Uptrend of results helped by Asian business
The Bayer Group achieved a slight year-on-year increase in underlying earnings for the first time this year. “We are very pleased to have reversed the earnings trend despite the fact that many industries are still suffering from the economic crisis,” said Chairman Werner Wenning, adding that the HealthCare and MaterialScience contributed to the positive performance in the third quarter. MaterialScience nearly doubled earnings compared with the second quarter, almost reaching the previous year level, though sales were down 20% year-on-year. The decline was mainly the result of a distinct drop in selling prices and lower volumes overall. “However, volumes already increased again in the Asia Pacific region,” Wenning reported, adding that the global economy seems to have passed the bottom of the cycle.
BASF, meanwhile, had a 2% increase in its sales in the third quarter compared to the second quarter but dropped by 19% compared to the same period in 2008. Chairman Jürgen Hambrecht said that positive impulses were coming from Asia, especially from China, and from parts of South America, while Europe and North America remain weak. He also said that the company’s decisive action in the form of strict crisis management, tailoring production to demand, idling plants and introducing flexible working time arrangements had help stabilise business. BASF also believes that destocking by its customers worldwide appears to be over for the time being, leading to a slight upturn in demand. However, customers are still placing smaller orders at increasingly short notice, especially closer to the end of the year. “Overall, there is much to suggest that the worst is behind us. After a steep plunge, we are now climbing gradually out of the trough,” said Hambrecht.
Dutch company DSM has reported third quarter operating profit from continuing operations of EUR139 million, more than double the second quarter of 2009 (EUR 58 million). The company said cost savings and efficiency improvements are on track to achieve EUR150–200 million on a yearly basis by 2010. The company says the outlook for the rest of the year remains uncertain with its fourth quarter operating profit expected to be lower than the third quarter, but above the fourth quarter of last year. Chairman Feike Sijbesma said, “Our early action to reduce costs, our focus on cash and our commitment to innovation and China are paying off. The operating profit of DSM's core business, Life Sciences and Materials Sciences, in the third quarter of 2009 (EUR137 million) was only 10% lower than last year's level, during which period DSM was not yet affected by the downturn. Net sales dropped by 14% compared to the third quarter of 2008, but improved by 5% compared to the second quarter of 2009.
US-based PolyOne reported net income of US$49.6 million, compared with a net loss of US$5.6 million in the third quarter of 2008. The company’s third quarter revenue was US$548.3 million, a 25% decrease compared with revenues of $735.1 million in the third quarter of 2008, but a 10% increase from the second quarter of 2009. While demand improved sequentially, it is still below the previous year as volume fell 20% versus the third quarter of 2008.
Another US company Eastman Chemical emerged a dark horse as it had a rise in profit for the third quarter, unlike analysts’ predictions. “We continued to make solid progress improving our profitability during what remains a challenging economic environment,” said CEO Jim Rogers. Sales revenue was US$1.3 billion, down from US$1.8 billion in the same period last year. Operating earnings in the quarter were US$191 million compared to US$174 million last year.
French company Rhodia reported 17% lower sales at EUR 1,041 million compared to EUR 1,256 million in the third quarter of 2008. With a reduction in selling prices limited to 11%, the group effectively managed its pricing policy in a context of decreasing raw material and energy costs. Operating profit was EUR104 million in the third quarter versus EUR65 million a year earlier. "We continued to apply strict financial discipline that allowed us to generate strong free cash flow," explained Chairman/CEO Jean-Pierre Clamadieu. He added, "We anticipate that demand in the fourth quarter will remain similar to the third quarter level. I am convinced that we are today well prepared to emerge stronger from the crisis."
Polyolefins producer Borealis reported a net profit of EUR46 million in the third quarter, which is a bright spark after its loss in the first quarter. The company’s focus is on cash generation and a rigorous downward pressure on costs but it will continue with its investments in a LDPE plant in Sweden, an expanded Innovation Headquarters in Linz, Austria, and Borouge 2, which will triple polyolefins capacity at its Abu Dhabi joint venture.
Belgium-based Solvay, meanwhile, reported a better than expected operating profit due to its drugs operation, which it is selling to Abbott to reinvest in its plastics/chemicals business. Its sales in its plastics business fell 10% and by 26%, compared to last year, due to difficult market conditions. Though the company says that demand improved leading to better results compared to the last two quarters it warned that the impact of the crisis would be seen on the primary markets for its products, in the automotive, construction and electrical/electronics sectors.
For Swiss Clariant it was a different picture as its sales were down by 14%. For the full year, Clariant expects sales in local currencies to decrease 16-20% compared to 2008. Cash flow is expected to remain strong as a result of ongoing stringent net working capital management. In the traditionally weak fourth quarter, Clariant expects an improved operating income before exceptional items compared to the fourth quarter of 2008. According to CEO Hariolf Kottmann, “The focus on improving cash flow, decreasing costs and reducing complexity continued to have a positive impact on our results. Sales declines of more than 20% in some businesses indicate that despite a stabilisation in demand we are still far from a sustainable recovery.”
It was a similar story for German chemicals company Lanxess that announced a lower (58.9%) net profit. However, the company says it beat analysts’ expectations thanks in part to the strong demand from China and its successful cost cutting measures. Though the sales figures were down by 24.3% when viewed in comparison with the same period last year, they were higher (10.9%) compared to the second quarter. Sales from Asia Pacific saved the day and were up 11%, driven primarily by the growing Chinese market. Said Chairman Axel Heitmann, “Our self-help measures coupled with an improved economic climate, in particular in China, has supported us in delivering a very respectable third quarter performance.”