Hoechst profits double as product prices soar

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The Independent Online

Deputy City Editor

Soaring product prices and buoyant volumes helped the German chemicals giant Hoechst almost to double profits in the six months to June. First- half profits exceeded those recorded at the peak of the last cycle in 1989.

The result, driven by strong performances in the chemicals and plastics businesses, outstripped analysts' expectations. They had forecast a 76 per cent rise in profits against a reported 96 per cent increase to DM2.1bn (pounds 917m), up from DM1.1bn.

The profits were struck from sales of DM26.3bn, a 6 per cent rise on the first half of 1994. Margins rocketed from 4.4 to 8.1 per cent.

Unit sales were up 5 per cent and sales prices were an average 8 per cent higher than a year earlier, Hoechst said. But it added that currency fluctuations cut sales by nearly DM2bn, or 8 per cent.

The company said: "Management are also expecting favourable business in the second half of the year and for 1995 as a whole a strong increase."

The figures excluded Marion Merrell Dow, which Hoechst acquired in two stages in June and July. After changing its name to Hoechst Marion Roussel, the new subsidiary will be consolidated from 1 July.

The plastics division achieved the strongest increase in sales, with turnover rising 24 per cent to DM2.65bn. Chemicals division sales rose 18 per cent to DM2.93bn, fibres sales 6 per cent to DM3.74bn and speciality chemicals 5 per cent to DM4.38bn.

Hoechst said European sales rose 11 per cent to DM14.9bn and sales in Asia, Africa and the Pacific region combined were up 5 per cent at DM4.09bn. American sales slipped 2 per cent to DM7.26bn as a result of the weaker dollar.

Analysts argued that if the dollar continues its recent appreciation, the effects could help offset a traditionally weaker third quarter. A stronger dollar would be especially helpful for Hoechst's pharmaceuticals and agriculture business, where production is still largely based in Germany, analysts added.

The stronger dollar could also lend psychological support to sector share prices as it may dampen lingering fears that a price decline will eventually knock earnings lower.

This year's unexpected mark appreciation, particularly against the dollar and several European currencies, has hit German companies hard, including the three big chemicals businesses, Hoechst, BASF and Bayer.