Clariant delivered strong Catalysts performance and stabilization in Care Chemicals in a continued challenging market environment
AD HOC ANNOUNCEMENT PURSUANT TO ART. 53 LR
- Q3 2023 sales decreased by 8 % organically vs. Q3 2022 (13 % including scope) in local currency to CHF 1.031 billion; organic sales vs. Q2 2023 showed 2 % volume improvement in challenging markets
- Catalysts achieved volume growth and positive pricing; Care Chemicals showed stabilization; Additives business faced continuing weaker demand for durable goods
- Q3 2023 reported EBITDA margin decreased to 15.4 % vs. 16.8 % in Q3 2022; underlying improvement of 340 basis points vs. Q2 2023, driven by proactive cost measures and operational improvements
- 9M 2023 sales decreased by 7 % in local currency to CHF 3.315 billion
- 9M 2023 reported EBITDA margin decreased to 15.1 % vs. 16.9 % in 9M 2022
- Full Year 2023 outlook confirmed
"Our performance is improving, despite continued uncertainties and risks related to the geopolitical and economic environment. On a Group basis Clariant has delivered an underlying sequential quarterly increase of 21% in EBITDA. Organic Group volumes increased slightly compared to the previous quarter, although weak demand for durable goods persisted, which primarily affected our Additives business. Our proactive measures to adjust our cost base are improving profitability with over CHF 120 million of savings achieved to date out of our CHF 170 million commitment. This, together with our underlying performance improvement, underpinned our strong cash generation in the third quarter. In addition, we continue to see strong Catalysts performance, both in volume and pricing. Despite a continued soft recessionary environment and currency headwinds, we expect to land in our guidance range for 2023. Our focused specialty chemicals portfolio and our highly committed people leave us well-positioned for profitable growth as end markets recover", said Conrad Keijzer, Chief Executive Officer of Clariant.
Third Quarter 2023 Group Discussion
MUTTENZ, 30 OCTOBER 2023 – Clariant, a sustainability-focused specialty chemical company, today announced third quarter 2023 sales of CHF 1.031 billion, down 8 % organically, 13 % in local currency and 21 % in Swiss francs. Pricing decreased by 3 % year-on-year and volumes by 5 %. Scope had a net negative impact of 5 % as the acquisition of the US Atta-pulgite business was more than offset by the divestments of the North America Land Oil and Quats businesses.
Care Chemicals sales decreased by 18 % in local currency. While Oil Services recorded strong organic volume growth, sales in the other segments were lower against a very strong Q3 2022 comparable base. Catalysts sales increased by 8 % in local currency, driven by the Propylene and Syngas & Fuels segments, continuing the positive project execution observed in recent quarters. Adsorbents & Additives sales decreased by 19 % in local currency against a strong comparable base. In Additives, demand in key end markets remained challenging with continued destocking.
In Europe, Middle East, and Africa, local currency sales were down 21 %. Strong sales growth in Catalysts in the Middle East only partially offset lower sales in Care Chemicals (partly attributable to the divestment of the Quats business) and Adsorbents & Additives. In the Americas, sales declined by 5 % as lower Care Chemicals and Adsorbents & Additives sales offset growth in Catalysts. Sales in Asia-Pacific declined by 12 %, with China down 2 %.
Group EBITDA decreased by 28 % to CHF 159 million versus Q3 2022, with an EBITDA margin of 15.4 %. Currency translation negatively impacted EBITDA by 14 % while lower volumes affected production utilization in Care Chemicals and Additives. The net negative operational impact from sunliquid® was CHF 11 million (an improvement of CHF 2 million year-on-year). However, cost savings from performance programs of CHF 14 million addressed remnant costs from divested businesses and contributed positively to offset inflation. Raw material costs also eased by 16 % year-on-year.
On a sequential basis, sales of CHF 1.031 billion in the third quarter of 2023 were 5 % below the second quarter of 2023 due to currency and scope impacts. Volumes slightly improved organically at a Group level, compensating lower pricing. Underlying profitability, as reflected by EBITDA before exceptional items, increased sequentially by 21 % to CHF 164 million, representing a margin increase of 340 basis points to 15.9 %. This significant improvement was a result of the proactive measures to align the cost base to a low volume environment, as well as strong operational performance in Catalysts and a slight organic volume increase in Care Chemicals.
Nine Months 2023 Group Discussion
In the first nine months of 2023, sales decreased by 7 % to CHF 3.315 billion (– 5 % organic) in local currency and by 14 % in Swiss francs. Scope effects (arising from divestments partly offset by an acquisition) were – 2 %. Volumes were down 6 %, however pricing increased by 1 %.
Local currency sales in Care Chemicals decreased by 12 %. Strong organic growth (both in volume and price) in Oil Services did not offset declines in other segments, particularly Crop Solutions. Catalysts sales grew 18 % with particularly strong growth in Propylene and Syngas & Fuels. Adsorbents & Additives sales decreased by 12 % in local currency due to the continued weak demand for durable goods impacting Additives volumes.
Local currency sales decreased in all geographic regions. The most pronounced decline was in Europe, Middle East, and Africa, with sales down by 10 % year-on-year. Local currency sales in Asia-Pacific and the Americas declined by 5 % and 4 %, respectively.
Group EBITDA decreased by 24 % to CHF 501 million, with a corresponding margin of 15.1 %. Profitability was impacted by lower volumes and currency translation, a CHF 18 million net impact from sunliquid® (including CHF 7 million restructuring charges in the second quarter), the CHF 11 million fair value adjustment of the Heubach Group participation in the first quarter, as well as inventory devaluation. Positive profitability impacts included a preliminary CHF 62 million gain on the disposal of the Quats business in Care Chemicals, declining raw material costs of 9 %, and cost savings of CHF 36 million in the period due to the execution of performance improvement programs.
ESG Update – Leading in Sustainability
Clariant’s Scope 1 and 2 total greenhouse gas emissions fell to 0.58 million tons in the last twelve months (September 2022 to September 2023), a decline of 6 % from 0.62 million tons in the full year 2022. The total indirect greenhouse gas emissions for purchased goods and services (Scope 3) also decreased by 13 %, from 2.58 million tons in the full year 2022 to 2.25 million tons in the last twelve months. These results are to an extent attributable to the lower sales volumes in the first nine months of 2023 as well as improvements at Clariant’s own sites and in its supplier engagement (Scope 3). This demonstrates Clariant’s continued progress toward reaching the Group’s 2030 emissions reduction targets.
Outlook – Full Year 2023
Clariant expects to see an easing inflationary environment, but no economic recovery in the final three months of 2023, with macroeconomic uncertainties and risks remaining. Despite this backdrop, Clariant confirms its sales guidance for the full year 2023 of CHF 4.55 – 4.65 billion. This includes a net divestments/acquisition impact of around CHF – 150 million relating to the Quats, North American Land Oil, and Attapulgite transactions as well as an FX translation impact currently expected at the upper end of the previously published negative 5 – 10 % range. Clariant also confirms its reported EBITDA guidance for the full year 2023 of CHF 650 – 700 million (14.3 % – 15.1 % reported EBITDA margin), including a preliminary CHF 62 million gain from the Quats divestment and approximately CHF 30 million in restructuring charges. Clariant expects an increased negative annualized sunliquid® impact to be counterbalanced by savings benefits from the restructuring programs.
Clariant is on track to deliver its sustainability targets. The Group has become a true specialty chemical company and remains committed toward its 2025 ambition to deliver profitable sales growth (4 – 6 % CAGR), a Group EBITDA margin between 19 – 21 %, and a free cash flow conversion of around 40 %.
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