Cognis bolsters BASF division sales in first quarter since acquisition

By Jess Halliday

- Last updated on GMT

Related tags Cognis

The newly-acquired Cognis business had a positive effect on BASF’s Q1 Performance Products results, as the integration is on-track for completion by the end of 2011.

Chemicals giant BASF completed its acquisition of Cognis in December 2010, shelling out €3bn. It has set about integrating it into its natural home within the BASF fold, the Performance Products division, which houses all its vitamins, additives, ingredients for pharmaceuticals and hygiene products, and home and personal care products.

The integration is expected to be mostly complete by the end of 2011, with Cognis being earnings accreditive by 2012, within two years of the acquisition.

In Q1 2011 Performance Products reported sales of €3982m, an increase of 39% on the previous year. Cognis is said to have “contributed significantly”​ to this growth.

The company said that the division’s sales growth was boosted by increased volumes (3%), higher selling prices due to higher raw material costs (5%), the expanded portfolio (29%), and favourable exchange rates (2%).

It did note some lower margins for some products, however, such as vitamin E.

The nutrition and health division, which houses Cognis’ portfolio of vitamins and nutrients, emulsifiers and other food ingredients, reported sales of €469m, up 27%.

Care Chermicals, which houses the cosmetics ingredients, reported sales of €1376m, up 117% on the prior year period. This boost was primarily due to the addition of Cognis.

As part of the integration process BASF has decided to use Cognis’ former headquarters in Monheim as the European region business unit for personal care.

BASF said in March that it will be eliminating 680 jobs in the functional and administrative units due to overlaps between the two parts of the enlarged company and measures to improve efficiency.

The blow is somewhat softened by the creation of 230 new jobs in the Care Chemicals division in order to support growth in that area, making an overall loss of 450 in headcount.

According to its website, BASF has a total of 190,000 employees.

Integration plan

Throughout the integration BASF expects Cognis to add EBIT of €275m a year, and €135m from 2015. The group expects to realise cost synergies of €140m a year.

In terms of the costs of the integration, by the end of 2013 it expects to pay out around €290m in one-time costs. In addition, it is using up inventories stepped up the fair value, which had resulted in €120m costs up to the end of Q1.

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