Stability of volumes reflecting priority given to prices: Rhodia
Rhodia is an international chemical company resolutely committed to sustainable development.
“Once again, Rhodia's strong pricing power has allowed us to more than offset the unrelenting increases in raw material and energy costs," commented Rhodia Chairman and Chief Executive Officer Jean-Pierre Clamadieu.
"On the back of satisfactory demand levels, we will continue to give priority to pricing. We remain therefore confident in the performance of our businesses despite the challenging feedstock environment and the strong Forex headwinds we are facing."
1. Strong pricing fully offsets cost increases:
The 5% (1) increase in Net Sales was driven by a 8.1% positive impact from strong pricing in local currency. In a satisfactory demand environment, volumes were stable as Rhodia effectively gave priority to prices over volumes. The transactional foreign exchange impact was a negative (3.5)%.
Recurring EBITDA(1) was stable. €95 million of price rises more than compensated for a €(78) million increase in raw material and energy costs. The transactional foreign exchange impact amounted to €(23) million. Fixed costs were under control and decreased by €7 million.
Operating Profit(1) was up by 16% versus the second quarter of 2007 and amounted to €115 million. The Financial Result improved to €(56) million from €(84) million in the second quarter of 2007 which was impacted by a one-off financial restructuring charge of €(34) million. Net financial charges improved from €(38) to €(33) million.
The Net Profit Group Share increased from €3 million in the second quarter of 2007 to €35 million in the second quarter of 2008. Earnings per Share rose to € 0.35 from €0.03 a year earlier.
2. Free Cash Flow affected by temporarily negative Working Capital variance:
Due to the continuous disciplined management of investments, Capital Expenditure amounted to €65 million versus €76 million in the second quarter of 2007.
Working Capital stood at 12.4% of Total Sales versus 12.9% a year earlier. However, Working Capital increased by €64 million versus the end of the first quarter of 2008, reflecting the impact of price increases and the temporary effect of the deployment of a new SAP based system in Rhodia's USA operations.
The temporary increase in Working Capital weighed on the Free Cash Flow which amounted to €(15) million. At €1,570 million on June 30, 2008, Consolidated Net Debt is nearly stable compared to €1,529 million on March 31, 2008.
The Polyamide Enterprise registered stable volumes, reflecting the Group's policy to give priority to prices. New price initiatives were implemented in order to fully cover raw materials and energy cost increases. US competitors with available volumes due to the slowdown in the US market benefited from favorable currency and natural gas costs.
The decline in the US Dollar against the Brazilian Real and the Euro led to a negative Forex impact of €(13) million. In the second half of the year, new price increases are underway to compensate for continuous raw material cost inflation, in particular for Butadiene.