Exhibit 99.2
Ciba Specialty Chemicals
January - September 2000 Ciba [GRAPHIC OMITTED]
o Sales rise 12 percent in Swiss francs; 5 percent in local currencies -
volume up 8 percent
o Net income up 65 percent
o Operating income up 58 percent; EBITDA margin at 17.4%
Consolidated Financial Highlights (unaudited)
(in millions of Swiss francs, except share and per share data)
Nine months ended September 30, Change
2000 1999 %
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Net sales(1) 5985 5344 12
Gross profit 2017 1678 20
Operating income(1) 688 435 58
Financial income and expense (191) (235) -19
Income from continuing operations, before income taxes 497 200 149
Provision for income taxes 168 77 120
Income from continuing operations 329 123 168
Net income from discontinued operations, net of tax(2) 0 76
Net income 329 199 65
Earnings per share, basic and diluted
Continuing operations 4.96 1.85
Discontinued operations 0.00 1.15
Net income 4.96 3.00
EBITDA(1)(3) 1039 773 34
(1) From continuing operations.
(2) On May 31, 2000, the Company completed the sale of its Performance
Polymers business to Morgan Grenfell Private Equity.
(3) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
is calculated as operating income plus depreciation and amortization.
Dear Shareholders,
Once again, I am pleased to be able to report to you a positive set of results
for our company. As you can clearly see in our financial highlights, Ciba
Specialty Chemicals has continued its strong performance - a positive upward
trend which began in the latter half of 1999. We have committed ourselves to
providing consistently steady and positive results. Our track record has
demonstrated that we have kept our promise. Sales for the first nine months of
this year were 12 percent higher in Swiss francs than during the corresponding
period in 1999. Operating income was 58 percent higher. EBITDA reached 17.4
percent of sales. And, we are very satisfied with our improvement in net
income, which rose 65 percent.
I would like to highlight several key points. The very good performance which
we achieved in the first-half continued in the third quarter. Our year-to-date
and third quarter sales were both higher than the corresponding periods in
1999. This was achieved in spite of the higher base level in the third quarter
of 1999. And, our strong bottom line performance continues to benefit from the
fact that as a truly global company, we have been able to offset sharp
increases in raw material prices by proactively shifting our source of
suppliers from one hemisphere to another. We continue to anticipate only a 2
percent to 3 percent increase in raw material prices for the full year.
This report marks a significant improvement in our reporting to shareholders
compared to our past practice and, for the first time we are providing both
sales and profit figures with our quarterly reporting. Why are we doing this?
Our aim is to perform at the highest levels of the specialty chemicals
industry and to achieve best practice standards, and I am personally committed
to openness and transparency in financial reporting. In 1997, Ciba became one
of the first Swiss companies to adopt the more transparent U.S. GAAP reporting
standards. I believe
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8
our shareholders and other stakeholders are entitled to quarterly sales and
profit figures and this will be our standard practice in the future. I trust
that you will appreciate this decision.
As we move through the last quarter of the year, we continue to monitor the
trends and conditions in the global economy and in our important end-user
markets. We continue to see signs of a so-called "soft landing" scenario in
the United States, with a continuation of growth, albeit at a more modest
rate, and we are mindful of the even stronger base level from the fourth
quarter of 1999 that we face in the final quarter of this year. However,
assuming that there is no drastic change in the current trends, I am able to
confidently state that we are clearly on target to achieve the financial
targets for 2000 that we established at the beginning of the year. In fact, I
can now say that we feel very comfortable that we will achieve an EBITDA
margin at the top or somewhat above the target range of 16 percent to 17
percent of sales. This would indicate a strong double-digit percentage
increase in both net income and earnings per share.
I would like to thank you for your continued support of our company. We will
continue to focus on our key business drivers, our compact and synergistic
portfolio of outstanding products and services and to achieve a consistent and
steady performance to the benefit of our employees, customers and, above all,
our shareholders.
