BUSINESS EXPANSION ABROAD Ciba Specialty Chemicals saw solid growth in Asia, particularly China, which is Ciba's third largest market.
company has approached a balanced global presence—38% of sales in Europe, 35% in the Americas, and 27% in Asia—closer to its target of one-third sales in each of the regions. At Rhodia, ChairmanJean-Pierre Tlrouflet focused on the company's improvement in operations, deflecting concerns about shareholders and control of the company He maintained that Rhodia has met its key commitments through improvement in profit margin, divestitures, and the generation of cash flow. Sales for the year were $6.3 billion, down 9% from 2001. About 4% of that decrease was due to the loss of sales from divested operations, and another 4% stemmed from negative currency translation. On a continuing operations basis, Tlrouflet said, sales were down 1% for the year, with a 2% decrease in prices and a 1% increase in volumes. The net profit picture still showed a loss, but it was only $3.8 million for the year, a sharp rebound from a loss of $201 million in 2001. Rhodia has also managed to cut its debt by 17%, to $2.1 billion. "Our goal in 2002 was to improve the company's financial $1.5 billion on its balance sheet. "We are structure," Tlrouflet said. To that end, it well positioned to further increase our per- closed 19 sites and workshops and trimmed formance, with a focus on profitable its workforce by 8%. The cash savings was growth," Meyer said. In fact, he added, the $66 million in 2002 and is expected to company has wrapped up its "Fit for grow to $104 million in 2003. Growth" program and has segued into a "Managing for Growth" program (C&EN, AT THE SAME TIME,Tirouflet pointed out, Jan. 21,2002, page 15). Rhodia streamlined its procedures for Sales in Europe and North America, he launching new products and plans to intronoted, started slowly, improved midyear, duce 50 new products this year. Rhodia's then weakened slightly toward the end of goal for 2005 is to generate 20% of sales from products less thanfiveyears old, up the year. However, Meyer was particularly from 14% in 2002, he said. To that end, pleased by Ciba's performance in Asia, three-quarters ofthe company's R&D budwhere it saw 5% sales growth overall and get will be directed to joint research pro13% growth in China, including Taiwan. grams with customers, to help introduce Virtually all of that growth came from products with strong market potential. mainland China, according to Meyer; sales Rhodia had targeted divestments of in Taiwan were relativelyflat.In fact, Chi- roughly $475 million for 2002, but topped na is now the company's third largest mar- that, according to Tirouflet. The divestiket, following only the U.S. and Germany tures were intended to reinforce the comWith the growth in Asia, he added, the pany's strategy of focusing on a selected
BETTER YEAR FOR EUROPEAN FIRMS
First flush of chemical industry earnings shows improvement over a tough 2001 PATRICIA L. SHORT, C&EN LONDON HE FIRST BATCH OF 2002 Financial results from the European chemical industry have helped lift the clouds of gloom that hung over the business in 2001. Ciba Specialty Chemicals led off the burst of results announced in thefirsttwo weeks of February, reporting what it considered good news. Net sales for the year were $4.6 billion, up 3% in local currencies but down 4% in Swiss francs, a measure of negative currency exchange swings during the year. Net profits were $261 million, up 6%, despite what Chairman and Chief Executive Officer Armin Meyer acknowledged was a "difficult economic environment." Ciba's improved operating performance helped strengthen its balance sheet, bringing net debt down to below $964 million. At the same time, it now shows a pot of
T
In the chemical industry, the results of mergers and acquisitions in recent years have not been very good." H T T P : / / W W W . C E N - O N L I N E . ORG
C & E N / FEBRUARY 17. 2003
