BASEL, Switzerland - Ciba has reported its third-quarter 2008 earnings. Sales in the third quarter of CHF 1,549 million were 5 percent lower in Swiss francs and 1 percent higher in local currencies. Europe was 5 percent lower in local currencies, with weaker demand in construction and automotive impacting the coatings and plastics businesses. Local currency sales in the Americas were 1 percent lower than the third quarter of 2007, with a similar pattern of construction and automotive weakness impacting NAFTA. Water & Paper Treatment, however, performed well. Central and South America showed good growth. Asian sales for the quarter were 11 percent higher in local currencies, with a strong performance in China, particularly in the Water & Paper Treatment segment.
Gross profit margin of 26.5 percent, compared to 28.8 percent in 2007, was impacted by higher raw material prices and energy costs during the third quarter.
Sales prices increased 6 percent in the third quarter as a result of sustained efforts to offset the impact of higher raw material prices, which rose 18 percent in the quarter, as the effects of record-high oil prices in July filtered through to downstream derivatives. Raw material prices are expected to ease in the fourth quarter. Volume mix was 5 percent lower in the third quarter.
Brendan Cummins, Chief Executive Officer commented, “The third quarter improved considerably over what had been a disappointing second quarter. Sales price increases took effect across the business. Coating Effects continued to maintain its high profitability levels and Water & Paper Treatment showed much better results. In Plastic Additives, however, demand started to drop significantly in August in a number of industries, notably automotive and construction, which severely impacted the results.
“Looking ahead, we are experiencing the effects of the economic slowdown, particularly in Europe, where there was a sudden deterioration in demand in a number of customer industries in the third quarter. In the Americas, we are not yet seeing the same extent of weakness, but we are expecting volumes to decline in the fourth quarter. We are also anticipating that growth in Asia will start to slow over the coming months as the economies in the region begin to be affected by the global downturn.”
The company also provided an update on BASF’s offer for all outstanding shares of Ciba Holding AG. The offer is progressing as planned and BASF has now secured the required two-thirds majority of Ciba shares in the tender offer, which ended on Tuesday Oct. 28, 2008. The additional acceptance period began on Nov. 3, 2008, and will finish on Nov. 14, 2008. The offer is still subject to merger control approvals, as well as the elimination of Ciba’s statutory voting and registration limits, which will be voted upon at an Extraordinary General Meeting on Dec. 2, 2008. The transaction is expected to close in the first quarter of 2009.
