Clariant (SWX:CLN):
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Key Financial Group Figures
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First Quarter
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Continuing operations: 2007 % of 2006 % of +/-%
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CHF mn sales CHF mn sales CHF
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Sales 2 156 100.0 2 048 100.0
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Local currency growth (LC): 6%
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- Organic growth (1) 5%
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- Acquisitions/Divestitures 1%
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Currencies -1%
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Gross profit 671 31.1 635 31.0 +6
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EBITDA before exceptionals 219 10.2 225 11.0 -3
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EBITDA 210 9.7 219 10.7 -4
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Operating income before
exceptionals 152 7.1 160 7.8 -5
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Operating income 139 6.4 154 7.5 -10
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Net income/loss from continuing
operations 86 4.0 96 4.7 -10
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Operating cash flow (total
operations) 5 -9
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Discontinued operations:
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Sales 46 113
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Net loss from discontinued
operations -2 -2
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(1) "Organic growth" means volume and price effects excluding the
impacts of changes in FX rates and acquisitions/divestitures.
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Other Key Group Figures
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31.03.07 31.12.06
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Net debt 1 544 1 556
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Equity (including minorities) 2 587 2 433
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Gearing 60% 64%
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Number of employees 21 614 21 748
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Clariant posted a solid performance in the first three months of
2007, with growth of 6% in local currency terms and 5% in Swiss franc
terms. Acquisitions made in 2006 contributed 1% to the sales gain.
First Quarter sales rose to CHF 2.156 billion from CHF 2.048 billion a
year earlier, with strong demand seen across all businesses.
Sales prices rose on average by 1% with notably strong increases
in Functional Chemicals and Masterbatches. Gross margin remained
stable at 31.1% from the previous year, despite a 3% increase in raw
material prices during the period. Operating income before
exceptionals declined to CHF 152 million from CHF 160 million,
impacted by increased freight costs, an 11% rise in energy costs,
unfavorable currency movements and one-time costs related to the
integration of Ciba's masterbatches business. As a result, net income
from continuing operations fell to CHF 86 million from CHF 96 million.
Clariant's plans to reduce net working capital are on track.
Operating cash flow rose to CHF 5 million from a negative CHF 9
million a year earlier. As part of efforts to reduce its cost base and
complexity, the company also announced a number of smaller site
closures.
"Top-line growth continues to be solid, driven by strong volumes
across all businesses and positive pricing developments," said Jan
Secher, Clariant's chief executive officer. "Profitability in the
First Quarter was unsatisfactory, but we have seen the first signs of
improvement in our cash flow. We are confident that the steps we are
now taking will allow us to deliver on our strategic initiatives, with
cash flow a priority for 2007," he said.
STRATEGIC INITIATIVES ON TRACK
In order to achieve its mid-term goals, Clariant is fully
committed to a set of targets for 2007, with a particular focus on
reducing net working capital and SG&A expenses. The company announced
in the First Quarter it will close several sites in its Masterbatches
and Textile, Leather & Paper Chemicals divisions. In Masterbatches,
for example, Clariant announced it will consolidate three sites in
France. In Textile, Leather & Paper Chemicals, it closed a leather
plant in the U.K. Clariant also announced it will close two of its
service laboratories for textile dyes in Switzerland.
"We are on track with all plans to implement the initiatives
announced in November to achieve World Class Performance by 2010", Mr.
Secher said.
STEADY GROWTH ACROSS ALL DIVISIONS
Pigments & Additives sees strong demand
The Pigment & Additives Division reported organic growth of 5% for
the First Quarter, with notably strong demand in the coatings
business. Conditions remained challenging for the printing business,
while sales in plastics were stable. Operating margins declined to
11.3% from a strong 13.4% a year earlier, mainly driven by price
erosion, rising raw material prices, negative currency effects and
higher freight and energy costs.
Masterbatches delivers strongest growth
Masterbatches saw sales growth of 11% in local currency terms,
supported by the successful integration of Ciba's masterbatches
business. Organically, the business grew by 5%, boosted by a
combination of price increases and particularly strong demand from
Asia and Latin America. Operating margins before exceptionals declined
to 8.9% from 10.8%, mainly due to integration costs related to the
acquisition, as well underperformance from the Australian business,
which has subsequently been sold.
Prices stable in Textile, Leather & Paper Chemicals
The Textile, Leather & Paper Chemicals Division posted organic
growth of 5% in the first three months of 2007. Prices remained stable
over the period. Paper continued to be the strongest growth driver, a
result of robust demand for optical brighteners. Despite good demand
and firm price increases, Leather continued to be impacted by a
challenging business environment. Textiles saw moderate growth, with a
mixed picture across the regions. Underperformance in the U.S. was
countered by the exit of some businesses there. Operating margins
remained stable at 5.9%.
Price increases in Functional Chemicals
Functional Chemicals achieved a 4% rise in organic growth in the
First Quarter with solid demand across most businesses. Significant
price increases offset rising raw material costs. Growth was
particularly strong in detergents, performance and oilfields
chemicals. However, the de-icing business suffered from unseasonably
mild weather. Operating margins before exceptionals declined to 8.5%
from 8.8%, impacted by higher freight and marketing costs.
Strong growth, particularly in Asia
Looking at the regional picture, Asia posted the strongest organic
growth of 11%, driven by an impressive 27% increase from China. India
and Pakistan also contributed to the strong growth rate. Europe
achieved 3% growth in local currency terms. The Americas meanwhile,
achieved a robust 3% growth with a solid contribution from Latin
America offsetting a 2% drop from the United States. The construction
and automotive businesses slowed in the U.S., while the plastics
business was also weaker compared to the high levels seen in 2006.
GROWTH SUPPORTED BY STRONGER FRONT-END FOCUS
As part of an overall push to be more front-end driven, Clariant's
textile business entered a strategic partnership with Pantone, Inc.,
the global authority on color and provider of professional color
standards for the design industries. The partners' combined
capabilities will improve the color matching and approval cycle,
reducing color development times and the associated management costs
by 50% or more.
The Pigments & Additives Division was awarded the "Excellent
Supplier Award" for 2006 by PPG Industries, one of the world's leading
global paints and coatings producers. The award rates suppliers on
various criteria such as quality, innovation, responsiveness and
commercial value, including participation in cost savings.
POSITIVE OUTLOOK FOR FULL YEAR
Clariant confirmed its outlook for the Full Year. The company
expects improved sales in local currency terms in 2007 in the context
of a broadly stable macro-economic environment, as well as continued
high raw material and energy prices. The company anticipates an
increase in operating income before exceptionals from continuing
operations, with margins remaining stable. Clariant also expects
higher cash flow from operations before exceptional items, as well as
an improvement in recurring net income. Achieving the 2007 targets
will ensure the company is on course to reach its mid-term goal of
above industry average ROIC by 2010.
"While we can confirm that we expect to see another good year in
2007 for top-line growth, our priority is very much on improving cash
flow," Mr. Secher said. "We are fully committed to delivering on our
medium-term goals, with a clear focus on reaching our ROIC targets."
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Calendar of Corporate Events
August 2, 2007 First Half 2007 Results
November 7, 2007 Nine Month 2007 Results
February 14, 2008 Full Year 2007 Results
April 10, 2008 Annual General Meeting
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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