Best regards,
/s/ Rolf A. Meyer
Rolf A. Meyer
Chairman of the Board and
Chief Executive Officer
Condensed Business Segment Data (unaudited)
(in millions of Swiss francs)
Nine months ended September 30, Change
2000 1999 %
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Net sales
Additives 2829 2533 12
Additives (excluding Water Treatments) 2007 1777 13
Water Treatments 822 756 9
Colors 2004 1774 13
Consumer Care 1152 1037 11
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Total net sales 5985 5344 12
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EBITDA(1)
Additives 579 471 23
Additives (excluding Water Treatments) 476 390 22
Water Treatments 103 81 27
Colors 340 252
Consumer Care 184 146
Corporate (64) (96)
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Total EBITDA(1) 1039 773
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EBITDA margin (2)
Additives 20.5% 18.6%
Additives (excluding Water Treatments) 23.7% 21.9%
Water Treatments 12.6% 10.8%
Colors 17.0% 14.2%
Consumer Care 16.0% 14.1%
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Total EBITDA margin(2) 17.4% 14.5%
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(1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
is calculated as operating income plus depreciation and amortization.
(2) EBITDA margin is EBITDA expressed as a percentage of net sales
(EBITDA divided by net sales).
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9
Detailed Third Quarter Results
Sales
The Company's sales for the first nine months of 2000 grew 12 percent in Swiss
francs over previous year's sales, or 5 percent in local currencies, to a
total of CHF 5.985 billion. Sales not only increased on a year-to-date basis,
but also on a third quarter-to-third quarter basis, by 9 percent in Swiss
francs or 3 percent in local currencies. They decreased only marginally
between the second and third quarters of 2000, by 3 percent in Swiss francs,
following the traditional summer pattern. On a year-to-date basis, currency
effects resulted in a favorable impact of 7 percent, based on a relatively
stable average foreign exchange rate scenario. For all divisions, volume
growth outpaced price reductions. Overall, volume rose 8 percent while price
reductions amounted to 3 percent on average. This price decline originates in
competitive conditions in certain markets. In addition, prices for products
delivered into strong currency regions, such as the United States, had to be
reduced as customers are demanding a share of the suppliers' currency gains.
During the second half of 1999, the Company began a series of selective price
increases, which have succeeded in slowing the rate of price erosion so far in
2000.
Sales year-to-date improved in all three regions. Sales in the Eastern
Hemisphere increased 18 percent in Swiss francs, or 6 percent in local
currencies; the Western Hemisphere saw a 14 percent rise in sales in Swiss
francs, or a 2 percent increase in local currencies; and sales in Europe rose
6 percent in both Swiss francs and in local currencies. In local currencies,
double-digit increases were seen in the China Region, South East Asia and
South America. Sales in Japan were still below last year's levels due to the
continuing difficult economic circumstances. In the United States, sales
remained stable at a high level. The strong British Pound led to a weakening
of demand in the UK. Performance in the rest of Europe was mixed.
Operating Income Operating income increased by 58 percent to a total of CHF
688 million. EBITDA totaled CHF 1.039 billion, reaching 17.4 percent of sales,
compared to 14.5 percent during the comparable period in 1999. This reflects
the impact of higher sales driven by strong volume growth. The combination of
volume growth and product mix changes coupled with operational efficiency
improvements in the production areas more than compensated for both the modest
reductions in selling prices and the modest raw material price increases. This
resulted in gross profit margins improving to 33.7 percent from 31.4 percent.
While raw material prices for the Company as a whole rose slightly
year-to-date in 2000, they were still relatively stable compared to the first
nine months of 1999 due to the Company's ability to offset sharp increases by
proactively shifting our source of suppliers from one hemisphere to another.
We continue to expect raw material prices to increase approximately 2 percent
to 3 percent over the course of the full year. Expressed as a percentage of
sales, selling, general and administrative expenses decreased from 18.8
percent to 18.5 percent despite continuing investment in new business
development. This improvement was achieved through the continuing positive
results of ongoing process improvement and cost control. Research and
development expenditures, expressed as a percentage of sales, has remained
stable at around 3.5 percent of sales.
Financial income and expense
Financial income and expense declined 19 percent during the first nine months
of 2000 as compared to the previous year. This is primarily attributable to
continuing positive cash flow generation and the reduction in the company's
net debt position following the sale of the Performance Polymers business.
Overall, movements in interest rates did not have a significant impact.
Net Income
For the first nine months of 2000, net income increased by 65 percent to CHF
329 million resulting in earnings per share of CHF 4.96 compared to CHF 3.00
in the first nine-months of 1999.
Discontinued Operations
Regarding the sale of the Performance Polymers business, the Company is in the
process of finalizing the closing balance sheet audit and its estimation of
exit and separation costs, including transaction taxes. This process will be
completed during the fourth quarter 2000. As a result, as of September 30,
2000 the Company has not recorded a gain or a loss on the sale of the
business. The Company does not expect that the net income from discontinued
operations will result in a loss.
