Hoechst profits down by 30%: Second-half warning brings fears of third dividend fall
The warning fuelled speculation that the company may have to cut its annual dividend for the third successive time.
First-half sales fell by 2.4 per cent to DM22.9bn. Hoechst said prices and sales volumes for chemicals in Europe were considerably below the previous year's level in the first half of 1993 and fell back slightly year-on-year in the US.
In a letter to shareholders Hoechst said speciality chemicals and paints sales barely reached 1992 levels and the earnings situation was difficult.
Fibre sales in Europe remained unsatisfactory and in the textiles sector Hoechst suffered losses as price pressures increased. Textile and technical fibres had held up well in the US.
Hoechst said the situation in the European plastics market had worsened as the automobile industry slumped, and the group's car paint business was increasingly affected. However, sales of technical plastics rose in the US.
Domestic sales of medicines through pharmacies fell sharply below 1992 levels, and overall pharmaceutical sales in Germany dropped by 6 per cent in the first half.
Lower agrochemicals volumes in Europe were offset by higher sales in North America and Eastern Europe.
Hoechst, whose parent company made an unspecified operating loss, said that a cost-cutting programme would soon be put into effect because of the lack of prospects for a sharp improvement in demand.
Last week the two other German chemicals giants reported a slump in profits. BASF announced a pre-tax fall of 50 per cent to DM483m and Bayer said its profits had fallen by 20 per cent to DM1.4bn.
In 1992 Hoechst was forced to cut its dividend to DM9 from DM12 while BASF went down from DM12 to DM10 and Bayer reduced from DM13 to DM11.
Bayer may be able to maintain dividend payments because its profitable pharmaceutical business has shielded earnings from the brunt of Europe's recession.
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