The Performance Materials division, which is comprised of the Liquid Crystals (LC) and Pigments & Cosmetics business units, faced a difficult year-over-year comparison in the first quarter of 2012 after generating a 14.6% organic sales growth rate in the year-ago quarter due to unusually high customer demand for its liquid crystal materials.
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Performance Materials | Key figures – Q1 | |||
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€ million |
Q1 – 2012 |
Q1 – 2011 |
Change |
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Total revenues |
386.2 |
408.7 |
–5.5% |
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Sales |
386.4 |
408.0 |
–5.3% |
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Operating result (EBIT) |
129.3 |
327.9 |
–60.6% |
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Margin (% of sales) |
33.5% |
80.4% |
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EBITDA |
159.7 |
354.9 |
–55.0% |
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Margin (% of sales) |
41.3% |
87.0% |
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EBITDA pre one-time items |
160.3 |
197.9 |
–19.0% |
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Margin (% of sales) |
41.5% |
48.5% |
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First-quarter 2012 sales of the division declined 5.3% to € 386 million compared to € 408 million in the first quarter of 2011. This performance reflected an organic sales decline of 7.9% and an 0.4% decline due to effects of divested businesses. These declines were partially offset by a 3.0% benefit from changes in foreign exchange rates.
The division continues to see healthy demand from its liquid crystals customers and maintained its leading market share in the first quarter. Due to the high concentration of liquid crystals customers, the business unit can see significant swings in the quarterly growth patterns based on these customers’ decisions to build or reduce inventories. The second business unit, Pigments & Cosmetics, declined in the quarter but showed sequential improvement from a very weak fourth quarter of 2011.
The division’s gross profit dropped 19% to € 214 million from € 265 million in the year-ago quarter. This decrease was due to lower sales and a negative mix effect (lower sales of polymer-stabilized vertical alignment or PS-VA liquid crystals materials, which carry high margins). The gross margin fell to 55.5% in the first quarter 2012 compared to 64.8% in the exceptionally strong year-ago quarter.
Selling, general and administration (SG&A) costs showed a change due to the divestment of the Crop BioScience business in the first quarter of 2011. Adjusted for this effect, the division’s SG&A spending was reduced by € 7 million compared to last year as a result of lower discretionary spending.
Research and development costs declined 2.0% to € 35 million, or 9.1% of sales. This R&D spending is spread between investments in LC and organic light-emitting diodes (OLED) materials and new technologies such as reactive mesogens. Other operating expenses (net) were € 7.3 million for the quarter compared to an income (net) of € 142 million last year due to a gain of € 157 million on the divestment of the Crop BioScience business.
Largely due to the one-time capital gain for the Crop BioScience divestment in 2011, the division’s operating result decreased 61% to € 129 million in the reporting period.
The division’s EBITDA pre for the first quarter of 2012 was € 160 million, or 41.5% of sales, down 19% from the € 198 million, or 48.5% of sales, in the first quarter of 2011. This decline was due to lower sales and a comparably lower gross profit.
Performance Materials | Sales by region – Q1
From a product perspective, the division’s top-line was driven by the strong performance of its In-Plane Switching (IPS) liguid crystal technology. This technology is an important component in tablet computers, which are currently in very high demand. Within the Pigments & Cosmetics business unit, a sales decline of its coating products, was partially offset by modest growth in Cosmetic Actives, including good performance of the RonaCare® skin-care products.
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Performance Materials | Growth components by region – Q1 | |||||
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€ million/change in % |
Sales |
Organic growth |
Exchange rate |
Acquisitions/ |
Reported |
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Europe |
47.1 |
–4.9% |
0.2% |
– |
–4.7% |
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North America |
23.9 |
5.1% |
3.8% |
–4.7% |
4.2% |
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Emerging Markets |
267.5 |
–5.4% |
2.9% |
–0.2% |
–2.7% |
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Rest of World |
47.9 |
–26.3% |
5.3% |
– |
–21.0% |
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