Excluding discontinued operations in both years, net income rose by 168
percent.
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10
Hexcel
As announced on October 12, 2000 the Company has agreed to sell the majority
of its approximately 49 percent stake in the US-based Hexcel Corporation to an
investor group led by Goldman Sachs. Approximately 14.5 million shares, or
approximately 39 percent of the outstanding shares in Hexcel, are being sold
in a transaction valued at $11.00 per share. The total gross value of the sale
is $160 million and the resulting gain is expected to be recorded in the
fourth quarter of 2000. This sale continues the Company's strategy of focusing
on a compact portfolio of businesses with synergies in shared technologies and
markets and of exiting non-strategic businesses that have little in common
with our key operations.
Divisional Results
Additives (excluding Water Treatments)
Additives, excluding the Water Treatments business unit, recorded sales of CHF
2.007 billion, up 13 percent in Swiss francs, or 5 percent in local
currencies. The division registered a strong volume increase with moderate
price declines. Selective price increases have been introduced to counter this
trend. Particularly strong sales increases were made in Swiss francs and in
local currencies in the China Region, South East Asia, Central America and
South America. Sales in both the Polymer Additives and Imaging and Coating
Additives business units increased by double-digits in Swiss francs. The
Process and Lubricant Additives business unit saw a strong double-digit
increase in both Swiss francs and local currencies.
EBITDA, at CHF 476 million, improved to 23.7 percent of sales, compared to CHF
390 million or 21.9 percent of sales for the first nine months of 1999. This
result reflects higher sales, improved margins and continuing operational
efficiency. This performance is toward the upper end of the range of normal
performance levels expected in the division.
Water Treatments
Sales for the Water Treatments business unit increased 9 percent in Swiss
francs, or 1 percent in local currencies, to a total of CHF 822 million.
Volume increased and outpaced price decreases. The business is still being
impacted by the secondary effect of the strong British Pound. Selective price
increases were recently announced for several key monomer intermediates used
in a range of coatings, adhesives and plastics. Strong sales increases in
Swiss francs and in local currencies were seen in China, India, Canada, South
America and Italy. Double-digit sales increases in Swiss francs were recorded
in the businesses Paper Technology, Extractive Industries, Performance
Intermediates and Soil Additives. Pollution Control, which faced ongoing
competitive pricing pressure in the municipal pollution control business,
increased sales in Swiss francs.
EBITDA for the first nine months of 2000 improved to CHF 103 million or 12.6
percent of sales, compared to CHF 81 million or 10.8 percent of sales for the
first nine months of 1999 (a 27 percent improvement). This result reflects
higher sales, reduced operating costs and the benefits of the ongoing
re-organization programs introduced during the first half of 1999. The Water
Treatments business unit supply chain is currently being merged with the
Additives division supply chain, which will further improve efficiency through
the sharing of infrastructure and skills.
Colors
The Colors division recorded sales of CHF 2.004 billion, an increase of 13
percent in Swiss francs, or 6 percent in local currencies. The division
recorded a very strong volume growth and only moderate price declines. Sales
were up strongly in Swiss francs and in local currencies in the China Region,
South East Asia, Central America and South America. Both the Inks, Paints and
Plastics and Colors for Textiles business units increased sales by
double-digits in Swiss francs and by solid single-digits in local currencies.
EBITDA, at CHF 340 million, improved to 17 percent of sales, compared to CHF
252 million or 14.2 percent of sales for the first nine months of 1999. This
improvement reflects higher sales, driven by improving overall market
conditions and growing market share, both in inks, paints and plastics and in
textile dyes. In addition, the full synergy benefits of the Colors
reorganization along with a number of process improvement initiatives helped
support the growth in profitability.
Consumer Care
Sales for the Consumer Care division increased 11 percent in Swiss francs, or
4 percent in local currencies, to a total of CHF 1.152 billion. Volume growth
was good and there was a moderate decline in prices. The division
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recorded strong sales in Swiss francs and in local currencies in South
America, the China Region and South East Asia. The Paper Chemicals business
unit increased sales by double-digits in both Swiss francs and local
currencies. The Textile Chemicals business unit posted a double-digit sales
increase in Swiss francs and a solid single-digit increase in local
currencies. The Home and Personal Care business unit continued to face intense
price competition among key detergent manufacturers as well as increasing
competition in antimicrobials. However, an improvement in these difficult
market conditions was noted in both August and September. Specialty products
for home and personal care markets continued to show strong double-digit
growth. While sales for the Home and Personal Care business unit for the first
nine months of this year increased in Swiss francs, they were lower in local
currencies.
