Clariant International Ltd:
-- Organic growth of 4% plus 4% positive currency effect,
totaling to 8% in Swiss Franc terms
-- Excellent performances in Masterbatches, Pigment & Additives;
Good recovery in Textile, Leather & Paper
-- Higher energy, logistics and raw material costs weighed on
profitability
-- Strategic options for Specialty Fine Chemicals business unit
being studied
-- Review of strategic focus and updated targets to be presented
in November
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*T
Key Financial Group Figures
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First Half
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Continuing operations: 2006 % of 2005* % of +/-%
CHF mn sales CHF mn sales CHF
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Sales 4 192 100.0 3 991 100.0
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Local currency growth (LC): 1%
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- Organic growth (1) 4%
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- Acquisitions/Divestitures (2) -3%
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Currencies 4%
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Gross profit 1 292 30.8 1 233 30.9 +5
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EBITDA before exceptionals 419 10.0 421 10.5 0
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EBITDA 390 9.3 375 9.4 +4
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Operating income before exceptionals 286 6.8 286 7.2 0
----------------------------------------------------------------------
Operating income 213 5.1 227 5.7 -6
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Net income/loss from continuing
operations 109 2.6 144 3.6 -24
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Operating cash flow (total operations) 53 -43
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Discontinued operations:
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Sales 114 96
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Net income/loss from discontinuing
operations -94 -82.5 2 2.1
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Second Quarter
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Continuing operations: 2006 % of 2005* % of +/-%
CHF mn sales CHF mn sales CHF
----------------------------------------------------------------------
Sales 2 083 100.0 2 040 100.0
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Local currency growth (LC): 0%
----------------------------------------------------------------------
- Organic growth (1) 2%
----------------------------------------------------------------------
- Acquisitions/Divestitures (2) -2%
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Currencies 2%
----------------------------------------------------------------------
Gross profit 650 31.2 628 30.8 +4
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EBITDA before exceptionals 195 9.4 214 10.5 -9
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EBITDA 172 8.3 193 9.5 -11
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Operating income before exceptionals 129 6.2 145 7.1 -11
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Operating income 62 3.0 115 5.6 -46
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Net income/loss from continuing
operations 16 0.8 71 3.5 -77
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Operating cash flow (total operations) 62 -65
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Discontinued operations:
----------------------------------------------------------------------
Sales 62 55
----------------------------------------------------------------------
Net income/loss from discontinuing
operations -95 - 3 5.5
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Key Financial Group Figures (cont.)
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30.06.06 31.12.05
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Net debt 1 574 1 508
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Equity (including minorities) 2 520 2 591
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Gearing 62% 58%
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Number of employees* 22 448 22 623
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(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, Germany, of the Life Science Chemicals Division
sold in July 2005
*2005 is restated to exclude the Discontinued operations of the
Pharmaceutical Fine Chemicals business, disposed in June 2006
*T
Clariant posted a rise in sales in the first half of 2006, with
organic growth of 4% in local currency terms and 8% in Swiss franc
terms compared with the first half of 2005.
A combination of higher costs for raw materials, energy and
logistics as well as unchanged average selling prices weighed on
results. Net income from continuing operations declined to CHF 109
million from CHF 144 million in the corresponding period last year
mainly due to higher restructuring charges. Operating cash flow rose
to CHF 53 million compared to a negative CHF 43 million in the first
half of 2005.
Jan Secher, Chief Executive of Clariant said: "Our top-line growth
is good and the majority of businesses are performing well, but
overall profitability is unsatisfactory. The company has already made
a lot of progress in our Transformation Program although there is much
more work to be done. We have to increase our focus on implementation
and execution to achieve our goal of strong and sustainable
profitability."
Raw materials rose 1% year-on-year, while energy increased 17%
over the same period. Nevertheless, the gross margin was maintained
around last year's level, at 30.8%, partially benefiting from the
Clariant Performance Improvement Program delivering cost savings
across the Group of approximately CHF 130 million. The EBIT (earnings
before interest and tax) margin before exceptional items declined to
6.8%, from 7.2%. This margin decrease was driven mainly by higher
costs in two areas: selling, general and administrative expenses,
which were incurred because of continued investment in improving the
supply chain, and higher volumes.
