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Empresas y finanzas

Clariant Reports Improved Operating Margin in the First Quarter 2008


    CEO Jan Secher commented: "The measures

    we have initiated to improve operational performance have started to

    show a positive impact. In particular our focus on increased pricing and

    strict cost control has contributed to the improved operating margin.

    While our top line growth in local currency has been satisfying in the

    first quarter, we closely follow the economy and are prepared to take

    further actions if changes should occur. Against this backdrop we stay

    committed to an improved operating margin and a continued strong cash

    flow from operations by the end of the year."
    Clariant, a world leader in specialty chemicals, posted a 3% sales

    growth in local currency for the first quarter 2008. Adverse currency

    effects resulted in a negative sales growth of 2% in CHF. Total sales

    amounted to CHF 2.112 billion.
    Clariant increased prices by 4% and was able to fully offset a 9%

    increase in raw material costs. The gross margin declined slightly to

    30.5% from 31.1% in the strong first quarter of 2007. Compared to the

    full year 2007 the gross margin improved 1.3 percentage points. The

    gross margin year-on-year has improved for three quarters in a row

    despite a steep increase of raw material costs in the same period.
    Clariant reduced the number of job positions by 400 in the first quarter

    as part of the ongoing restructuring measures. Sales, General and

    Administration (SG&A) costs declined to 20.7% down from 21.8% in the

    first quarter of 2007.
    The operating margin before exceptionals improved to 7.9% from last year´s

    7.1%. This translates into an increased operating income before

    exceptionals of CHF 167 million compared to CHF 152 million in the first

    quarter of 2007. The net income from continuing operations declined to

    CHF 41 million from CHF 86 million as a result of higher restructuring

    costs and unfavorable currency effects. In the first quarter, foreign

    exchange effects had a negative impact on the operating income of CHF 36

    million and another CHF 44 million on the net result.
    Cash flow from operations declined to CHF -6 million from CHF 37 million

    in the previous year as inventories have been built up before the Easter

    holidays and trade payables have been reduced.
    Improved pricing across the divisions
    All four divisions achieved higher prices in the first quarter as a

    result of the company´s focus on price

    increases and the corresponding measures that have been initiated in the

    previous year. Following Clariant´s price over

    volume approach, the divisions have tackled customers with unsatisfying

    profitability by price increases, utilization of alternative low cost

    distribution channels or giving up on unprofitable business. These

    measures had a slightly negative effect on volumes without having

    materially impacted capacity utilization.
    Pigments & Additives division with strong sales and margin growth
    The Pigment & Additives division grew 6% in local currency (1% in CHF)

    compared to previous year. This favorable development was mainly

    influenced by good demand but also partially the result of some

    inventory build-up by customers. The main growth driver was the Coatings

    business that has benefited from robust demand in particular from the

    automotive industry in Europe and strong growth in Asia. The

    Specialties, Publication Inks and Plastics businesses also saw good

    growth in terms of price and volume whereas at different levels.
    Geographically, demand in Asia and Latin America gained momentum, whilst

    sales in Europe were slightly lower. The weakness of the US market had

    only limited impact on the division´s top line

    due to the relatively small exposure of Pigments & Additives to the US

    market.
    The division significantly improved profitability due to price increases

    and effective cost management, although the gross margin declined

    slightly on a year-on-year basis.
    The division has extended its joint venture with its Chinese partner

    Zhejiang Baihe in Hang Zhou city, province of Zhejiang. The joint

    venture will build a new plant for the production of Quinacridone high

    performance organic pigments. The investment demonstrates Clariant´s

    strong focus on the emerging markets in Asia and in particular on

    mainland China, where the company already operates nine facilities.
    Textile, Leather & Paper Chemicals challenged by unfavorable market

    conditions
    The performance of the Textile, Leather & Paper Chemicals division was

    impacted by difficult, however different, market environments for all

    three businesses. Sales in local currency declined 6% (11% in CHF). The

    gross margin declined compared to the first quarter of 2007.
    The Textile business was affected by a weak demand in the US and Europe "“ in particular in key markets like Italy, Spain and Turkey. Customers in

    India and Turkey suffered from strong currencies that negatively

    impacted their exports. The business managed an unprecedented price

    increase despite the challenging market situation. As a result, the

    gross margin could be increased compared to the last quarter of the

    previous year although it was lower than in the first quarter of 2007.
    The leather market was basically stable. The leather finishing market

    experienced good growth partly due to the solid development of the

    automotive industry in Europe, while the wet end chemicals market was

    weak. In this environment, Clariant´s Leather

    business has progressed well in addressing overcapacities and executing

    the previously announced restructuring measures. The closure of the

    Selby production plant in the UK is proceeding according to plan, and

    will be completed by the end of 2008. This step reduces the company´s

    exposure to the weak, lower margin wet end chemicals market. The gross

    margin of the leather business remained stable.
    The pulp and paper market has gone through a difficult period marked by

    weakening demands. Clariant´s Paper business

    was strongly influenced by a developing shortage of supply of chemical

    feedstock for optical brighteners as well as by extreme price increases.