Consumer Care's EBITDA rose to CHF 184 million for the first nine months of
2000, or 16 percent of sales, compared to CHF 146 million or 14.1 percent of
sales for the first nine months of 1999. Despite the more challenging sales
conditions and proactive investments in new business development, the division
managed a substantial improvement in its results.
Outlook
The Company remains on track toward meeting its strategic goals as an
innovative market leader in the global specialty chemicals industry. All
indications continue to point to a somewhat more moderate rate of growth in
the fourth quarter than that seen in the first nine months, coupled with a
slight weakening of average foreign currency exchange rates. The base effect
comparison, against the particularly strong sales achieved in the fourth
quarter of 1999, also needs to be considered. Nevertheless, should current
global economic and market trends continue -- including a gradual moderation
of the growth rate in the United States (the so-called "soft landing"
scenario), a continuing recovery in Europe and maintained stability in Asia --
the Company now feels comfortable that it can expect to report an EBITDA
margin for the full year at the top or somewhat above the target range which
was set at the beginning of the year: between 16 percent and 17 percent of
sales. This would indicate a strong double-digit percentage increase in net
profit and earnings per share.
Ciba Specialty Chemicals (SWX:CIBN,NYSE:CSB) is a leading company dedicated to
producing high-value effects for its customers' products. Our specialty
chemicals, added in small quantities, enhance the performance, look and feel
of the final product. Business success is driven by our long-term strategy of
innovation and continuous operational improvements. Ciba brings new and
creative thought to the processes and products of our customers in more than
120 countries. Ciba's continuing operations generated sales of CHF 7.2 billion
in 1999 and some CHF 250 million was spent on R&D to foster innovation across
the Company.
Forward-Looking Statements
Forward-looking statements contained herein are qualified in their entirety as
there are certain important factors that could cause results to differ
materially from those anticipated. Investors are cautioned that all
forward-looking statements involve risks and uncertainty. In addition to the
factors discussed above, among the factors that could cause actual results to
differ materially are the following: the timing and strength of new product
offerings; pricing strategies of competitors; the Company's ability to
continue to receive adequate products from its vendors on acceptable terms, or
at all, and to continue to obtain sufficient financing to meet its liquidity
needs; and changes in the political, social and regulatory framework in which
the Company operates or in economic or technological trends or conditions,
including currency fluctuations, inflation and consumer confidence, on a
global, regional or national basis.
Reporting dates for 2001
Full Year 2000 Results February 21, 2001
First Quarter 2001 Results April 26, 2001
Half-Year 2001 Results August 16, 2001
Third Quarter 2001 Results October 23, 2001
Annual General Meeting March 23, 2001
Ex-Dividend Date March 28, 2001
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Contact Addresses
Corporate Communications Investor Relations Share Register
For media inquiries, For investor or analyst To report shareholder
please contact: please contact: address or other changes,
please contact:
Headquarters Headquarters Switzerland
Switzerland Matthias A. Fankhauser Share Register
Thomas Gerlach Tel: +41 61 636 5081 Ciba Specialty Chemicals
Tel: +41 61 636 4444 Fax: +41 61 636 5111 Holding Inc.
Fax: +41 61 636 3019 P.O. Box
CH-4002 Basel
Switzerland
United States Tel: +41 61 636 2922 or
O'Patrick Wilson +41 61 636 5791
Tel: +1 914 785 4045 Fax: +41 61 636 5243
Fax: +1 914 785 2211
Japan Internet Address
Chisato Akamatsu http://www.cibasc.com
Tel: +81 3 5403 8220
Fax: +81 3 5403 8223
Singapore
Joanne Er
Tel: +65 832 0529
Fax: +65 334 7131
United Kingdom
Ian Stewart
Tel: +44 1625 888 290
Fax: +44 1625 615 632
Published in both English and Ciba Specialty Chemicals Inc.
German. Klybeckstrasse 141
(C)Ciba Specialty Chemicals Inc. CH-4002 Basel, Switzerland
2000. Tel: +41 61 636 1111
