Cognis’ first nine months 2010: excellent performance…

Cognis’ first nine months 2010: excellent performance continues

• Sales volumes increased by 10.0 percent compared to previous year
• Sales rose by 18.2 percent to 2,314 million euros
• Operating result (Adjusted EBITDA) of 423 million euros – up 153 million euros or 56.9 percent compared to the first nine months of 2009
• Return on sales of 18.3 percent
• Net profit of 184 million euros
• Cash position improved to 388 million euros
• Leverage ratio, including Cognis Holding GmbH, decreased to 3.5 from 5.1 in December 2009

In the first nine months of 2010, global specialty chemicals supplier Cognis continued the dynamic development from the first half, and again recorded excellent results. Sales increased by 18.2 percent to 2,314 million euros, due to higher sales volumes driven by an increased demand and a favorable product mix. Sales volumes increased by 10.0 percent.

Cognis’ operating result (Adjusted EBITDA) increased by 153 million euros to 423 million euros compared to the same period in 2009 (up 56.9 percent). Return on sales (Adjusted EBITDA as a percentage of sales) reached 18.3 percent. These excellent results were largely related to higher sales volumes due to an increased demand, a further shift in the product portfolio towards high-value specialties as well as better capacity utilization.

Earnings before interest and taxes (EBIT) rose by 207 million euros to 345 million euros. Net profit for the period reached 184 million euros, representing an increase of 183 million euros on the first nine months of the previous year.

Cognis generated a strong operating cash flow of 231 million euros, although investment in working capital amounted to 146 million euros due to the high level of commercial activity in the first nine months of 2010. Overall, Cognis’ cash position improved to 388 million euros.

The net debt of the Cognis Group including Cognis Holding GmbH slightly decreased to 1,831 million euros at the end of Q3. Due to the strong operating result the leverage ratio (ratio of net debt to Adjusted EBITDA) for the whole group including Cognis GmbH fell from 5.1 in December 2009 to 3.5.

Comments Cognis CEO Antonio Trius: “Also in the third quarter of 2010 our business remained dynamic. We were again able to take full advantage of high consumer demand due to our strategy of offering innovative products that are aligned with the wellness and sustainability trends. Our excellent performance was largely driven by our improved product mix, along with higher sales volumes and higher capacity utilization.”

Outlook

“Due to the excellent performance of the first nine months of 2010, we expect to achieve a record full-year result,” says Trius.

Sales by strategic business unit

Care Chemicals reported sales growth of 17.9 percent to 1,306 million euros (up 13.0 percent on an organic basis). This growth was driven by higher sales volumes in the European markets, especially relating to home and personal care ingredients. But also segments with industrial applications contributed to this development. Care Chemicals’ Adjusted EBITDA rose by 58.4 percent to 249 million euros. Increased sales resulted not only in higher profit but also in a higher absorption of fixed production costs and a better plant utilization.

Nutrition & Health saw its sales increase by 7.1 percent to 265 million euros (up 2.8 percent on an organic basis), reflecting higher demand in all market segments in almost all regions. Adjusted EBITDA increased by 36.0 percent to 52 million euros. This was driven by higher sales volumes, a good product mix, and better plant utilization. Efficiency gains from the 2009 acquisition of Phyto-Source L.P., a state of the art producer of phytosterols, also significantly contributed to the improvement.

Functional Products achieved sales of 731 million euros, a 23.7 percent rise compared to the first nine months of 2009 (up 18.0 percent on an organic basis). The business unit reported a strong performance especially in the coatings and lubricants businesses. Key markets such as automotive, housing and mechanical engineering have recovered compared to the low activity level in 2009. Further, mining sales were above last year as demand from copper producers increased in line with higher copper production. Adjusted EBITDA was up by very strong 66.6 percent to 125 million euros, mainly due to higher volume-driven sales further supported by a favorable product mix and better capacity utilization.
Overview of results for Q1-Q3 2010

		Q1-Q3 2009	Q1-Q3 2010	Change
Cognis Group sales	€m	1,957	2,314	+18.2%
Organic sales growth				+13.2%
Operating result (Adjusted EBITDA)	€m	270	423	+56.9%
Restructuring and other exceptional items	€m	(37)	4
Return on sales	%	13.8	18.3	+4.5
Earnings before interest and taxes (EBIT)	€m	138	345	207
Net profit/(loss)	€m	1	184	183
Operating cash flow	€m	387	231	(156)
Cash position	€m	328	388	60

Sales and Adjusted EBITDA by strategic business unit

Sales		Q1-Q3 2009	Q1-Q3 2010	Change
Care Chemicals (organic*)	€m	1,108	1,306	+17.9% (+13.0%)
Nutrition & Health (organic*)	€m	247	265	+7.1% (+2.8%)
Functional Products (organic*)	€m	591	731	+23.7% (+18.0%)
Other activities	€m	11	12
Adjusted EBITDA		Q1-Q3 2009	Q1-Q3 2010	Change
Care Chemicals	€m	157	249	+58.4%
Nutrition & Health	€m	38	52	+36.0%
Functional Products	€m	75	125	+66.6%

Sales by region

		Q1-Q3 2009	Q1-Q3 2010	Change
Europe (organic*)	€m	1,093	1,257	+15.0% (+14.0%)
North America (organic*)	€m	437	502	+16.8% (+10.5%)
Central and South America (organic*)	€m	127	162	+20.5% (+4.2%)
Asia-Pacific (organic*)	€m	300	393	+31.0% (+18.0%))

* Adjusted for foreign currency effects, and acquisitions and divestments

About Cognis

Cognis is a worldwide supplier of specialty chemicals and nutritional ingredients, with a particular focus on the areas of wellness and sustainability. The company employs about 5,500 people, and it operates production sites and service centers in 30 countries. Cognis has dedicated its activities to a high level of sustainability and provides value adding solutions and products based on renewable raw materials. The company serves the food, nutrition and healthcare markets, and the cosmetics, detergents and cleaners industries. Another main focus is on products for a number of other industries, such as coatings and inks, lubricants, as well as agriculture and mining.

Cognis is currently owned by private equity funds advised by Permira, GS Capital Partners, and SV Life Sciences. In 2009, Cognis recorded sales of about 2.6 billion euros and an Adjusted EBITDA (operating result) of 364 million euros.