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BUSINESS group of specialties and to have no nega 10% of the votes managing the company" He said, however, that Rhodia's man tive impact on shareholder value. Maintenance of shareholder value is agement would consider any takeover offer. part of Tirouflet's argument for keeping "But how I respond to it will depend on the Rhodia independent, despite criticism offer," he said. "In the chemical industry, from some industry analysts. According to Tirouflet, Rhodia is SLIPPERY SLOPE looking at ways to get the 25% stake Even specialties firms suffered stock-market held by Aventis—which Aventis blues must shed by the end of this year— into friendly hands. "We are look Clariant ing at solutions which wouldn't im ICI pact the value of the shares. So they Degussa are unlikely to go on the market," he European stock market average said. Rhodia The stake could go to more than Ciba Specialties one acquirer, added Myron S. DSM ^ Galuskin, a board member and pres -20 -10 0 ident of Rhodia's U.S. operations, % annual change in share price and could be dispersed through a pri NOTE: Variance in stock price from end of 2001 to end of 2002. vate placement. SOURCE: Rhodia, collected from Reuters data Tirouflet acknowledged that "cer tain shareholders are concerned by the current situation, and they get a lot of the results of mergers and acquisitions in publicity— sometimes too much. Our cus recent years have not been very good." tomers and the other shareholders do not Rhodia already faced a takeover bid support them. The company has to go on from DSM, and Tirouflet insists that the as a democracy: It is not the people with board "talked about this at length and
GATEWAY C H E M I C A L TECHNOLOGY CUSTOM SYNTHESIS • • • • • • •
did a great deal of analysis of the offer. But members of the board did not con sider the offer desirable. The industrial logic didn't seem to be good. None of the board felt that this would be a good de cision," a conclusion that led Rho dia to rebuff the bid. AT ICI, FINANCIAL matters topped the concerns ofthe investment com munity when CEO Brendan O'Neill unveiled 2002 results. O'Neill left his critics grumpy, but they grudgingly accepted his contention that ICI has sharply cut the debt burden it has borne since it bought Unilever's specialty chemicals operations in 1997 and began to reshape itself. "We've beaten nearly all expectations for our debt levels by controlling work ing capital and containing capital expenditure,'' he said. That almost made up for the fact that the company halved its dividend, in line with a policy adopted two years ago of paying out onethird of profits to shareholders. Total group sales for 2002 were $9.2
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ty chemical ballast for the reporting week, Royal Dutch/Shell reported significant im provements for its chemical operations. The year "showed signs of improve ment," company officiais reported, al though the chemical business "experi enced a challenging year because of difficult trading conditions, particularly in the U.S." Shell reported chemical sales of $11.5 bil lion for the year, up 8% from 2001. The in crease was led by'Western Hemisphere (ex cluding U.S.) operations, with sales of $502 million, up 75%, and Asian sales of $2.2 bil lion, up 32%. European chemical sales were up 10% to $4.1 billion, while those in the U.S. declined by 5% to $4.7 billion. Chemical operating profits more than doubled from 2001, reaching $489 mil lion. The increase, however, was moderat ed by a loss of $144 million in the U.S., which was hit by $105 million in special charges for restructuring. The fourth quar ter showed particularly strong recovery for Shell's chemicals: operating profits of $128 million, compared with a $98 million loss in fourth-quarter 2001. EARNINGS BENEFITED from lower costs, margin improvements, and 5% higher vol umes, mainly reflecting capacity expan sions and utilization improvements. For the year, volumes were up 4%, margins— excluding cracker margins—improved, and costs fell. In fact, Shell's chemical business delivered a 7% unit-cost reduction in 2002, well over its 3% target. According to CEO Evert Henkes, 2002 reaffirmed Shell's "cracker plus first-line derivatives" strategy of focusing on petro chemical building blocks and polyolefins. That strategy, he contended, adds value to the hydrocarbon chain, building on syner gies with the company's oil refineries and sharing technology Basell—the 50-50 polyolefins joint ven ture between Shell and BASF—saw par ticular improvement, Henkes said. The venture delivered its "stretch" target of $236 million in synergy cost savings one year early, in part by cutting employees— it has 20% fewer employees than when it was established in 2000—and mothballing 10% of its capacity. Basell saw a turnaround from a 2001 loss of $202 million to a 2002 profit of just under $7 million. Additional structur al improvements of roughly $95 million are targeted for 2003. If results for 2002 continue to improve over 2001, most chemical industry exec utives may have grounds for cautious op timism for the year to come. • HTTP://WWW.CEN-ONLINE.ORG
