Rhodia confirms its strong pricing power & full year objectives

10 Nov '08

5 min read

Consolidated Net Debt decreased to €1,451 million on September 30, 2008 versus €1,570 million on June 30, 2008, benefiting from €224 million of proceeds from divestments completed in the third quarter of 2008.

3. Overview by Enterprise

Rhodia Polyamide continued its price-over-volume strategy. While volumes in Europe were impacted by the slowdown in the automotive and textile markets, the Enterprise implemented further price increase initiatives: those offset close to 90 % of rises in raw material and energy costs, in particular for Butadiene. US competitors holding available volumes due to the slowdown in their domestic 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 transactional forex impact of €(11) million year-on-year.

In October, Rhodia Polyamide launched plans to optimize its European production and research & development resources, as first step of a broader program aimed at cutting costs by about €40 million per year by 2010.

Rhodia Novecare, nearly doubled its EBITDA year-on-year. This record quarter reflects the Enterprise's reinforced pricing power and a strong growth momentum in the oilfield and agro markets.

Silcea - Rhodia Silcea produces high performance silicas, rare earth-based materials and diphenols to serve the automotive emissions reduction, tire, lighting, electronics, flavours & fragrances markets.

Rhodia Silcea registered overall good volumes. This was particularly true for silicas for low rolling resistance tires. The Enterprise demonstrated that its pricing power could offset most raw material and energy cost increases.

Silcea was impacted by a €(2) million negative transactional forex effect.

Energy Services - Rhodia Energy Services is in charge of the Group's energy supply and the management of Rhodia's projects related to the reduction of greenhouse gas emissions.

Carbon Emission Reduction (CER) sales reflected the expected Q3-Q4 phasing. Recurring EBITDA of €28 million was generated from CERs, versus €39 million in the third quarter of 2007.

The cogeneration business is traditionally slow in the third quarter.

Rhodia expects to generate slightly more than 13 million tons of CERs for the full year 2008.

Eco Services - Rhodia Eco Services offers sulphuric acid regeneration services to chemical manufacturers and oil refiners in North America. Rhodia Eco Services enjoyed good pricing power. This allowed the Enterprise to offset the €(5) million impact on EBITDA resulting from the hurricanes in the USA. The non cash negative forex conversion impact amounted to €(3) million.

4. Outlook - The Group is pro-actively adjusting to the challenging economic environment with aggressive cost competitiveness plans and a strong focus on cash management.

Combined with those actions, its performance year-to-date and the proven resilience of its portfolio allow the Group to confirm its 2008 full year objectives:

• Recurring EBITDA should be within 5% of the level achieved in 2007
• Earnings per Share should increase versus 2007
• Net Debt should be further reduced compared to the end of 2007, supported by a solid Free Cash Flow generation in the fourth quarter of 2008.

After the massive impact of raw material and energy inflation as well as adverse currency fluctuations on the Group's EBITDA over the last nine months, Rhodia is observing a favorable inflexion point at the end of the third quarter 2008. This structurally positive effect should gradually materialize in the Group's accounts, starting early 2009.

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