Clariant's Q3 sales up 25% in local currency; Süd-Chemie on target

31 Oct '11

5 min read

Cash flow from operations improved to CHF 105 million, below last year's CHF 173 million, but clearly above the CHF –101 million reported in the second quarter of 2011. Due to lower sales, Net Working Capital as a percentage of sales increased to 21.3% compared to 19.7% in the previous-year period, but is on track to meet the year-end 2011 target of below 20% of sales.

Due to the acquisition of Süd-Chemie, net debt increased to CHF 1 812 million from CHF 126 million at year-end, resulting in a gearing (net debt divided by equity) of 62% at the end of the third quarter of 2011. The cash position was strong with CHF 1.029 billion in cash and cash equivalents at quarter-end. The extension of the maturity profile is underway with the issuance of bonds totaling CHF 300 million in the Swiss francs market since May. After the reporting period, another EUR 365 million in certificates of indebtedness with terms of three years and four and a half years have been raised in October.

In the first full quarter of consolidation into Clariant, the two new Süd-Chemie Business Units – Catalysis & Energy and Functional Materials – developed according to plan, with the Catalysts business picking-up in the third quarter as expected. Catalysis & Energy reported an EBITDA before exceptionals of CHF 41 million (margin 21.6%), and Functional Materials CHF 18 million (margin 10.8%).

The integration of Süd-Chemie is progressing as planned with all project teams fully operational. Based on current insights and integration experience, the anticipated EUR 75-95 million EBITDA improvements to 2013 are confirmed. Integration synergies and functional excellence efforts are expected to lead to redundancy for some 700 FTE worldwide, primarily in G&A functions but also from improvement measures in production. The implementation of the measures is expected in the timeframe from 2012 to 2014 with a focus on 2012/13 once the squeeze-out becomes effective.

Going forward, the focus will be on the continued delivery of the business objectives of Süd-Chemie while progressing with the integration and the squeeze-out process.

At the beginning of 2011, Clariant shifted its focus from restructuring to continuous improvement and profitable growth. While the continuous improvement initiative “Clariant Excellence” will make the competitive cost basis sustainable, the company is now focusing on creating value by investing in future profitable growth.

In the fourth quarter, Clariant expects the general slow-down in economic activity to continue, with clear signs of further weakness in demand in some regions and industries, especially in Europe. Exchange rates for the major currencies are expected to remain volatile. Commodity prices look set to stabilize at the level of the third quarter, leading to an increase in raw material costs in the mid-teens in 2011 compared to 2010.

For 2011, Clariant – including eight months of consolidated Süd-Chemie figures – expects sales in the range of CHF 7.0 to 7.2 billion and an EBITDA margin before exceptional items of 12.8% to 13.2%.

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