Clariant improves operating margin

04 Nov '08

7 min read

Hence restructuring will be accelerated and operational excellence will be improved using a stringent six sigma approach. Clariant will put an even stronger focus on cash generation.

Divisions maintained strong focus on prices
The decisive 'price over volume' approach as well as a strong focus on lowering SG&A costs in all four divisions has been the main reason for the improvement of Clariant's operational performance.

Pigments & Additives Division has good profitability
Pigments & Additives grew 6% in local currency (-1% in CHF). The division had excellent growth in Asia, Latin America and the Middle East driven by strong demand and could withstand the continuously weak demand in the US and the decline in Europe by market share gains.

The Coatings Business was the main driver for the favorable top-line development whereas the Base Products and the Plastics Businesses were slightly impacted by declining demand In the third quarter however only the Specialty Business Unit could resist the unfavorable demand development.

The division gross margin remained stable compared to the previous year, whereas the operating margin significantly increased. The negative impact of currency effects on EBIT were more than offset by the systematic implementation of the restructuring measures and the focus on cost leadership.

Textile, Leather & Paper Chemicals Division hit by unfavorable market conditions
Textile, Leather & Paper Chemicals sales declined 3% in local currency and 11% in CHF. The top line suffered from a deteriorating leather market - in particular in the third quarter - and declining demand for textile chemicals and dyes. The harsh economic climate in the US spilled over to Europe and had a negative effect on global leather and paper production. Growth in Asia and Latin America was still healthy but with a weakening trend towards the end of the period.

The profitability of the Leather and the Textile Businesses were affected by the weaker demand. The bottom line of the Paper Business suffered from an unprecedented hike in raw material costs. Good progress on implementing the cost leadership strategy mitigated the impact on the division's profitability. Gross margin and operating margin dropped on a year-on-year basis, but stabilized towards the end of the reporting period.

Healthy performance of the Masterbatches Division despite weakening demand
Clariant's Masterbatches Division grew slightly by 2% in local currency (-4% in CHF). Due to the relative proximity of the masterbatch business to the end-user markets, the division was affected by declining demand notably in the US but – particularly towards the end of the period – also in Europe and Asia. Only demand from Latin America and the Middle East remained persistently strong.

The automotive market in the US, and to a lesser degree also in Europe, showed some weakness and the textile markets experienced a downturn.

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