Clariant posted a robust rise in sales for the Full Year 2006,
with annual organic sales growth of 7% in Swiss francs and 5% in local
currency terms. Sales reached CHF 8.100 billion during the period from
CHF 7.728 billion a year earlier. Overall, selling prices remained at
stable levels, with significant improvements in certain businesses.
Gross margins for the Full Year increased to 30.7% from 30.5% the
previous year, despite raw material and energy costs remaining at high
levels over the period. Operating income before exceptionals rose 11%
to CHF 592 million from CHF 533 million. The operative margin before
exceptionals rose to 7.3% from 6.9%. Operating cash flow improved to
CHF 284 million from CHF 209 million a year earlier.
Net income from continuing operations, meanwhile, fell to CHF 131
million from CHF 262 million, mainly impacted by a goodwill impairment
charge of CHF 100 million in the leather business, as announced in the
third quarter. Including discontinued operations, the company reported
a net loss of CHF 78 million compared to a net income of CHF 192
million a year earlier.
-0-
*T
Key Financial Group Figures
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Full Year
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Continuing operations: 2006 % of 2005* % of +/-%
CHF mn sales CHF mn sales CHF
-----------------------------------------------------------------
Sales 8 100 100.0 7 728 100.0
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Local currency growth (LC): 3%
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- Organic growth (1) 5%
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- Acquisitions/Divestitures (2) -2%
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Currencies 2%
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-----------------------------------------------------------------
Gross profit 2 486 30.7 2 355 30.5 +6
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EBITDA before exceptionals 855 10.6 795 10.3 +8
-----------------------------------------------------------------
EBITDA 798 9.9 714 9.2 +12
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Operating income before
exceptionals 592 7.3 533 6.9 +11
-----------------------------------------------------------------
Operating income 385 4.8 448 5.8 -14
-----------------------------------------------------------------
Net income/loss from continuing
operations 131 1.6 262 3.4 -50
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Operating cash flow (total
operations) 284 209
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Discontinued operations:
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Sales 325 453
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Net loss from discontinued
operations -209 -70
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Key Financial Group Figures
----------------------------------------------------------------
Fourth Quarter
----------------------------------------------------------------
Continuing operations: 2006 % of 2005* % of +/-%
CHF mn sales CHF mn sales CHF
----------------------------------------------------------------
Sales 2 010 100.0 1 958 100.0
----------------------------------------------------------------
----------------------------------------------------------------
Local currency growth (LC): 3%
----------------------------------------------------------------
- Organic growth (1) 3%
----------------------------------------------------------------
- Acquisitions/Divestitures (2) 0%
----------------------------------------------------------------
Currencies 0%
----------------------------------------------------------------
----------------------------------------------------------------
Gross profit 585 29.1 576 29.4 +3
----------------------------------------------------------------
EBITDA before exceptionals 202 10.0 171 8.7 +18
----------------------------------------------------------------
EBITDA 182 9.1 160 8.2 +14
----------------------------------------------------------------
Operating income before
exceptionals 134 6.7 105 5.3 +28
----------------------------------------------------------------
Operating income 112 5.6 105 5.3 +7
----------------------------------------------------------------
Net income/loss from continuing
operations 23 1.1 16 0.8 +43
----------------------------------------------------------------
Operating cash flow (total
operations) 143 14
----------------------------------------------------------------
----------------------------------------------------------------
Discontinued operations:
----------------------------------------------------------------
Sales 55 129
----------------------------------------------------------------
Net loss from discontinued
operations -24 -46
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*T
-0-
*T
Key Financial Group Figures (cont.)
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31.12.06 31.12.05
----------------------------------------------------------------------
Net debt 1 556 1 508
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Equity (including minorities) 2 433 2 591
----------------------------------------------------------------------
Gearing 64% 58%
----------------------------------------------------------------------
Return on invested capital (ROIC)** 8.3% 7.7%
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Number of employees* 21 748 22 132
----------------------------------------------------------------------
(1) The term "organic growth" means volume and price effects excluding
the impacts of changes in FX rates and acquisitions/divestitures.
(2) Acquisitions/Divestitures in 2005 included Clariant Acetyl
Building Blocks of the Life Science Chemicals Division, sold in July
2005.
* 2005 is restated to exclude the Discontinued operations of the
Pharmaceutical Fine Chemicals business, sold in June 2006. In
addition, as a result of the decision of the Board of Directors to
sell the business Custom Manufacturing, these activities were also
reclassified to Discontinued operations.
** Clariant calculates ROIC by dividing NOPLAT before exceptional
items by the average Net Capital employed. NOPLAT is calculated by
taking the Operating Income before exceptional items adjusted by the
expected tax rate. Net Capital employed also considers operating cash
and capitalized operating leases.
