Clariant grows sales and improves underlying profitability in 2019
- Sales from continuing operations grew by 3 % in local currency to CHF 4.399 billion
- Continuing operations EBITDA before exceptional items unchanged at CHF 740 million, corresponding to a 16.8 % margin
- Continuing operations EBITDA (excl. European Commission provision) rose to CHF 692 million, corresponding to a 15.7 % margin
- Net result for the total Group at CHF 38 million
- Operating cash flow declined to CHF 509 million
- Proposed unchanged dividend of CHF 0.55 per share
- Outlook: Focused portfolio to achieve above-market growth, higher profitability and stronger cash generation, supported in 2020 by selective efficiency measures in the businesses
“In 2019, we made a significant step forward in our strategy to focus on our specialty businesses. We reshaped our portfolio and, in a difficult environment, achieved a further increase in sales and a solid margin improvement, which clearly proves the resilience of our businesses,” said Hariolf Kottmann, Executive Chairman of Clariant. “Given that we expect the sluggish economic environment to continue in 2020, we have launched selective efficiency measures in all our businesses to further support the increase in profitability.”
Full Year 2019 – Sales progression in local currency and clearly improved underlying EBITDA after exceptional items
Muttenz, February 13, 2020 – Clariant, a focused and innovative specialty chemical company, today announced full year 2019 continuing operations sales of CHF 4.399 billion, compared to CHF 4.404 billion in 2018. This corresponds to organic growth of 3 % in local currency and is a stable development in Swiss francs due to unfavorable currency fluctuations. The sales increase in local currency was driven by the Business Areas Catalysis and Natural Resources and was supported by both higher volumes and pricing.
For the full year, almost all regions contributed to the sales growth in local currency. Sales expansion was most pronounced in Latin America with 13 % growth, followed by an 8 % increase in Asia. Sales in the Middle East & Africa rose by a solid 3 % and Europe grew by 1 %. Only North America reported a contraction of 5 %.
Catalysis and Natural Resources both reported continued sales growth in local currency throughout 2019. Sales in Catalysis improved by 9 % in local currency as a result of positive contributions from both Petrochemicals and Syngas. Natural Resources sales rose by 4 % in local currency, underpinned by the strong progression in Oil and Mining Services and a slight improvement in Functional Minerals. Additives sales were negatively impacted by the softer electrical and electronics sectors as well as the weak automotive market.
Care Chemicals sales declined a minor 1 % in local currency. The good sales progression in Consumer Care could not fully absorb the softened development in Industrial Applications, which primarily resulted from a continued cautious demand environment and a weaker Aviation business.
Continuing operations EBITDA after exceptional items was negatively impacted by the one-off CHF 231 million provision, which was booked in the second quarter as a result of further developments in an ongoing competition law investigation by the European Commission into the ethylene purchasing market. Therefore, the full year 2019 EBITDA after exceptional items decreased significantly to CHF 461 million, compared to CHF 607 million in the previous year.
Excluding the effect of this provision, the continuing operations EBITDA after exceptional items rose by 14 % to CHF 692 million, supported by strong profitability improvements in both Catalysis and Natural Resources, which more than offset the softer margin in Care Chemicals. Catalysis benefited from solid top-line expansion throughout the year and a margin improvement underpinned by an increasing proportion of Petrochemical sales. Natural Resources’ profitability was positively influenced by sales growth together with an intensified focus on more value-added applications supported by a more streamlined cost base. One-off effects in the second quarter and lower Industrial Applications sales were the primary reasons for the EBITDA decline at Care Chemicals. The corresponding continuing operations EBITDA margin after exceptional items, excluding this provision, increased to 15.7 % versus 13.8 % in the previous year.
The net result for the total Group declined to CHF 38 million from CHF 356 million in full year 2018. This decrease is largely attributable to the above-mentioned one-off provision, the weaker operational performance in the discontinued operations, the carve-out costs of the discontinued operations and higher income taxes.