    As a result, Paper was unable to compensate for the rise in raw material

    costs through price increases. Despite these circumstances, the

    profitability of the business still remained at a satisfactory level.
    Differentiated price increases of the Functional Chemicals division

    has triggered profitable growth
    The Functional Chemicals division saw a 9% growth in local currency (5%

    in CHF). A favorable demand situation in Europe, the division´s

    biggest market, as well as market share gains in the US have contributed

    to this positive development. The gross margin remained stable compared

    to the first quarter of 2007, which represents a significant improvement

    compared to the second half of 2007.
    A strong focus on price increases has turned the negative trend of the

    recent quarters for the Detergents and Specialty Intermediates business

    in terms of both volume and profitability. The Oil Services as well as

    the Mining business continued to grow dynamically as market conditions

    remained favorable.
    A main reason for the positive development of the division´s

    profitability was a differentiated approach on price increases that has

    been enabled by the new structure of the Functional Chemicals division.

    The new structure enables the division to clearly separate

    product-driven from service-driven businesses and to manage them

    according to their respective needs.
    Solid business development of the Masterbatches division
    The Masterbatches division experienced a restrained demand in the first

    quarter. Sales in local currencies remained flat and declined by 5% in

    CHF due to adverse currency exchange effects. The division saw good

    growth in Latin America and Asia whereas the United States has been

    impacted by a difficult economic climate in the first quarter.

    Consequently, due to the proximity of the division to the end user

    markets, sales in the US declined particularly in the housing and

    automotive industries. Europe showed a differentiated sales pattern with

    the main countries partially offsetting a weaker demand in smaller

    countries.
    The division was able to offset the rise in raw material costs with

    selective price increases. The raw material costs increased again but at

    a lower pace than in the first quarter of 2007. The gross margin of the

    division remained at the level of the previous year.
    Outlook for 2008 unchanged
    Against a backdrop of an increasingly uncertain global macro-economic

    outlook, Clariant´s focus during the

    remainder of the year will be on the continuing implementation of price

    increases and cost leadership, which will help offset expected further

    increases in raw material and energy costs.
    With the benefits of the operational performance improvements already

    underway, Clariant expects an improved operating margin before

    exceptional items and continuing strong cash flow from operations in

    2008.
    Going forward, the company will focus on businesses where it will be

    able to leverage strong market positions in attractive markets, and thus

    proactively manage its portfolio.

    = = = = = = = = = = =

    Key Financial Group Figures
    - - - - - -

    First Quarter
    - - - - - -

    Continuing operations:

    2008

    2007

    - - - - - -

    CHF mn

    % of sales

    CHF mn

    % of sales
    - - - - - -

    Sales

    2112

    100.0

    2156

    100.0
    - - - - - -

    - - - - - -

    Local currency growth (LC):

    3%

    - - - - - -

    Organic growth

    3%

    - - - - - -

    Acquisitions/Divestitures

    0%

    - - - - - -

    Currencies

    -5%

    - - - - - -

    - - - - - -

    Gross profit

    645

    30.5

    671

    31.1
    - - - - - -

    EBITDA before exceptionals

    230

    10.9

    219

    10.2
    - - - - - -

    EBITDA

    207

    9.8

    210

    9.7
    - - - - - -

    Operating income before exceptionals

    167

    7.9

    152

    7.1
    - - - - - -

    Operating income

    140

    6.6

    139

    6.4
    - - - - - -

    Net income from continuing operations

    41

    1.9

    86

    4.0
    - - - - - -

    Operating cash flow (total operations)

    -6

    37

    - - - - - -

    - - - - - -

    Discontinued operations:

    - - - - - -

    Sales

    0

    46

    - - - - - -

    Net loss from discontinued operations

    0

    -2

    - - - - - -

    - - - - - -

    Other key figures:

    31.3.2008

    31.12.2007

    - - - - - -

    Net debt

    1357

    1361

    - - - - - -

    Equity (including minorities)

    2249

    2372

    - - - - - -

    Gearing

    60%

    57%

    - - - - - -

    Number of employees

    20530

    20931

    - - - - - -

    Clariant "“ Exactly your chemistry.
    Clariant is a global leader in the field of specialty chemicals. Strong

    business relationships, commitment to outstanding service and

    wide-ranging application know-how make Clariant a preferred partner for

    its customers.
    Clariant, which is represented on five continents with over 100 group

    companies, employs around 21,000 people. Headquartered in Muttenz near

    Basel, Switzerland, it generated sales of CHF 8.5 billion in 2007.

    Clariant´s businesses are organized in four

    divisions: Textile, Leather & Paper Chemicals, Pigments & Additives

    Masterbatches and Functional Chemicals.
    Clariant is committed to sustainable growth springing from its own

    innovative strength. Clariant´s innovative

    products play a key role in its customers´ manufacturing and treatment processes or else add value to their end

    products. The company´s success is based on

    the knowhow of its people and their ability to identify new customer

    needs at an early stage and to work together with customers to develop

    innovative, efficient solutions.
    www.clariant.com