Job cuts despite profits rise at Ciba

Swiss chemicals company Ciba Speciality Chemicals has announced strong second quarter results with a 9% increase in sales in Swiss francs (6% in local currencies) to a total of CFH3.285bn.

The result has been accredited to a higher operating income (EBIT) and strict cost management. According to Ciba, operating income for the first half of 2006 rose 5% to CHF259m or 7.9% of sales, and for the second quarter the results showed a 9.2% increase.

The divestment of its Textile Effects group also helped contribute to the figure. The sale was completed with a significantly lower separation cost than expected and leaves Ciba free to focus on its three core businesses - Plastic Additives, Coating Effects and Water & Paper Treatment.

“We expect the implementation of this strategy and the complementary Operational Agenda, over the next years, to boost local currency sales on average by 3-4% a year; to increase operating income margins by more than 1% of sales per year in 2007 and 2008, with an accelerated improvement thereafter; and to significantly improve free cash flow beginning in 2008,” said Armin Meyer, chairman of the board and ceo.

But such expectations come at a price as Ciba has also announced plans to shed almost one in five of its workforce. The implementation of such a move is to mitigate general pressures on the industry, such as competition from Asia and a rise in fuel prices, according to a Ciba spokesperson. However, a report in the Financial Times suggests that the proposed job losses are an acknowledgement of the depth of crisis in the speciality chemicals sector.