Cognis, BASF Target, Says Weaker Euro Hampered Improvement in Debt Holding

Cognis GmbH, the German specialty chemicals company that is drawing interest from BASF SE, said debt remained at 1.88 billion euros ($2.3 billion) in the first quarter, hindered by a weakening euro against the U.S. dollar.

Record earnings in the first quarter helped counter exchange rate moves, slimming Cognis’s leverage ratio to 4.5 from 5.1 at the end of 2009, the maker of ingredients for moisturizers and detergents, owned by Goldman Sachs Group Inc. and Permira Advisers Ltd., said in a statement today.

The buyout firms, which plan to sell shares in Cognis or find a suitor, will be hoping potential investors focus on the company’s prospects. Cognis Chief Executive Officer Antonio Trius said today there are “clear signs” of a recovery and that he expects growth driven by demand for Cognis’s natural ingredients and emerging markets.

“We remain cautiously optimistic and expect that the recovery in Europe will continue and that Asia-Pacific and other emerging markets will remain on track for growth,” Trius said in the statement.

Adjusted earnings before interest, taxes, depreciation and amortization rose to a record 131 million euros in the first quarter, 80 percent higher than the year-earlier result. Sales rose 11 percent to 728 million euros, the company reiterated today.

Goldman Sachs and Permira are evaluating a bid from BASF, Financial Times Deutschland reported yesterday, citing unidentified people familiar with the planned transaction.

Buying the business would help BASF Chief Executive Officer Juergen Hambrecht reduce his company’s reliance on plastics and chemicals that Middle East competitors produce more cheaply. Cognis makes ingredients for body lotions and shampoos from natural resources such as palm kernels and coconut oil, as opposed to synthetic materials, tapping demand for environmentally friendly products.

The buyout firms bought the former Henkel AG unit, which also makes lubricants and drug ingredients, in 2001.

To contact the reporter on this story: Andrew Noel in London at anoel@bloomberg.net

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