Good Growth Across the Group
Solid demand drove good growth across most businesses.
Masterbatches delivered excellent results, particularly in the United
States. Pigments & Additives grew strongly in volumes and showed very
good performance with increased demand across all business areas,
especially plastics. Textile, Leather & Paper posted solid sales
growth compared to the previous year with strong growth in paper and
encouraging developments in leather and textiles.
Functional Chemicals achieved strong volumes, but results were
affected by a significant downturn in the agro industry and
unsatisfactory results for detergents. A reduction in the cost base in
detergents was initiated during the Second Quarter, including the
closure of a plant in Knapsack, Germany.
In the Life Science Chemicals Division, Specialty Fine Chemicals
(SFC) continued to experience very difficult market conditions,
particularly in the crop protection area. The company recently
appointed an investment bank to explore strategic options for the SFC
business unit.
Pharmaceutical Fine Chemicals, which is qualified during the
period as discontinued operations recorded excellent growth,
continuing the positive trend since the start of the year. The
business was sold to TowerBrook Capital Partners, effective June 30.
Looking at the regional picture during the first half of the year,
organic sales growth in Asia was 4%, including 14% in China. In the
Americas, sales grew 5%, including 7% in the United States, while in
Europe sales increased 3%, including 3% in Germany.
Sharper Focus
"Delivering shareholder value is and will remain our absolute
priority, meaning that all of Clariant's activities are ultimately
aimed at increasing return on invested capital," Mr. Secher said. "An
important way for us to achieve this goal is to continue reducing
costs on a permanent basis."
"Previous forecasts underestimated the persistence of high raw
material prices, the amount of change required to transform Clariant
as well as the rate we would be able to achieve that change," Mr.
Secher added. "We are dedicated to fully delivering the potential of
the Transformation Program, but more time is needed."
"Many measures to increase efficiency and productivity are already
in place, but the speed at which the results are coming through is not
yet satisfactory," Mr. Secher said. "We must strengthen the focus and
drive harder to make sure that we have sufficient improvements on an
ongoing basis." The company is currently engaged in a review of its
operational effectiveness and strategic focus, the results of which
will be presented in November.
Pigments Facility Opens in China
A new facility to produce high performance red and yellow pigments
opened in the Second Quarter in Hangzhou, southwest of Shanghai. The
facility is the result of a joint venture between Clariant's Pigments
& Additives Division and Hangzhou Baihe Chemical Co. Ltd, a privately
owned company with a turnover of approximately USD 60 million.
Production will meet growing demand from both international customers
with facilities in China and local Chinese customers.
The Second Quarter also saw the opening of a ColorWorks center in
Merate, near the international design capital Milan. The center, part
of the Masterbatches Division, is the seventh of its type,
specializing in integrating color into early design stages,
accelerating new products to market and encouraging more effective use
of color to increase customers' brand recognition. There are other
ColorWorks centers in New York, Sao Paulo and Singapore.
Value-Based Pricing Initiatives Launched
In the Second Quarter, the company began wide-ranging initiatives
to improve its pricing capabilities. These initiatives will be
implemented over the next 16 months, with positive results expected
over the medium- to long-term. The company is also preparing to launch
the Clariant Academy, a dedicated center in Switzerland focused on
leadership development and building excellence across the company in
the areas of sales, marketing and continuous improvement processes.
Outlook for 2006
Taking into account a broadly stable macro-economic environment,
the company anticipates for its continuing operations for the full
year: Good sales growth in local currency terms; a total of CHF 250
million in cost base reductions; raw material and energy prices to
remain at high levels; an improvement of approximately CHF 60 million
in operating income before exceptionals, from CHF 100 million expected
previously, and a satisfactory net income.
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*T
Calendar of Corporate Events
November 7, 2006 Nine Month 2006 Results
February 20, 2007 Full Year 2006 Results; Annual Media Conference
April 2, 2007 Annual General Meeting
*T
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 22,500 people. Headquartered in
Muttenz near Basel, Switzerland, it generated sales of around CHF 8.2
billion in 2005.
Clariant's businesses are organized in five divisions: Textile,
Leather & Paper Chemicals, Pigments & Additives, Functional Chemicals,
Life Science Chemicals and Masterbatches.
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
