Volume sales lift Degussa 1H

Related tags Food ingredients Revenue Degussa

Building on a stronger start to the year, Germany's third largest
chemicals group reports continued growth into the second quarter
with an increase in demand pushing up sales and earnings for the
period, reports Lindsey Partos.

But the firm warned that a hike in raw material prices is likely to impact the bottom line for the rest of the year.

Professor Utz-Hellmuth Felcht, chairman of Degussa, said that core businesses - Fine & Industrial Chemicals, Performance Chemicals, Coatings and Advanced Fillers, Speciality Polymers and Construction Chemicals - had raised sales for the first half by 2 per cent to €5.4 billion, a wisp above €5.3 billion for the same period in 2003.

"This was mainly due to a 5 per cent rise in volume sales, while selling prices were unchanged and exchange rate movements trimmed sales by 3 per cent,"​ continued Professor Felcht in a statement on Monday.

Degussa recently reorganised its food ingredients activities, which now come under the performance materials division. With sales of €527 million, the unit - with its two business lines Flavors & Fruit Systems, BioActives and Texturant Systems - generates about a fifth of the group's revenue. The flavouring systems target the food, dairy and beverage markets while texturant systems supply a range of formulations based on hydrocolloids, blends, and lecithins.

"EBIT was up slightly year-on-year in the food ingredients business unit,"​ said the firm, without offering further details about the financial movement in this area of the business.

Degussa is also a key player in health ingredients, such as phospholipids and amino acids, as well as creatine.

For the group, net income for the first half of 2004 came in at €191 million, a massive 72 per cent year-on-year rise from 2003 that posted €111 million. Earnings per share rose from €0.54 to €0.93.

Looking ahead to the rest of the year, Felcht said he was cautiously optimistic, expecting "the recent sharp hike in raw material costs will dampen EBIT momentum in the second half of the year."​ But the chemicals firm said it expected core businesses to report a slight rise in sales and EBIT. In 2004 the number of employees for the group fell to 45,040, down from 46,297 in 2003.

Like all international players in the ingredients arena Degussa said earlier this year that it had targeted China as a key area for sales growth. The Dusseldorf-based firm said it will invest €10 million in a new 6,900-square metre research and development centre in Shanghai, China where its numerous business units, including food ingredients, will seek to develop products targeted for the Chinese market.

"We are seeking to considerably step up our activities in China over the medium term, and are holding extensive talks with a series of Chinese companies in pursuit of this aim,"​ commented Professor Felcht at the time.

Degussa increased its sales in China in 2003 by 17 per cent to around €280 million. The group currently has 17 companies operating there, and plans to set up an additional 'multi-user site', where new operations from several different business units will be established.

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