Rhodia reaches its principal objectives
Speciality Chemicals manufacturer Rhodia has achieved its key commitments made at the end of 2001, a gradual return to profitability, the completion of a significant asset divestiture program and the generation of positive operating cash flow. Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) were up 26.1%, to Euro 798m (US$865m) against Euro 633m reported in 2001. There was an improvement in operating income to Euro 351m (US$380m) in 2002 against Euro 91m in 2001.
The company reported net sales of Euro 6,617m ($7175) in 2002, representing a 9.1% decline compared with 2001. Structural changes related to the different divestments completed in 2001 and 2002 reduced sales by a total of 3.8%.
On a comparable basis (constant structure and exchange rates), net sales declined by 1.5% with a 2.4% decrease in prices and a 0.9% increase in volumes.
In addition to the impact directly related to the business activities divested in 2002, a number of external factors limited the growth of the EBITDA/Sales ratio. These included unfavourable foreign currency conversion rates linked to the US dollar and the Brazilian Real, the absence of economic recovery in 2002 and the decision of the Food and Drug Administration (FDA) in the United States to postpone approval of new molecules in the pharmaceutical industry.
The Group managed to offset these negative effects and increase its margins due to the positive impact of two main factors:
• Following the wide-reaching restructuring programme launched at the end of 2001 (closure of 18 sites or production units), Rhodia succeeded in reducing fixed costs, as planned, by approximately Euro 58 million, net of inflation.
• The implementation of Rhodia's business model, based on offering customers tailor-made solutions through the cross-fertilization of technologies, now applies to 30% of the Group's business units and has started to show initial results. It has helped improve the Group's product range and enhanced commercial efficiency. As a result, the improved focus of Rhodia's business portfolio helped increase from 12.4% to 14% the percentage of new products contributing to Group sales and increased the Group's market share in eight strategic markets.
Overall, the Fine Organics division reported growth in sales volumes. This was true for Rhodia ChiRex, although the actual increase fell short of forecasts due to the FDA's decision to postpone the market launch of new molecules. The Life Sciences and Intermediates businesses also experienced strong sales volumes. In contrast, the Pharmaceutical Ingredients business suffered a decline in volumes owing to intense competitive pressure, especially in the United States. However, the Pharmaceutical Ingredients business started to benefit from the restructuring measures taken at the end of 2001 in France and the US, but it encountered problems from the beginning of the year related to the commissioning of one of the production units under its responsibility, leading to extra costs of approximately Euro 37m ($40m).