Ciba increases sales prices 6% in third quarter

06 Nov '08

5 min read

Net income for the third quarter was CHF 46 million.
Sales of CHF 4,637 million for the nine months were 6 percent lower than 2007 in Swiss francs and flat in local currencies, as the Swiss franc remained strong relative to the US dollar. Sales in local currencies were 5 percent lower in Europe, with a significant slowdown in the automotive and construction industries, as well as continued weakening in the paper and inks markets.

In the Americas, sales were 1 percent higher, with good growth in the Water & Paper Treatment segment, which offset some softening in plastics and coatings, which were impacted by the slowdown in the automotive and construction industries. Central and South America showed growth of 10 percent and 6 percent respectively.

In Asia, growth remained strong across most business lines, up 8 percent in local currencies.

Sales prices increased 2 percent over the nine months, accelerating significantly in the third quarter. This did not however, fully offset the CHF 247 million or 11 percent increase in raw material prices experienced during the period. Volume mix was 2 percent lower.

Gross profit margin was 26.7 percent (2007: 28.9 percent), lower as a result of the raw material price increases in 2008.

Operating income (EBIT) before restructuring of CHF 274 million or a margin of 5.9 percent (2007: CHF 423 million, 8.6 percent) for the nine months, reflected the weaker second quarter, where raw material price and energy cost increases were significant. Sales price increases improved profitability in the third quarter.

Restructuring charges relating to the Operational Agenda program to improve the cost structure and facilitate growth, were CHF 70 million (2007: CHF 93 million) for the nine months. There was also a goodwill impairment charge of CHF 590 million in Water & Paper Treatment mainly incurred in the second quarter.

Savings from the Operational Agenda were CHF 90 million for the nine months and are expected to come in at CHF 120 million for the full year, higher than the previously anticipated CHF 100 million.

Net financial expenses increased in the nine months to CHF 109 million (2007: CHF 88 million).This increase was mainly a result of the sell-off in emerging market currencies in September, especially the Brazilian real, and the decrease in the value of the Euro against the Swiss franc, which resulted in higher foreign exchange costs.

Taxes were lower in the nine month period at CHF 28 million (2007: CHF 76 million). In both the third quarters of 2007 and of 2008 there were one-time effects relating to a change in tax law which had an impact on tax expenses. In the third quarter of 2007 there was an additional expense of CHF 15 million, and in the same period in 2008, an additional CHF 10 million income.

The outstanding difference mainly relates to the lower pre-tax income between the years.

The second quarter goodwill impairment resulted in a net loss for the nine month period of CHF 523 million (2007 net income: CHF 153 million).

Ciba Inc

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