Operating cash flow for the total Group declined to CHF 509 million from CHF 530 million in the previous year. This decrease was primarily attributable to a lower net result and slightly increased working capital.
Net debt for the total Group remained nearly unchanged at CHF 1.372 billion versus CHF 1.374 billion recorded at the end of 2018, despite the inclusion of CHF 246 million attributable to the adoption of IFRS 16 (Leases) in 2019.
Despite the difficult economic environment, the solid performance allows the Board of Directors to propose an unchanged dividend of CHF 0.55 per share to the Annual General Meeting, following a 10 % dividend increase the year earlier. This distribution is proposed to be made from a capital decrease by way of a par value reduction.
This distribution is in addition to the proposal of an extraordinary cash distribution of CHF 3.00 per share linked to the completion of the divestment of Masterbatches as announced on December 19, 2019.
Fourth Quarter 2019 – Sales growth and solid profitability improvement
In the fourth quarter of 2019, sales from continuing operations of CHF 1.127 billion rose by 3 % in local currency and remained stable in Swiss francs due to the unfavorable currency development. This positive development was driven by higher volumes in all Business Areas.
Sales in Latin America grew by 22 % in local currency, while Asia progressed by 20 % with a notable improvement observed in China. In contrast, sales were 4 % lower in Europe and down 6 % in North America because of the continuing economic weakness. Middle East & Africa, the smallest region, reported a contraction of 11 % in the fourth quarter.
Catalysis sales improved by 5 % in local currency, mainly attributable to higher Petrochemicals demand. Natural Resources sales rose by 4 %, despite a tough comparison base, driven by a strong improvement in Oil and Mining Services and growth in Functional Minerals, which compensated for the weaker Additives business. Sales in Care Chemicals improved by 2 % as both Consumer Care and Industrial Applications reported small advances.
The continuing operations EBITDA after exceptional items increased by 68 % in Swiss francs to CHF 208 million in 2019 on the back of both higher operating profitability and notably lower exceptional costs. The profitability advanced significantly in Catalysis as a result of the more favorable product mix. Natural Resources’ profitability rose due to local currency sales expansion and the margin improvement in Oil Services. Care Chemicals reported an unchanged EBITDA in the fourth quarter and a margin improvement despite a less favorable product mix, notably a softer Aviation business in Europe. The continuing operations EBITDA margin after exceptional items on the Group level increased to 18.5 % from 11.0 % in the previous year.
For the full year 2019, sales in discontinued operations (Masterbatches and Pigments) declined by 2 % in local currency and by 4 % in Swiss francs, negatively impacted by the global economic slowdown. In the fourth quarter, sales remained unchanged in local currency and declined by a mere 3 % in Swiss francs despite the continued weak economic environment.
The EBITDA after exceptional items decreased in absolute value in the full year 2019 due to the sales contraction and one-time costs caused by the carve-out of the discontinued operations. In the fourth quarter, the absolute EBITDA after exceptional items remained unchanged compared to the previous year as carve-out costs were offset by the gain on the disposal of Healthcare Packaging.
Outlook – Focused portfolio to achieve above-market growth, higher profitability and stronger cash generation
Clariant is a focused and innovative specialty chemical company that aims to grow above the market to achieve higher profitability through innovation and sustainability. The Group has significantly reshaped its portfolio through the divestment of Healthcare Packaging in 2019, the announced sale of Masterbatches and the planned divestment of Pigments in 2020.
Clariant expects its continuing businesses to achieve above-market growth, higher profitability and stronger cash generation based on our focused, high value specialty portfolio. For 2020, given the current sluggish economic environment and continued adverse foreign exchange conditions, growth will be more limited and additional efficiency measures have been defined for each of the businesses to support the margin increase. These measures will lead to a workforce reduction of approximately 500 to 600 positions over the next two years and imply a cost base reduction of approximately CHF 50 million.
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