Rhodia Continues Its Recovery: 28% Increase in EBITDA; 55 Million Euros Positive Operating Income
PARIS--May 12, 2005--Following a meeting of the Board of Directors on May 11, 2005, Rhodia today reported its financial results for the first quarter of 2005, prepared in accordance with IFRS accounting standards. Highlights for the period include:A 9.4% increase in net sales, on the same basis (constant structure and exchange rates) 9.3% from price increases, 1.6% from higher volumes and a transactional exchange rate effect of -1.5% .
A strong 28% improvement in recurring(a) EBITDA, compared to the first quarter of 2004, on the same basis (constant structure and exchange rates).
Savings of 35 million euros, in line with the 2005 objective to reduce fixed costs by 114 million euros.
Operating income of 55 million euros compared to 1 million euros for the first quarter of 2004.
Faster implementation of action plans concerning less profitable businesses.
Consolidated net debt stood at 2,616 million euros due to a seasonal increase in working capital requirements.
Liquidity (cash + marketable securities + unused confirmed lines of credit) totaled approximately 680 million euros as of the end of March, 2005.
A new 300 million euros syndicated bank line.
Simplified Income Statement for first quarter 2005 (non audited)
In millions of euros, under IFRS
Q1 2004 Q1 2004 Q1 2005
Actual Restate (b)
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1,316 1,333 Net sales 1,458
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121 121 Recurring(a) EBITDA 154
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9.2% 9.1% Recurring EBITDA margin 10.6%
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99 100 EBITDA 150
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7.5% 7.5% EBITDA margin 10.3%
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6 1 Operating income 55
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-92 NA Net loss Group share -72
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(a) recurring: before restructuring costs and other gains and losses
(b) on the same basis (constant structure and exchange rates)
Strong improvement in operating performance
-- Net sales stood at 1,458 million euros, a 9.4% growth* on the same basis (constant structure and exchange rates), reflecting the significant impact of price increases (9.3%) with an increase of 1.6% in volumes and a transactional exchange rate effect of -1.5%. For the first quarter, price increases more than offset higher raw materials prices.
-- The fixed cost reduction program continued to deliver results, with first quarter savings of 35 million euros (before inflation) in line with the targeted 114 million euros reduction over the full year.
-- Recurring EBITDA rose by 28%(a) and recurring EBITDA margin increased to 10.6% from 9.1% compared with the first quarter of 2004 on the same basis (constant structure and exchange rates).
-- Operating income stood at 55 million euros, versus 1 million euros in the first quarter of 2004.
-- Net financial result totaled - 115 million euros, including 17 million euros in non-recurring costs related to the February 2005 refinancing, a 31 million euros unrealized foreign exchange loss (conversion of US dollar-denominated debt) to be put in perspective of a 64 million euros unrealized forex gain booked in 2004, primarily in the fourth quarter. Interest expense (58 million euros) and securitization costs (6 million euros) were unchanged from the prior-year period.
-- Accounting for the above items, the net loss for the period came to - 72 million euros, compared with - 92 million euros in the first quarter of 2004.
Faster implementation of action plans concerning less profitable businesses
-- The Silicones business is improving its operating performance, while the signature of a Memorandum Of Understanding marks a new step in the creation of its strategic alliance with Blue Star.
-- The Pont-de-Claix TDI unit has been running reliably since the end of 2004, enabling the business to restore its margins.
-- Organics (Perfumery & Agro) repositioning on a limited number technologies continues, as expected, through divestitures and announced workshop closures.
-- The signature of a letter of intent with Radici is the first step in the withdrawal from the European textile fibers business (Nylstar).
-- The results of the Pharma business do not show the expected signs of improvement.
Increase in consolidated net debt due to seasonal changes in working capital requirements
-- Capital expenditure totaled 58 million euros for the period. As expected due to its seasonal nature, working capital requirements rose by 219 million euros compared with year-end 2004. Compared with the first quarter of 2004, working capital requirements as a percentage of net sales improved from 16.4% to 15.4%.
-- Consolidated net debt stood at 2,616 million euros at the end of March 2005. The 500 million euros senior note issue in February extended the maturity of the Group's bond debt to 2010 and beyond. On May 11, Rhodia signed a protocol agreement with five banks putting in place a new credit line of 300 million euros with a due date of 2008, replacing the existing bank syndicated facility (due date of 2006). The extended maturity of Rhodia's debt gives the Group sufficient mid term resources to implement its plan.
-- Liquidity (cash + marketable securities + unused confirmed lines of credit) totaled around 680 million euros at the end of March 2005.
(a) compared to Q1 2004
Claims and litigation
Following an investigation opened in 2003 regarding the company's financial communications, the specialized commission of the Autorite des Marches Financiers (AMF) notified Rhodia March 29 of the findings of three alleged rule infringements (see press release of March 29, 2005). Rhodia has strong arguments in its defense which it will present to the AMF as part of the ongoing proceedings.
Senior management has worked actively, since November 2003, supported by the Board of Directors, to obtain additional coverage from Sanofi-Aventis for some environmental liabilities, above those amounts provided when Rhodia was created which proved, for different reasons, to be insufficient. After filing suit in the United States at the end of 2004 and in Brazil in early 2005, Rhodia initiated on February 1, 2005 an arbitration proceeding which also included some pension benefit obligation claims.
