Sales by companies in North America declined by 0.6% to €11,937 million. In local-currency terms, sales increased by 7.8%.
The economic environment and domestic demand in the region weakened significantly in the second half of 2008. In addition, exports of industrial goods declined as a result of the strengthening of the U.S. dollar toward the end of the year. Sales declined due to lower demand as well as destocking at our customers.
Sales in the Plastics, Performance Products and Functional Solutions segments declined as a result of the weakening automotive and construction industries. In the Agricultural Solutions segment, sales in euro terms almost matched the previous year’s level due to higher sales prices and the strong demand for agricultural products.
Income from operations declined by 90.4% compared with the previous year to €73 million in 2008. The main reasons for the decline in earnings were the significant decrease in prices and margins and the marked under-utilization of our production capacities due to the drop in business in the fourth quarter. The Chemicals, Plastics and Functional Solutions segments were especially affected by this. Plant shutdowns – caused by two hurricanes on the U.S. Gulf Coast – and temporary unscheduled plant shutdowns also negatively impacted earnings in the Chemicals and Plastics segments. The decline in earnings was partially offset by the good performance of the Care Chemicals division.
Special items overall negatively impacted earnings: Special income resulted from the divestitures of the coil coatings business and the sale of the pharmaceuticals manufacturing business in Shreveport, Louisiana. Special charges resulted from the writedown of assets in the Styrenics business, costs for environmental protection measures, and costs associated with the sale of real estate.
Within the framework of the excellence program NEXT, we initiated various measures in 2008, for example, we implemented a new transportation management system. Now, we can make the supply chain process more reliable and efficient as well as make the cost structures more transparent in order to facilitate future cost savings.
In the fourth quarter, we intensified our cost-cutting measures in order to promptly reduce discretionary costs by 10% and to adjust personnel resources to the expected lower demand in 2009.