*T
"We achieved robust top-line growth with stable pricing in 2006.
Profitability increased, but we see considerable room for further
improvement," said Jan Secher, Clariant's chief executive officer. "We
have laid out clear plans to achieve our goal of above average return
on invested capital by the end of 2009. Putting these plans in motion,
particularly placing a strong emphasis on improving our cash flow will
be our priority this year," he said.
2006 FINANCIALS
Improvements in cash flow and lower interest expenses
EBITDA before exceptionals rose to CHF 855 million from CHF 795
million a year earlier. The EBITDA before exceptionals margin rose to
10.6% from 10.3% in the period, allowing operating cash flow across
all operations to rise to CHF 284 million, up from CHF 209 million in
2005. Net working capital, however, also increased due primarily to
the implementation of a new supply chain management system in Europe.
Net income from continuing operations fell to CHF 131 million in
2006 from CHF 262 million in 2005, mainly impacted by a goodwill
impairment charge of CHF 100 million in the leather business and by
the sale of site services in Germany amounting to approximately CHF 43
million, as announced in the company's Third Quarter results.
Solid sales and improved performance in the Fourth Quarter
Sales in the Fourth Quarter rose 3% to CHF 2.010 billion from
1.958 billion a year earlier. Operative income before exceptionals
showed a significant improvement in the Fourth Quarter, up to CHF 134
million from CHF 105 million. Selling prices remained stable and
material costs increased year-on-year.
Cash flow increased in the Fourth Quarter to CHF 143 million from
CHF 14 million a year earlier. Net income from continuing operations
amounted to CHF 23 million, up from the CHF 16 million reported in the
same period of 2005.
GROWTH ACROSS KEY DIVISIONS
Masterbatches delivers strongest growth
Masterbatches showed the strongest growth over the Full Year.
Organic growth rose 8% in local currency terms, fuelled by solid
performances in packaging and consumer goods. A marked improvement in
pricing continued to more than offset increased raw material costs.
The integration of the recently acquired masterbatches business of
Ciba Specialty Chemicals is proceeding well.
Growth in Functional Chemicals driven by process and performance
chemicals
Functional Chemicals achieved the second-highest growth of all
divisions, with a 7% rise in organic growth over the 12-month period.
Process Chemicals, as well as Performance Chemicals, showed
particularly strong overall growth, and measures taken by the company
lifted Detergents in the Second Half. Demand increased in key
businesses including Oil Services, Construction Chemicals and Personal
Care products. While the division was able to implement price
increases during the period, profitability was affected by rising raw
material prices and adverse conditions in the agro-chemical market.
Pigments & Additives experiences strong demand across most product
lines
The Pigments & Additives Division reported organic growth of 4%
for the Full Year, with strong demand across most product lines,
notably in Coatings and Plastics and increased demand for innovative
flame retardants and wax products. Despite pricing pressure in most
businesses, strong operational leverage contributed to overall margin
improvements during the year.
Paper lifts Textile, Leather & Paper Chemicals Division
The Textile, Leather & Paper Chemicals Division posted organic
growth of 3% for the Full Year. The division benefited from a very
strong pick up in sales volumes in the paper business, primarily
optical brighteners. After a weak 2005, Leather made progress overall
in 2006, with increased sales in South America and Asia, although the
business experienced some weakness towards the end of the year.
Textiles were stable despite continued challenging market environments
in North America and Asia in 2006.
Clariant addresses underperformance in Life Science Chemicals
Given continued deterioration in market conditions, Clariant has
taken active steps to address underperformance. In July 2006, the
Pharmaceutical Fine Chemicals business, part of the LSC Division, was
sold to TowerBrook Capital Partners. The Custom Manufacturing
business, adversely affected by overall weak demand from agrochemical
customers, has been earmarked for sale. As a first step, the company
has announced today the sale of the DMS business to Grillo Werke AG,
Germany. The Specialty Intermediates Business, which experienced
weaker demand in 2006, has been integrated into the Functional
Chemicals Division from January 1st and the LSC Division has ceased to
exist. Custom Manufacturing is now reported under "discontinued
operations."
GREATER CUSTOMER FOCUS
Customer requirements driving innovation
Clariant is increasingly tailoring its innovations to better match
its customers' needs, reflecting the company's greater front-end
focus. In the Functional Chemicals Division, for example, Clariant has
developed a superplasticizer that strengthens cement, an ideal feature
for ready-made concrete parts of major construction projects. The
product has already been used in the construction of the highest
motorway bridge in the world, the Millau Viaduct in France, and the
world's tallest building, Taipei 101, in Taiwan's capital. With 40%
less water the concrete has better durability and improved binding.
