Rhodia Foods: 1Q04 Results Point to Recovery

Rhodia Foods: 1Q04 Results Point to Recovery

CRANBURY, N.J.Rhodia Foods (NYSE:RHA) reported net sales of 1.34 million euros for the first quarter of 2004, a decline of 5.7 percent over the same period in 2003. The company attributed the decline primarily to unfavorable exchange rates caused by depreciation of the U.S. dollar. In contrast, 1Q04 net sales remained stable compared with the first quarter of 2003, when evaluated from the standpoint of constant structure and exchange rates. Operating income declined to 4 million euros in 1Q04, from 9 million euros in 1Q03, while net loss increased to 108 million euros in 1Q04 from 63 Euros reported for the same period in 1Q03.

The majority of the groups businesses reported increased volumes due to strong demand, particularly in the United States and Asia. Although depreciation of the U.S. dollar affected net sales between 1Q04 and the corresponding quarter in 2003, the price dynamic in 1Q04 was more favorable in a variety of markets than in the second half of 2003. The preliminary effects of restructuring plans implemented in 2003 reduced fixed costs by 22 million euros over the first quarter of 2003; a further reduction of 7 million euros was tied to re-capitalization of leasing contracts at the end of 2003.

In addition, the group reported it achieved major steps in an action plan, including consolidation of its medium-term financing, refocusing of the business portfolio, and streamlining activities around nine core enterprises.

According to the company, the year 2004 is dedicated to transformation. Supported by a reinforced board, Rhodias new senior management team is focusing on completing the companys divestment program and implementing cost-cutting actions. The company expects to benefit from a slight improvement in the markets it serves.

In other company news, Rhodia signed a letter of intent with Feralco AB for the sale ofthe groups chiefly European potable and waste water treatment business, which generated sales of 26.5 million euros in 2003. The two parties expect to reach a sale agreement over the next few weeks after consultations have been held with employee representatives and legal authorizations received.

The company also finalized the sale of its food ingredients business to Danisco for approximately 320 million euros. The 860-employee business generated sales of 211 million euros and had a pro forma EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of 31.6 million eurosan EBITDA multiple of more than 10in 2003.The divestment will provide Rhodia with a second-quarter capital gain, before tax, of more than 200 million euros.

Finally, Rhodia also signed a definitive agreement with Bain Capital, a producer of phosphoric acid and phosphates for use in a wide variety of industrial applications, for the sale of its North American specialty phosphates business for an enterprise value of $550 million dollars, representing an EBITDA multiple of more than seven. The agreement is expected to be finalized in the third quarter of 2004.