Clariant confirms outlook on solid Q2 results

• Sales from continuing operations rose 6% in local currencies. In Swiss francs, sales decreased 1% to CHF 1.53 billion from CHF 1.54 billion in the second quarter 2013
• Strong volume growth offset by unfavorable currency effects
• EBITDA margin before exceptional items increased to 14.0% compared to 13.7%
• Net result from continuing operations improved to CHF 83 million from CHF 71 million
• Outlook confirmed: For full-year 2014, Clariant expects low to mid-single-digit sales growth in local currencies and an EBITDA margin before exceptional items above full-year 2013

"The first half-year 2014 was characterized by a more favorable but still volatile and challenging business environment compared to the previous year," said CEO Hariolf Kottmann. "Under these conditions, Clariant achieved good volume growth in both the first and the second quarter, supported by solid pricing. With unfavorable currency developments expected to soften, the strength of our portfolio makes us cautiously optimistic going into the second half of the year."

Second quarter 2014 – Higher volumes continued to drive growth

Muttenz, 30 July 2014 - Clariant, a world leader in specialty chemicals, today announced second quarter 2014 sales from continuing operations of CHF 1.531 billion compared to CHF 1.544 billion in the second quarter of 2013, equivalent to sales growth of 6% in local currencies. The organic sales growth of 6% was the result of 5% higher volumes and average sales price increases of 1%.

Robust sales growth of 6% in local currencies was heavily impacted by the unfavorable development of the US dollar and the Japanese yen, as well as important emerging market currencies – predominantly the Brazilian real, and the Indian rupee. The negative effect from those currencies translated into sales growth of –1% in Swiss francs.

Clariant achieved local currency growth in all of its regions, led by Latin America with 13% higher sales due to robust development in all four Business Areas and despite a weakening trend in Brazil. Asia/Pacific gained 9% in local currencies, driven by sales increases of 16% in China and 15% in India. Sales growth in North America recovered from the impact of a harsh winter in the first quarter and grew 6% in local currencies. Europe, Middle East & Africa (EMEA) returned to growth in the second quarter, adding 2%. Within EMEA, the Middle East & Africa region developed in-line with the other emerging markets and added 15%, while Europe dragged down sales growth, decreasing 1%. Europe lost steam in the second quarter, indicating that the recovery of the European economy remains fragile.

All Business Areas achieved mid- to high single-digit sales growth in local currencies in the second quarter. Care Chemicals reported 3% growth in local currencies on the back of solid growth in both Consumer Care and Industrial Applications. Catalysis & Energy continued to grow with 5% higher sales, also due to an improvement in the Energy Storage business. In Natural Resources, both the Oil & Mining Services and Functional Minerals businesses contributed to a 9% sales increase. In the Plastics & Coatings Business Area, solid growth was realized in all three businesses Additives, Masterbatches, and Pigments, resulting in sales growth of 6% in local currencies.

At 29.5%, the gross margin slightly improved from the 29.3% recorded in the prior-year period. Better capacity utilization and 1% higher sales prices more than offset a negative currency impact.

EBITDA before exceptional items from continuing operations rose 9% in local currencies to CHF 214 million. This compares to CHF 211 million in the second quarter of 2013. The corresponding EBITDA margin improved to 14.0% versus 13.7%. The increase in margin resulted from a higher gross margin and lower selling, general, and administrative costs that more than compensated for a 1.5-percentage-point negative impact from unfavorable exchange rate developments.

Exceptional items including restructuring, impairment, and transaction-related costs decreased to CHF 23 million from CHF 33 million one year ago. The portfolio repositioning has been completed, with the closing of the sales of Leather Services, Water Treatment, and the 50% stake in ASK Chemicals during the second quarter. Those three transactions resulted in a cash inflow of CHF 188 million. Net income from continuing operations of CHF 83 million was recorded, compared to CHF 71 million in the previous year. Following the normal seasonal pattern, operating cash flow was negative at CHF –62 million versus CHF –41 million in the second quarter one year ago, therefore matching the same level as in the first half of 2013. Operating cash flow is expected to gradually improve as the year progresses.

Net debt stood at CHF 1.619 billion and was therefore higher than the CHF 1.500 billion recorded at year-end 2013. Gearing, reflecting net financial debt in relation to equity, rose to 61% from 54% at the end of 2013.

Changes in reporting structure effective since 1 January 2013

Clariant has stringently executed the announced divestments of the five businesses Textile Chemicals, Paper Specialties, Emulsions, Detergents & Intermediates, and Leather Services. On 30 September 2013, Clariant sold its Textile Chemicals, Paper Specialties, and Emulsions businesses to SK Capital. The disposal of Detergents & Intermediates (D&I) to the International Chemical Investors Group (ICIG) was closed effective 1 January 2014. The divestment of the Leather Services business to Stahl Holdings B.V. was closed on 30 April 2014. Clariant continues to hold a 23% stake in the combined entity. Hence, all five businesses have been reported as "discontinued operations" since 1 January 2013.

In the second quarter of 2014, discontinued operations generated sales of CHF 32 million (Leather Services) compared to CHF 451 million (Textile Chemicals, Paper Specialties, Emulsions, Detergents & Intermediates, Leather Services) in the second quarter of 2013, and a net result of CHF –9 million compared to an income of CHF 8 million in the second quarter of 2013.

Outlook 2014 confirmed – Focus on performance, growth and innovation

For 2014, Clariant expects the business environment to remain challenging with heterogeneous global economic developments and volatile currency markets. The general economic environment in the emerging markets is expected to remain mixed but overall favorable, while moderate growth should continue in the advanced economies, in particular in the United States. Hence, Clariant will focus on profitably growing the four Business Areas, cost efficiency and strengthening innovation.

For full-year 2014, Clariant expects low to mid-single-digit sales growth in local currencies and an EBITDA margin before exceptional items above full-year 2013.

Clariant confirms its mid-term target of achieving a position in the top tier of the specialty chemicals industry. This corresponds to an EBITDA margin before exceptional items in the range of 16% to 19% and a return on invested capital (ROIC) above the peer group average in 2015 and beyond.

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