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
