First Quarter Delivered ‘Unprecedented’ Low Demand, Says Rhodia

In reporting Rhodia’s first quarter 2009 results, company chairman and CEO Jean-Pierre Clamadieu has reflected upon a difficult three-month period. “As anticipated, we faced in the first quarter unprecedented low levels of demand,” said Clamadieu. “This, combined with the absorption of costly raw material inventories, resulted in a major adverse impact on profitability.”

In the first quarter, net sales were down 24 per cent to 920 million euros as a result of a 27 per cent contraction in volumes, primarily linked to decreased demand in the automotive, construction and other industrial end-markets across geographic zones. Recurring EBITDA amounted to 2 million euros in the quarter, compared to 168 million euros in the same period last year. This, says Rhodia, reflects amongst other factors an unprecedented drop in volumes and the corresponding poor operating yields.

Operating Profit in Q1 was minus 91 million euros versus a profit of 92 million euros a year earlier. The company notes that the significant decrease in profit is primarily a reflection of the recurring EBITDA evolution coupled with larger restructuring charges in this most recent first quarter. A net loss of 134 million euros was recorded, as opposed to a net profit of 42 million euros in the same period of 2008.

The section of Rhodia’s business most closely linked to the tyre industry, Rhodia Silcea, generated sales of 142 million euros in the first quarter of this year. Like-for-like, this represents a 30 per cent decline on the opening quarter of 2008. Recurring EBITA, at three million euros, was 90 per cent down on a year earlier, like-for-like.

As for the future, Rhodia states that “uncertainty still prevails in a depressed economic environment”, yet notes that while no signs of recovery have been seen in Europe and North America, the completion of customer de-stocking is expected by the end of the second quarter. According to “Jean-Pierre Clamadieu, “the negative impact from costly raw material inventories is now behind us. Looking ahead, we are perceiving signs of slight demand recovery in Asia and Latin America and we expect that customer de-stocking in Europe and North America will be completed by the end of the semester. In a very uncertain economic environment, our key priority remains to generate Free Cash Flow in 2009.”