Akzo tops expectations in 1Q but sees tough times ahead
Akzo Nobel has posted a 7 per cent rise in net income to €176
million for the first quarter of 2004, a little more than expected,
but has warned that its pharmaceuticals division is in for a rough
ride this year, writes Phil Taylor.
The company said a strong euro, increasing competition from generic drugs makers and rising raw materials prices were having an impact that would be felt throughout the remainder of the year.
And Diosynth, the group's contract active pharmaceutical ingredient (API) manufacturing business, continued to be hit by weak demand for ingredients in the drug sector, according to Akzo. Turnover fell from €105 million to €102 million in the first quarter of the year, as lower captive demand from Organon started to bite.
Akzo has already announced major restructuring at Diosynth, including job losses in Scotland, Mexico and the Netherlands.
Overall, pharmaceutical sales dropped 7 per cent to €821 million, primarily due to currency impacts, generic competition in the USA for the antidepressant Remeron (mirtazapine) and lower sales of the firm's infertility and hormone therapy products.
Operating income rose 10 per cent to €155 million, the result of cost savings and product portfolio actions according to the company's chief financial officer Fritz Frohlich, who noted that this was particularly benefiting the drug business Organon.
"Cost savings at Organon are clearly paying off. This unit received more than €30 million from product portfolio management," he said, adding that this more than offset Organon's lower sales which were held back by generic competition to Remeron.
Meanwhile, Akzo said on Monday it had received a €625 million offer from the US Albemarle for its catalysts unit, which was put on the block last year along with the coating resins and phosphorus chemicals divisions. Akzo hopes that together they will fetch more than €1 billion.
