Cognis CFO says 2007 net loss possible

German specialty chemical maker Cognis could suffer net losses for the full year, partly due to one-off costs incurred to refinance its debt, its finance head said on Wednesday. Klaus Edelmann also told Reuters changes in the German tax regime could contribute to a possible loss for 2007, compared with a 2 million euro ($2.7 million) net profit in 2006.
"I'm not ruling out that the bottom line will stay in the red," Edelmann said in an interview. But he added that the losses would have no impact on its operations or liquidity. "We have performed well on the operating level. We can look forward positively to the second half," he said.
The firm, controlled by Permira and GS Capital Partners, had previously expected a small profit for the year. Cognis recently refinanced its 2 billion euros of debt, allowing the company to save about 74 million euros a year in interest expenses.
Cognis on Wednesday reported a first-half net loss of 17 million euros, compared with a net profit of 9 million euros a year ago. The company achieved a first-half net profit before exceptional items of 39 million euros.
Adjusted earnings before interest, tax, depreciation and amortisation were flat at 214 million euros, as cost cutting and higher selling prices could partly offset rising raw material prices, especially in natural oils and fats.
By 1100 GMT, five-year credit default swaps on Cognis were 25 basis points tighter at 555 basis points, a trader said, while in the cash market its 9.5 percent fixed bond due 2014 and floating-rate note due 2013 were up a quarter of a basis point. "It's really more a case of the whole market being tighter," the trader added, rather than anything specific to Cognis.
Edelmann said he expected a "visible" improvement in sales and core profit this year, driven by its care chemicals used for shampoos or shower gels as well as nutrition & health and functional products. He also said the company had decided to sell its stake in its 50:50 joint venture with Malaysian plantation firm Golden Hope, which is in the process of merging with other Malaysian plantation firms.
"The joint venture will be listed on the stock market, or we will find a strategic buyer. We are following both options," Edelmann said, adding that the company was not under any time pressure to sell its stake.