Arab Spring Tips Tessenderlo To Surprise Q4 Loss
Belgian chemicals and plastics group Tessenderlo swung to an unexpected fourth-quarter net loss as demand for fertilizers dropped in countries hit by "Arab Spring" revolutions and raw materials prices rose.
Tessenderlo said it had experienced a sharp decline in demand for potassium sulfate fertilizers in North Africa and the Middle East and recession-hit southern Europe, and that margins came under pressure due to higher raw material costs.
"We struggled a bit with our sales in the Middle East, from Tunisia over Libya, Egypt and in Syria, which are important markets for us. Volumes went down further than we anticipated," Chief Executive Frank Coenen told a conference call, adding that he did not know when this would improve.
Uprisings, dubbed the Arab Spring, last year swept through Tunisia, Egypt, Libya and Yemen and touched off the revolt still raging in Syria.
Potassium sulfate is used as a fertilizer in arid and semi-arid areas because of its low salinity.
The decline in this type of fertilizer was partly mitigated by a rise in profit at Tessenderlo's Kerley unit which makes chemicals for the agriculture and mining industries.
The Gelatin and Akiolis unit, whose main customers are the food and pharmaceuticals industries, posted lower sales due to tighter raw materials availability.
"If you look at the two most important divisions, Kerley and Gelatin-Akiolis, the latter's results were worse than expected in the fourth quarter," said Filip De Pauw, analyst at ING.
The group net loss was €8.6 million ($11.2 million) compared with a forecast net profit of €1.4 million in a Reuters poll of analysts.
Tessenderlo said it was cautious about 2012, which would be a year of transition.
For 2012, the group has a capex budget of €150 million, against €113.6 million spent last year, with a further €200 million available for acquisitions, its chief financial officer said.
Recurring operating profit for the fourth quarter was €1 million($1.31 million), below the €7.3 million expected in the Reuters poll of four analysts.
It was also below an earlier company outlook that the figure would be in line with €4.4 million of the fourth quarter of 2010.
