rd quarter 2007 results confirm solid free cash flow generation
Third Quarter 2007 Results
Confirm Solid Free Cash Flow Generation
Another quarter of profitable growth drives solid EBITDA and Free Cash Flow generation
* Net Sales up 7% to €1,261 million
* Recurring EBITDA* up 20% to €192 million versus €160 million in the third quarter 2006, despite the €(22) million negative impact of foreign exchange.
* Recurring EBITDA margin up to 15.2% versus 13.6 % in the third quarter 2006
* A positive Free Cash Flow of €53 million versus €(10) million in the third quarter 2006
* Free Cash Flow for the first 9 months of 2007 of €41million, compared to a cash outflow of €(124) million for the same period in 2006
* 9% volume growth with strong demand levels
* Solid pricing +3%
* Unfavorable foreign exchange, raw material and energy cost environment
* Organics’ restructuring continues
Accelerated delivery on financial commitments
* Free Cash Flow generation of more than €100 million expected in 2007
* Financial leverage of Net Debt on Recurring EBITDA ratio below 2 times expected at the end of 2007
“Our strong leadership positions in growing markets give us full confidence that we will continue to generate sustainable and profitable growth”, said Rhodia Chief Executive Officer Jean-Pierre Clamadieu. He added: “We expect to generate more than €100 million of Free Cash Flow in 2007 and to be one year ahead in the delivery of our financial leverage commitment.”
1. Results in line with 2007 objectives
Net Sales rose by 7% to €1,261 million in the third quarter of 2007, from €1,179 million a year earlier. This increase was driven by a significant 9% volume growth (4.4% excluding CERs) and a 3% positive impact from price increases. Foreign exchange had a 4.4% negative impact, due to the continued weakness of the US Dollar.
Recurring EBITDA grew by 20% to €192 million, benefiting from the good volume trends, in spite of the negative impact of foreign exchange (€22 million). Solid pricing in local currency continued to offset the impact of increases in raw material and energy costs. CER sales generated €39 million of recurring EBITDA in the third quarter of 2007.
The recurring EBITDA margin rose to 15.2% in the third quarter 2007 from 13.6% in the third quarter 2006.
Operating Profit rose by 2.7% to €115 million, versus €112 million for the third quarter 2006 which was favorably impacted by a €27million exceptional gain.
The Financial Result improved to €(43) million compared to €(62) million in the third quarter 2006, as the Group now fully benefits from the lower interest costs resulting from the refinancing initiatives realized over the past year.
The Net Profit Group Share for the third quarter 2007 totaled €45 million, compared to a profit of €70 million in the third quarter 2006, which was favorably impacted by a €34 million recognition of US deferred tax assets.
2. A positive Free Cash Flow and further Net Debt reduction
Operating Cash Flow totaled €115 million in the third quarter 2007.
The ratio of Working Capital Requirements on total sales stood at 12.9%. Capital Expenditure totaled €83 million.
Free Cash Flow* was €53 million, versus €(10) million in the third quarter 2006 and now stands at €41million for the first nine months compared to a negative of €(124) million for the same period in 2006.
Consolidated Net Debt totaled €1,623 million on September 30, 2007, a €25 million decrease from June 30, 2007.
3. Focusing on profitable growth
Thanks to the strength of Rhodia’s business portfolio, Net Sales grew 7%, with 9% volume growth and a 3% positive impact from price increases.
Polyamide, Silcea and Novecare are high margin leadership businesses well positioned in growing markets. Investments are under way to support the growth of these businesses.
Acetow is finalizing its action plan to improve margins to compensate for the unfavorable foreign exchange environment.
Organics focuses on the development of its leadership position in Diphenols and continues its restructuring in fine organics. Recently it announced plans to end Paracetamol manufacturing at its Roussillon site in France and to end all operations at its Avonmouth site in the UK .
Eco Services continues to generate very high margins and Energy Services benefits from the ongoing sales of CERs.
* Defined as “net cash provided by operating activities” plus “non recurring refinancing cash costs” minus Capital Expenditure"
The level of demand is expected to remain favorable in most regions, with strong volumes and a solid pricing power, in an environment still influenced by high raw material and energy costs. The foreign exchange environment should remain unfavorable.
Rhodia confirms its 2007 outlook of a strong growth in recurring EBITDA and expects to generate more than €100 million positive Free Cash Flow for the full year 2007.
One year ahead of its commitment, Rhodia expects to achieve a Net Debt on Recurring EBITDA ratio below 2 at the end of 2007.
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