Clariant Posts Growth in the First Quarter
- Well-balanced portfolio allows Clariant to grow in a challenging but stable business environment.
- Continuing operations achieved first quarter sales growth of 2% in local currencies and 1% in Swiss francs, to CHF 1.526 billion from CHF 1.513 billion in the previous-year period.
- EBITDA margin before exceptional items at 13.7% compared to 13.9% in Q1 2012.
- Net result from continuing operations of CHF 38 million compared to CHF 16 million in Q1 2012.
- Net debt reduced to CHF 1.66 billion, down from CHF 1.79 billion at year-end 2012.
- For full-year 2013, Clariant expects further progress in sales and profitability compared to 2012 by focusing on growth and continuous cost efficiency.
CEO Hariolf Kottmann: “Clariant had an encouraging start to the year as sales continued to grow and margins remained robust under stabilizing economic conditions. While the Group concentrated on disciplined cost management and the execution of the announced portfolio measures, the businesses turned their attention to intensifying growth and fostering innovation. Regardless of the persistent economic softness, Clariant is in shape to deliver step-by-step on its promises in order to create one of the leading specialty chemicals companies.”
First Quarter 2013 results
Muttenz, April 30, 2013 – Clariant, a world leader in specialty chemicals, today reported first quarter sales 2013 from continuing operations of CHF 1.526 billion compared to CHF 1.513 billion in the previous-year period, an increase of 2% in local currencies and 1% in Swiss francs. Organic growth of 2% was primarily the result of higher volumes. The negative currency effect of 1% was mainly attributable to the double-digit percentage depreciation of the Brazilian real and the Japanese yen against the Swiss franc compared to the same period one year ago.
The business environment remained basically unchanged compared to the final quarter of 2012. As in the previous quarter, sales trends were therefore not uniform across regions and businesses. At the regional level, Latin America exhibited the highest growth with a 10% increase in local currency sales. Year-on-year, sales in Asia Pacific and EMEA were unchanged, with the latter posting 2% growth in Europe and a 10% sales decline in Middle East & Africa. Sales in North America grew 5%.
As expected, the Care Chemicals and Natural Resources Business Areas continued to grow, with local currency sales increases of 13% and 4% respectively. Care Chemicals benefitted from the low sensitivity of the consumer-oriented businesses to the general economic cycle and favorable weather conditions for its European and North American de-icing business. In 2013, the de-icing season extended into late March on both sides of the Atlantic. Natural Resources was driven by double-digit local currency sales growth in Oil & Mining Services while the Functional Minerals business was weak, recording a mid-single-digit decline in local currencies year-on-year. Catalysis & Energy experienced a single-digit sales decline due to a slow start in Syngas and Specialty Catalyst, reflecting the usual high volatility in the first two quarters of the year. Plastics & Coatings, on the other hand, stabilized at low levels, with the slightly lower sales figures mainly attributable to the early Easter break and therefore fewer billing days this year compared to the previous-year period.
The gross margin was close to the level achieved one year ago, at 29.2% compared to 29.3% in the first quarter 2012. The negligible decline was due to higher costs of underutilized production capacities. Year-on-year, sales prices increased marginally while raw material costs rose 1%. Compared to the fourth quarter 2012, sales prices and raw material costs remained stable.
EBITDA before exceptional items from continuing operations was flat in local currencies and 1% lower in Swiss francs year-on-year, reaching CHF 209 million compared to CHF 211 million. The respective EBITDA margin reached 13.7% compared to 13.9% for continuing operations in the previous-year period.
Exceptional items were lower, decreasing to CHF 22 million in comparison to CHF 33 million in the first quarter of 2012 as a result of lower restructuring costs in the continuing businesses. The net result from continuing operations therefore improved to CHF 38 million from CHF 16 million one year ago, also helped by a better financial result which more than compensated for higher taxes.
The operating cash flow followed the normal seasonality with an increase in net working capital in the first half-year followed by cash generation in the second half-year. A build-up in inventories led to a cash outflow of CHF 72 million compared to a CHF 6 million cash inflow in the previous-year period. Capital expenditure was lower year-on-year, at CHF 44 million versus CHF 54 million, reflecting a cautious investment philosophy in the current volatile economic environment.
Net debt stood at CHF 1.656 billion, a reduction from the CHF 1.789 billion recorded at year-end 2012. The reduction was exclusively achieved through the early redemption of the CHF 300 million convertible bond 2009-14 in February/March which entailed a conversion into share capital instead of a repayment. As a result of lower net debt, gearing (net financial debt in relation to equity) improved to 56% from 67% at year-end 2012.
Changes in reporting structure and restatements
Effective 1 January 2013, Clariant has regrouped its seven Business Units for reporting purposes into four Business Areas: Care Chemicals (BU ICS), Catalysis & Energy (BU Catalysts, Energy Storage business), Natural Resources (BU Oil & Mining Services, BU Functional Minerals), and Plastics & Coatings (BU Additives, BU Masterbatches, BU Pigments). In addition, the Medical Specialties business has been reallocated from BU Functional Minerals to BU Masterbatches. Restatements for 2012 have been made accordingly.
At the Group level, the introduction of IAS 19 (revised) (pension accounting) as of 1 January 2012 is reflected in restated figures for the period. For the quarter, IAS 19 had a positive impact of CHF 4 million on EBITDA and EBIT, while net income decreased by CHF 3 million. For the full-year 2012, the positive impact of IAS 19 on EBITDA and EBIT was CHF 18 million, while net income decreased by CHF 10 million.
Event subsequent to Q1 2013 – repayment of straight bond and distribution from reserves
Clariant repaid the EUR 600 million straight bond 2006-13 with a 4.375% coupon on 5 April, thus at the bond’s maturity date.
On 4 April a distribution totaling CHF 105 million was made to Clariant shareholders. This was accrued for in the consolidated accounts as of 31 March 2013.
In 2012, Clariant announced it would be looking for strategic options for the five businesses Textile Chemicals, Paper Specialties, Emulsions, Detergents & Intermediates and Leather Services. In a first phase, Clariant announced on 27 December 2012 an agreement to sell its Textile Chemicals, Paper Specialties and Emulsions businesses to SK Capital, a US-based investment firm. The project to find buyers for the Business Units Leather Services and Detergents & Intermediates is pursued. Therefore, all five businesses are reported as “discontinued operations”, starting from the 2012 full-year results.
The repositioning of the portfolio in 2011 and 2012 has brought Clariant to a sustainably higher level of profitability and net income.
For 2013, Clariant expects a persisting soft macroeconomic environment, characterized by high volatility. While solid growth in the emerging markets is most likely, no significant growth impulses are expected from the European and North American economies.
In this scenario, Clariant will focus on growing the seven core businesses and on continuous cost discipline. This will lead to further top-line growth in local currencies and improved profitability in 2013. For the mid-term, Clariant confirms its 2015 targets of an EBITDA margin of above 17% and a return on invested capital (ROIC) above the peer-group average.