In 2006, Clariant spent 2.6% of total sales on R&D while keeping a
close eye on the quality of new products and the return on the capital
it is investing. In addition, the company will invest a total of CHF
100 million over the next four years in early-stage "incubator"
projects, paving the way for new innovations in areas including
multi-functional coatings, membrane technology and nano materials.
These incubators will run as start-up companies within Clariant Group
Technology.
As a first step, the company last year acquired KiON and made an
investment in Starfire, both U.S.-based companies. Clariant will also
continue with its strategy of creating alliances with start-up firm
and universities. The KiON acquisition gives Clariant the ability to
offer products such as anti-grafitti coatings. Starfire uses
nanotechnology to produce light materials for uses such as ceramic
brakes on motorcycles.
"Our innovation capabilities are key to providing the right
features and benefits to our customers and to drive our sustainable
and profitable growth," Mr. Secher said. "Our clear priority is to
maximize pipeline growth."
GROWTH ACROSS ALL REGIONS
Asia posts biggest regional increase; Germany drives progress in
Europe
Asia led Clariant's growth in 2006 with organic sales rising 7% to
CHF 1.870 billion. China remains a key growth market and progress
there was especially notable with sales increasing by 20%. India and
Turkey also contributed significantly, with double-digit growth rates
in both countries.
Year-on-year organic sales in Europe grew by a robust 5% and 6% in
Swiss francs to total CHF 3.94 billion. Sales in Germany, which
generates a significant proportion of European sales for the company,
grew organically above the regional average at 7%, totaling CHF 1.17
billion. Growth in Eastern Europe was above average for the region.
Solid sales in Americas
The Americas achieved solid organic sales growth of 4% to CHF 2.29
billion, with the contribution from Latin America, up by 5%. The U.S.
market recorded growth of 3%, which was below the regional average,
taking sales there to CHF 1.03 billion. Strong demand for plastics and
construction drove solid growth during the first three quarters,
however, lower plastics demand, combined with weaker macroeconomic
conditions led to a weaker Fourth Quarter.
Stable payout proposed
Clariant's Board of Directors will propose at the Annual General
Meeting on April 2, 2007 a payout of CHF 0.25 per share through a
reduction of the nominal value of the shares to CHF 4.25, from CHF
4.50. The proposed payout remains unchanged year-on-year, in line with
the company's present dividend policy.
The Board of Directors will also propose the election to the board
of Dr. Rudolf Wehrli and Dr. Jurg Witmer, both Swiss citizens, for
terms of office of four years. Dr. Wehrli, born in 1949, is former CEO
of Gurit-Heberlein AG and now Board member of Gurit Holding AG. He is
President of the Board of SF Chem and President of the Swiss Society
of Chemical Industries SGCI as well as Board member of several other
companies. Dr. Witmer, born in 1948, was CEO of Givaudan SA until 2005
and is now President of the Board of Directors. Among others, he is
member of the Board of Directors of Syngenta AG.
ACHIEVING WORLD-CLASS PERFORMANCE
Building on strength, focusing on execution
In November, Clariant announced the results of its Strategic
Review, outlining how it will achieve World-Class Performance by 2010.
The company will focus on generating profitable long-term growth and
achieving sustained cost leadership in the specialty chemicals
industry. Clariant will build on its strengths in colors, surfaces and
performance chemicals, focusing its investments strictly according to
value-creation criteria.
Value creation will also be achieved by reducing its cost
structure, cutting net working capital and strengthening its
performance culture. To reach the mid-term goal, the company aims to
achieve a Return on Invested Capital (ROIC) above the average of its
peers by the end of 2009. This represents an increase of approximately
25% from current levels.
"In 2006 we laid out clearly our long-term goals of reaching a
top-quartile ranking among our peers in value creation", Mr. Secher
said. "We are now working towards achieving broad, sustainable
improvements across the business."
POSITIVE OUTLOOK FOR 2007
Setting course to deliver ROIC targets
Throughout 2007, the company will take measures to ensure it meets
its mid-term ROIC target. The company expects improved sales in local
currency terms in 2007 based on expectations of a broadly stable
macro-economic environment as well as continued high raw material and
energy prices. It anticipates an increase in operating income before
exceptionals from continuing operations, with margins remaining
stable. The company also expects higher cash flow from operations
before exceptional items, as well as an improvement in recurring net
income.
"We expect 2007 to be another good year for top-line growth," Mr.
Secher said. "We are fully committed to delivering on our medium-term
goals, with a clear focus in 2007 on improving cash flow."
Calendar of Corporate Events
-- April 2, 2007 Annual General Meeting
-- May 8, 2007 First Quarter 2007 Results
-- August 2, 2007 First Half 2007 Results
-- November 7, 2007 Nine Month 2007 Results
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 21,500 people. Headquartered in
Muttenz near Basel, Switzerland, it generated sales of CHF 8.1 billion
in 2006.
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 know-how
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
