Clariant improves profitability and cash flow

 

	Sales up 16% in local currencies and 13% in CHF on the back of improved demand
	Operating income before exceptional items rose to CHF 183 million compared to CHF -13 million a year ago on higher capacity utilization and lower costs
	Operating income margin before exceptional items reached 10.1%
	Cash flow from operations reached CHF 159 million after CHF 156 million in the first quarter 2009
	Outlook: For the full-year, Clariant expects sales in local currencies to increase in the mid single-digit range and an operating margin before exceptional items above the 2008 level of 6.6%. Cash flow from operations will remain strong.

 

 

CEO Hariolf Kottmann commented: "We have made good progress in our restructuring efforts and continued to deliver solid results on the back of lower costs, higher capacity utilization and an improved demand due to an economic environment that developed more favorably than expected. Going forward, we expect the economic recovery to remain fragile and raw material costs to further rise heading into the seasonally weaker second half of the year. Consequently, we do not anticipate an operating performance at the same strong level of the first quarter. As we have stated previously, 2009 and 2010 are restructuring years and our goal is to close the performance gap to our peers. Hence we will decisively focus on managing our margins and vigorously continue our restructuring efforts in 2010. Under the current business conditions, the EBIT margin before exceptional items for the full-year is expected to be above the 6.6% achieved in 2008."

 

 

 

Key Financial Data

 

First quarter
in CHF million	2010	2009	% CHF	% LC
Sales	1'817	1'604	13	16
EBITDA before exceptional items	235	43	447	-
- margin	12.9%	2.7%
EBIT before exceptional items	183	-13	-	-
- margin	10.1%	-0.8%
EBIT	74	-68	-	-
Net income / loss	10	-91
Operating cash flow	159	156
Number of employees	17'331	17'536*

*) as of 31^st December 2009

 

 

 

Clariant Q1, 2010 Performance

 

Muttenz, April 29, 2010 - Clariant, a world leader in specialty chemicals, today announced sales of CHF 1.817 billion in the first quarter 2010, compared to CHF 1.604 billion in the previous year, an improvement of 13% in Swiss Francs and 16% in local currency. However, sales were still clearly behind pre-crisis levels.

 

Sales improved significantly compared to the low base a year ago and also strengthened on a quarter-on-quarter basis. Especially in the business units (BU) Pigments, Additives, Leather and Masterbatches, sales growth was above the average group level. At the regional level, growth in Asia - and particularly in China with local currency sales growth of +65% - outperformed the other regions compared to the first quarter of 2009. Europe and North America showed double-digit sales growth while Latin America remained slightly behind as the region had showed resilience against the downturn in the previous year.

 

The gross margin improved to 28.7% from 18.9% a year ago. This positive development was a result of mainly three effects. Firstly, 20% higher sales volumes that led to improved capacity utilization rates and therefore significantly lower idle facility costs. Secondly, a favorable business / product mix with higher margin businesses recovering from trough

levels seen in the previous year. And thirdly, the absence of any material inventory de- or revaluation effects. While sales prices dropped 4%, raw material costs fell 1% compared to the first quarter 2009, resulting in a negative squeeze at the gross margin level. However, sales prices increased from the fourth quarter 2009, as a result of the stringent focus on managing the gross margin by adapting sales prices where appropriate. Clariant will continue to increase sales prices in order to react to higher raw material costs.

 

Mainly as a result of some project-related one-time costs, SG&A increased to CHF 307 million compared to CHF 281 million during the same period a year ago. In percentage of sales SG&A costs fell to 16.9% from 17.5%.   

 

Resulting from a higher gross margin and the positive impact of the decisive implementation of restructuring measures, the operating income (EBIT) before exceptional items reached CHF 183 million and improved significantly - not only compared to the previous year quarter (CHF -13 million) - but also compared to the third and fourth quarter of 2009. The EBIT margin before exceptional items improved to 10.1% from -0.8% a year ago.

 

Restructuring and impairment costs amounted to CHF 110 million. The number of job positions was reduced to 17'331 from 17'536 during the quarter. However, despite these restructuring expenses, Clariant reported a net profit of CHF 10 million compared to a net loss of CHF 91 million a year ago based on the favorable development of the operating income.

 

Cash flow from operations amounted to CHF 159 million and was at about the same level as in the previous year period (CHF 156 million). Contrary to a year ago when the reduction of net working capital was the main driver, cash flow generation in the first quarter this year was mainly driven by the improved operational performance. Net working capital as a percentage of sales was lower at 20.2% and in reach of our below 20% target at the end of 2010.

 

Clariant continued to strengthen its balance sheet by increasing its cash position to CHF 1,241 million compared to CHF 1,140 million at the end of 2009. Net debt was further reduced to CHF 378 million and the company's gearing - net debt divided by equity - further improved to 20%.

 

Outlook

 

In spite of a better than expected economic environment in the first quarter the global economy will recover only slowly. Based on this scenario and giving reference to the fact that the second half of the year is normally weaker than the first half, Clariant expects mid single digit sales growth compared to 2009. Operating cash flow will remain strong.

As announced previously, 2009 and 2010 are restructuring years. The continuation of the restructuring efforts will result in a further reduction of job positions as well as further site and plant consolidation. Restructuring and impairment costs will amount to CHF 250 - 300 million in 2010.

Clariant will continue to focus on generating cash, reducing costs and reducing complexity, resulting in a positive impact on the operating result. First quarter operating income must not be taken as a basis for the full-year result due to the still fragile economic environment. The EBIT margin before exceptional items is expected to be above the 2008 level of 6.6%.

Clariant confirms its target of an above industry average return on invested capital (ROIC) by the end of 2010.

 

Contacts

  

Media Relations
Mark Hengel	Phone:	+41 61 469 66 53
	E-Mail:	mark.hengel@clariant.com
Arnd Wagner	Phone:	+41 61 469 61 58
	E-Mail:	arnd.wagner@clariant.com
Investor Relations
Ulrich Steiner	Phone:	+41 61 469 67 45
	E-Mail:	ulrich.steiner@clariant.com