Clariant addresses challenging economic environment by further cost reduction

17 Feb '09

5 min read

By the end of 2008, Clariant had reduced roughly 1 650 job positions out of the reduction target of approximately 2 200 that was announced in 2006. The activities to reduce SG&A costs as well as the production site closures that were announced previously – namely in Horsforth, Coventry, Selby and Naucalpan – proceeded as planned. Restructuring and impairment costs related to those activities amounted to CHF 141 million. Total restructuring and impairment costs were at CHF 321 million. The Group recorded a net loss of CHF 37 million.

The operating cash flow remained solid in 2008 and reached CHF 391 million despite a negative impact from inventories buildup in the first nine months. This compares to an operating cash flow of CHF 540 million in the previous year.

The balance sheet of the company remains solid. Clariant was able to reduce its net debt by 11% to CHF 1.21 billion from CHF 1.36 billion. The interest expenses also developed favourably, falling to CHF 85 million from CHF 107 million in 2007. The company will not face maturities in capital markets for almost three years as all mid- and long-term debt was refinanced under favorable conditions between April 2006 and July 2008. Therefore the liquidity of the Clariant Group is strong and the company is prepared for a potential further economic downturn.

Divisional Overview
Pigments & Additives Division significantly improves operating income
Sales in the Pigments & Additives Division remained stable in local currency while sales in CHF declined 6%. Solid growth in the first nine months could not compensate for the dramatic decline in demand from key customer industries such as automotive and plastics in the fourth quarter. Only the division's Specialties Business could offset the unfavorable demand development in Q4; Full Year sales in the Coatings and Plastics businesses declined.

The division's gross margin remained stable compared to the previous year despite significant underutilization costs in the last quarter, whereas the operating margin significantly increased. The negative impact of currency effects on EBIT was more than offset by the systematic implementation of the restructuring measures and the focus on cost leadership.

In order to streamline its portfolio and contribute to the consolidation of the wax markets, the division sold its Netherlands-based affiliate Dick Peters B.V. to the German specialty chemicals group Altana. The transaction was worth EUR 18 million.

Clariant's Textile, Leather & Paper Chemicals Division was significantly impacted by the deterioration of the leather and textile markets that commenced already in early 2008 and continued with increasing momentum after the Olympic Games, when the demand decline reached the markets in Asia. Divisional sales decreased 6% in local currencies and 13% in CHF. The Paper Business held up relatively well in the economic downturn.

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