All environmental and pension liabilities were accounted for in Rhodia's financial statements as of December 31 2004, according to French GAAP, either in the consolidated balance sheet or in the notes to the financial statements concerning potential environmental contingencies and the unrecognized losses on pension benefit obligations.
Consequently, the various procedures initiated against Sanofi-Aventis could only translate to reduce future costs to the Group and in no case call into question Rhodia's recovery plan.
Outlook
Consolidated second quarter 2005 results should be in line with those of the first quarter.
In an environment characterized by satisfactory demand in its markets and geographic zones and strong volatility in raw materials prices and exchange rates, Rhodia remains focused in 2005 on its priorities of improving its margins and controlling its debt.
Rhodia confirms its 2006 objectives, under IFRS:
-- A recurring EBITDA margin of at least 13%.
-- A return to positive net income in 2006.
-- A ratio of consolidated net debt to EBITDA of less than 3.5.
This press release and a detailed presentation of the first quarter results will be available at www.rhodia.com as of 7:30 this morning.
This press release contains elements that are not historical facts including, without limitation, certain statements on future expectations and other forward-looking statements. Such statements are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those anticipated.
Rhodia is a global specialty chemicals company recognized for its strong technology positions in applications chemistry, specialty materials & services and fine chemicals. Partnering with major players in the automotive, electronics, fibers, pharmaceuticals, agrochemicals, consumer care, tires and paints & coatings markets, Rhodia offers tailor-made solutions combining original molecules and technologies to respond to customers' needs. Rhodia subscribes to the principles of Sustainable Development communicating its commitments and performance openly with stakeholders. Rhodia generated net sales of 5.3 billion euros in 2004 and employs 20,000 people worldwide. Rhodia is listed on the Paris and New York stock exchanges.
CONSOLIDATED INCOME STATEMENT
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(IFRS)
(Million euros) Q1 2004 Q1 2005
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Net Sales 1,316 1,458
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Recurring EBITDA 121 154
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Restructuring -23 -5
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Other gains and losses 1 0
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Operating Profit 6 55
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Financial result -77 -115
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Income Tax -23 -8
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Equity in earnings of affiliated companies -6 0
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Discontinued operations 9 -6
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Minority Interests 0 2
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Net result after minority interests -92 -72
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Earning/(loss) per share (euro) (a) -0.51 -0.11
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(a) calculated on the base of 179 309 188 shares as of March 31st,
2004 and 627 582 158 shares as of March 31st , 2005
SIMPLIFIED CONSOLIDATED BALANCE SHEET
(IFRS)
December 04 March 05
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(Million euros)
Fixed Assets 2,938 2,928
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Current Net Assets 540 836
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Total Assets 3,478 3,764
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Shareholders' Equity(a) -521 -572
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Short Term & Long Term Liabilities 1,671 1,720
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Net Debt 2,328 2,616
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Total Liabilities 3,478 3,764
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(a) including minority interests
(Million euros) Q1 2004 Q1 2004 Q1 2005 %
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Restated(a)
RHODIA (consolidated) (A) (B) (B)/(A)
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Net Sales 1,316 1,333 1,458 109%
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Recurring EBITDA 121 121 154 128%
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Recurring EBITDA margin % 9.2% 9.1% 10.6%
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Operating Income/(Loss) 6 1 55
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NOVECARE
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Net Sales 266 209 231 111%
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Recurring EBITDA 30 28 29 104%
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Recurring EBITDA margin % 11% 13.4 12.4
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Operating Income/(Loss) 19 n/a 20
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SILCEA
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Net Sales 195 192 202 105%
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Recurring EBITDA 14 14 24 171%
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Recurring EBITDA margin % 7.2% 7.3% 12.1%
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Operating Income/(Loss) 0 n/a 10
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COATIS
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Net Sales 165 170 200 118%
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Recurring EBITDA 1 4 16 400%
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Recurring EBITDA margin % 0.6% 2.1% 8.0%
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Operating Income/(Loss) -6 n/a 8
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POLYAMIDE
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Net Sales 370 384 471 123%
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Recurring EBITDA 45 50 74 148%
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Recurring EBITDA margin % 12.2% 13.0% 15.6%
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Operating Income/(Loss) 23 n/a 50
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ACETOW
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Net Sales 97 97 93 96%
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Recurring EBITDA 27 27 22 81%
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Recurring EBITDA margin % 27.4% 28.1% 23.2%
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Operating Income/(Loss) 19 n/a 13
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(a) Restated: same perimeter and exchange rate (conversion)
ECO SERVICES
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Net Sales 50 47 49 104%
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Recurring EBITDA 13 13 12 94%
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Recurring EBITDA margin % 26.6% 26.6% 24.2%
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Operating Income/(Loss) 6 n/a 7
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ORGANICS
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Net Sales 86 99 100 101%
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Recurring EBITDA 5 6 6 100%
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Recurring EBITDA margin % 5.2% 5.6% 6.0%
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Operating Income/(Loss) -16 n/a 1
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RPS
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Net Sales 62 62 53 85%
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Recurring EBITDA -6 -5 -7 40%
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Recurring EBITDA margin % -10.2% -8.3% -12.7%
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Operating Income/(Loss) -15 n/a -11
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Inter company Sales & Others 25 n/a 59
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CORPORATE & OTHERS
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Recurring EBITDA -8 -15 -21 40%
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Operating Income/(Loss) -24 n/a -43
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