Ciba's profits fall and they fail to meet forecasts - a tough 2008 is predicted

A combination of slowing demand and rising material costs have been blamed for the 51% fall in Ciba Specialty Chemical's profits. This result is well short of analysts forecasts.

Net income declined to CHF 37 million (USD 36 million) from CHF 76 million. Sales dropped 6 percent to CHF 1.56 billion. Seven analysts surveyed by Bloomberg predicted a profit of CHF 60 million.

Ciba has now predicted a 5% increase in operating income in 2008, compared with a previous estimate of 10%. Raw material costs gained 4.5% in the first quarter and they failed to increase selling prices to customers (reduced by 1% overall). Ciba SC is cutting a total 2,500 jobs to lower expenses by as much as 500 million francs by 2009 to compensate for rising costs.

As the Bloomberg article points out, Ciba is the second worst-performing stock in the Swiss Leader Index this year with a decrease of 30%, giving the company a market value of 2.5 billion francs. Missing the profit forecast will raise further questions regarding Ciba's management especially as we move further into 2008. Ciba's shares have not moved much since the 1Q08 results, hovering around CHF 35.