Ciba announces smaller net loss for 2006

Ciba makes special protective packaging for the food industry (Ciba SC)

Ciba Specialty Chemicals has posted a net loss of SFr41 million ($32.72 million) for 2006 compared with a loss of SFr256 million in 2005.

The Basel-based company said the better result was driven by improved sales and cost-cutting measures.

Ciba, which is undergoing a wide-reaching restructuring, forecasts higher 2007 net income and sales, and a one per cent increase in full-year operating income margin.

The company, which produces dyes and pigments, also announced that current chief operating officer Brendan Cummins would take over as chief executive officer from January 1, 2008, replacing Armin Meyer, who will continue as chairman.

Earnings before interest and tax (Ebit) from continuing operations rose to SFr531 million, from SFr509 million in 2005, while full-year sales from continuing operations were up four per cent to SFr6.35 billion, from SFr6.05 billion.

For 2007 Ciba said it expects growth both in sales and profitability, with business conditions expected to remain similar to those in 2006 and the impact of raw material prices also expected to remain unchanged.

“Going forward, we will focus on our three core businesses: plastic additives, coating effects and water and paper treatment,” Meyer said in a statement.

Sales growth

Ciba said its savings programme is developing as expected and it plans to propose a SFr3-per-share dividend, the same as last year.

Improved sales were primarily driven by sales growth in Asia and Europe, with nine per cent and three per cent increases in local currencies respectively.

Volumes increased in all businesses, up five per cent overall, with particular strength in plastic additives and coatings effects.

However, sales prices overall were one per cent lower than 2005, with plastic additives and water and paper treatment being flat and some price erosion in coating effects.

Specialty chemicals makers have been hit by higher raw materials costs and tougher competition from Asian companies, and both Ciba and rival Clariant have raised prices to offset higher costs.

Cost savings

The company said its new cost-cutting plan, launched in 2006, foresees sales growth of three to four per cent, and SFr400-500 million of cost savings by 2009.

As a result of the programme, operating income margin is expected to increase by one per cent of sales per year in 2007 and 2008, with an accelerated rate thereafter.

Ciba announced in August that it would slash its workforce by about 2,500 over the next three to four years – with 350 jobs going in Switzerland – and reduce its product range as part of a fresh round of restructuring. This is the group’s fourth cost-cutting exercise in five years.

“We judge the results as mixed, with more negatives than positives,” said Alexandre Pasini, analyst at Bank Vontobel. “Ciba is beginning to feel the impact of an economic slowdown in the United States and raw materials remain high.”

swissinfo with agencies

In brief

Ciba Specialty Chemicals is one of three companies created by the merger of Ciba-Geigy and Sandoz in 1996, along with Novartis and Syngenta.

The group supplies dyes and pigments to textile, car, cosmetic, plastics, paper and construction industries.

Basel-based Ciba SC employs around 14,000 people on 69 sites in 22 different countries.

Key facts

Financial figures 2006
Gross profit: SFr1.8 billion (+6%)
Sales: SFr6.4 billion (+4% in local currencies)
Sales volumes: +5%
Operating income (Ebit): SFr531 million (+5%)
Proposed dividend payout: SFr3
Staff at the end of 2006: 14,130 (2005: 19,105).