control over costs with ongoing restructuring a feature, while the company remains well-placed to benefit when demand rebounds," Cazenove said in a research note. It has an "in-line" recommendation on the stock.
Cost cuts should be €220m from 2009 to 2010.
Chemical companies are sensitive to the economic cycle, and the poor performance of the car and building sectors has had a major impact, leading to further cost, production and job cuts.
BASF of Germany has said it sees 2009 as a year of unprecedented challenges and it expects chemical production to slip 2% in 2009.
By Caroline Jacobs, Reuters.
quoted from: www.chemicals-technology.com
The worsening crisis took its toll on customers, mainly in the car and building sectors, in the last quarter, and Arkema said on Thursday there were no signs of a recovery in demand.
Ongoing uncertainty led Arkema to aim for 20% lower capital expenditure this year from 2008 levels. However, it was confident of making positive free cash flow – a priority which its French rival Rhodia also set itself for this year.
Arkema gave no forecast for the year. It had initially aimed for 12% growth of its earnings before interest, tax, depreciation and amortisation (EBITDA) in 2010 under "normal conditions".
Chairman and chief executive Thierry Le Henaff refused to update Arkema's target, only saying circumstances were unlikely to return to normal in 2010.
"We have to be realistic, we expect conditions to normalise again in 2011," he said at a news conference.
Fourth-quarter earnings fell due to an "unprecedented collapse in demand". Clients used up their stock and dropped orders for Arkema's PVC products, used to make window profiles, and its acrylic glass products for cars or consumer electronics.
Net profit fell 18% in 2008 to €100m, and Arkema proposed cutting its dividend to €0.60 a share from €0.75 in 2007 when it offered its first after its spin off from oil company Total. Rhodia scrapped its 2008 dividend.
Sales fell 0.7% to €5.6bn ($7bn), after tumbling 10.3% in the final quarter.
Its vinyl division was hit the hardest in the quarter partly due to a significant price increase of the raw material ethylene and a drop in demand. Arkema aims to reduce the unit's part of total sales to 15% from about 25%.
Arkema's products are used in cosmetic powders, paint, high-pressure natural gas distribution pipes and running shoes.
EBITDA fell 4% to €498m in the year but more than halved in the final quarter. The full-year margin narrowed to 8.8%, in line with Arkema's estimate of around 9% and compared with 9.1% in 2007.
Debt dropped to €495m from €450m, giving the company a gearing of 25%.
Le Henaff excluded making takeovers in the first half of the year however he said that in time Arkema could decide to buy small companies mainly to add to Performance Products, which makes chemicals for hoses, toys and cosmetics, and mainly in Asia.
Arkema has cut about 4,000 jobs in the past three years to have 15,000 employees in 2008. Le Henaff left the door open on whether more jobs would go: "We have no plans, but we do it when necessary."
Arkema shares rose 2.1% to €10.98 by 12.39 GMT, yielding a market value of €664m. They recovered from a 5.15% drop earlier and outperformed a 2.9% fall in the DJ Chemical index.
"The outlook remains difficult for at least the first half...Arkema, however, has a tight control over costs with ongoing restructuring a feature, while the company remains well-placed to benefit when demand rebounds," Cazenove said in a research note. It has an "in-line" recommendation on the stock.
Cost cuts should be €220m from 2009 to 2010.
Chemical companies are sensitive to the economic cycle, and the poor performance of the car and building sectors has had a major impact, leading to further cost, production and job cuts.
BASF of Germany has said it sees 2009 as a year of unprecedented challenges and it expects chemical production to slip 2% in 2009.
By Caroline Jacobs, Reuters.
quoted from: www.chemicals-technology.com
