Clariant sales drop; to optimize Resende textile plant

16 Feb '10

5 min read

Clariant Q4, 2009 Performance
Clariant reported sales of CHF 1,710 million in the fourth quarter compared to CHF 1,744 million a year ago. All businesses continued to stabilize. At the regional level, Asia showed double-digit growth while all other regions remained at the depressed levels of the previous-year period.

In local currencies, fourth quarter sales rose 2% compared to a weak quarter in the previous year. While volumes increased 8%, sales prices fell 6% and raw material costs were 14% lower. The underutilization costs were also lower than in the previous year quarter as a consequence of higher capacity utilization rates.

As a result, the gross margin for the quarter reached 29.6% compared to 25.2% a year ago. The EBIT margin before exceptional items also improved to 6.3% from 2.4% in the fourth quarter of 2008.

Operating cash flow reached CHF 224 million, up from CHF 217 million a year ago. Future cash flow is expected to be increasingly generated through the operating income line as savings from tight inventory management have already been realized.

Global Asset Network Optimization (GANO) Update
In 2009 Clariant started a program to optimize its global production network. First results were communicated to the public in November. Clariant announced a second step of this program which effects the following locations:

Clariant will transfer the Textile Dyes and the Textile Chemicals production from Muttenz, Switzerland, to locations in Asia. In addition, the Paper Chemical production will be moved to Prat in Spain.

The optimization of the Textile production in Resende, Brazil, will lead to a partial plant closure. It will be proposed to the Board of Directors of Clariant Chemicals (India) Ltd to close the Balkum site in Thane, India.

Approximately 500 jobs will be affected by these measures, of which roughly 400 in Muttenz, Switzerland.

The closures and transfers will be completed between 2011 and 2013.

Outlook 2010
The company does not foresee a sustainable recovery of the global economy due to structural problems. Asia – in particular China – and Latin America will continue to provide positive impulses for the world economy, although it is unlikely that these impulses will be strong enough to significantly mitigate a flat or even negative development in Europe and the United States.

Clariant expects 2010 sales growth in local currencies in the low single-digit range. The continued restructuring measures will improve the company's cost position, resulting in a positive impact on the operating result. The EBIT margin before exceptionals is expected to rise above 6%. Cash flow from operations will remain strong. The projected restructuring costs will amount to CHF 200–300 million.

Reflecting the current uncertainties in the economic environment, the Board of Directors will recommend to Clariant's 15th General Assembly on March 29, 2010 to suspend dividends, grants or payouts to shareholders for 2009.

Clariant confirms its target of a sustainable above industry average return on invested capital (ROIC) by the end of 2010.

Clariant

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