However, the company reported net losses that were a little larger than expected, at €108 million, up from €63 million in the same period of 2003 and affected by increased financing charges. Earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 3.3 per cent to €124 million.

The company said that volumes had grown encouragingly, reflecting strong demand particularly in the US and Asia.

Looking towards the remainder of 2004, Rhodia said it expected to benefit from a slight increase in the markets it serves, but cautioned that raw material costs remain high and the exchange rate environment is uncertain.

Rhodia also reported an increase of €236 million in net debt, including off-balance sheet items, to €3.54 billion, despite a divestment programme that has seen it sell of €400 million in assets. The company said it expects to reach its target of €700 million in divestments by the end of the year.

Analysts said it was somewhat concerning that the businesses which had shown better than expected growth, such as specialty phosphates, are those that have been earmarked for divestment.