Higher sales and lower margins for 2019 first quarter
The first quarter of 2019 reflects a growth in sales as well as a narrowing of margins due to the drop in the prices of marketed products and the increase in the cost of raw materials.
Ebitda has dropped from EUR 20.76 million in Q1 2018 to EUR 12.97 million in Q1 2019, a 37.5% decrease. Amortization has increased by 5.9% as a result of the investments made, and financial expenses have decreased by 33.1%. The expense for income tax is reduced to EUR 1.25 million, and the profit for the period has decreased to EUR 3.66 million compared to the EUR 9.32 million in the first three months of the year 2018, a 60.7% decrease.
Both the ebitda and the profit for the first quarter of 2019 are lower than those obtained in the same period of the previous year –under exceptional sector and macroeconomic conditions– and are in line with the tightening of margins that the European chemical sector is suffering, caused by the weak demand, lower prices and the sharp rise in the cost of raw materials.
Uncertainties and risks that appeared in the second half of 2018 have not been cleared: the tariffs conflict between the USA and China persists; the price of oil remains high; and the uncertainty about Brexit and its effect on the European economy persists. In the EU, continues the cyclical slowdown aggravated by the USA decision to review the tariffs with the EU, particularly those related to the automotive sector, which affects the most to Germany and, by contagion, to the rest of Europe. In any case, it’s expected that the current downward cycle will be shorter and with less impact than the one of the Great Recession.
In the chlorine-caustic soda sector, however, the turnarounds scheduled for the second quarter and the operating difficulties to maintain the current high capacity utilization rates –that are at their historic highs in both Europe and the USA– could led to an increase in caustic soda price due to lower supply. In the case of Ercros, the tightening of margins could be partially offset by new volumes in the third quarter following the last scheduled expansion of the chlorine-caustic soda production capacity, which will also allow reducing the volume of purchased EDC.
Income statements for the 2019 and 2018 first quarters