Rhodia swings to Q4 loss plummeting demand, customer destocking

French chemical company, Rhodia posted a 3.5% decline in Q4 net sales (EUR 1,126 mln) led by decreasing sales volumes particularly in its Polyamide and Silcea business. Other businesses posed strong resistance to the deepening global economic crisis in the alst quarter of 2008. The company recorded a net loss of EUR 28 mln in Q4 due to decline in end-market demand, inventory de-stocking practices and customers' deferred purchasing offsetting advantage of the easing in raw material and energy costs at the end of the year. For full year, the net profit stood at EUR 105 mln in 2008 against EUR 129 mln in 2007. In Q4, Rhodia's Polyamide volumes plummeted 31% due to crisis in the automotive market and, to a lesser extent, from the continuous erosion of the housing and textile markets. The abrupt decline in demand and correspondingly the reduced operational yield from low rates of capacity utilization, combined with still costly raw materials in inventories and an adverse Forex impact, have led to a recurring EBITDA of EUR 8 mln. As demand remains depressed, Polyamide anticipates a low level of volumes in Q1 2009. Moreover, the de-stocking of still costly raw materials will inevitably affect the Enterprise's bottom line at the end of the quarter. The implementation of the competitiveness plan launched by Rhodia in October 2008 is being accelerated and its scope is being reinforced to attain structural savings of €60 million per year by 2011 versus an initial €40 million targeted. Entering 2009, the company's top priority is to generate free cash flow amid the current severe economic crisis affecting end markets, volatility and plummeting demand of products. The group says its main end-markets have not shown so far signs of volume recovery from December's low levels. Despite the easing of raw material and energy costs it is not expecting any favorable impact in Q1 of 2009 yet as remaining costly raw materials in stock are being absorbed, with resulting continued pressure on EBITDA.
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