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Switzerland:Ciba says bottom lines hit by textile
quotas expiry |
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2005-2-2
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Swiss chemical giant Ciba Specialty Chemicals say its bottom line has been impacted by the elimination of international textiles tariffs.
Its Q4 results state of unexpected loss and expects a difficult 2005 with tough global competitive environment, rising raw material costs and the weak US dollar.
Shares in Ciba plunged 7 percent in Swiss trade.
Ciba said margins in its textile effects division, which sells textile chemicals and dyes and accounts for about 19 percent of total sales, were "notably affected in the fourth quarter from lower demand levels, as customers grappled with the effects of the WTO liberalization of international trade."
Ciba said it''s making "strong efforts" to improve margins by containing production and general costs.
In 2004, pretax cash flow margins in textile effects fell to 9.0 percent from 9.2 percent, and sales fell 7 percent to SFr1.3 billion Swiss francs, or 5 percent in local currencies.
"Growth was seen primarily in China, which has become the segment''s biggest individual market, as well as Turkey and India," Ciba said in its 2004 earnings report.
Textile chemicals maintained sales levels in local currencies, but price and volume in the textile dyes division declined further. Key points were the shift of customers to Asia and the move toward lower quality textiles, Ciba said.
Ciba said it swung to a loss of SFr22 million in the fourth quarter. It said net income was SFr43 million in the same period last year.
Not including restructuring and special charges, net income rose 8 percent to SFr46 million. Sales rose 9 percent to SFr1.76 billion in the quarter.
"We are determined to effectively manage the challenges in our business environment. Price increases have been implemented and I expect to see the benefits coming through quickly," CEO and Chairman Armin Meyer said.
Besides the decline in fourth-quarter textile effects margins and sales, Ciba said its electronic materials showed a "very mixed picture" with strong sales to liquid crystal display (LCD) producers. There was a "substantial drop" in demand for dyes for writeable compact discs following over-stocking by customers, it also said.
Looking ahead, Ciba said it expects "difficult challenges in 2005, particularly a tough competitive environment, rising raw material costs and ongoing negative currency impact."
Assuming the U.S. dollar doesn''t get much weaker, Ciba expects higher sales in local currencies and a net income higher than 2004''s in Swiss francs. Free cash flow in 2005 is expected to be between SFr250 million and SFr350 million. |
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