Clariant reports strong cash flow despite continuing weak demand

31 Jul '09

5 min read

Operating cash flow reached CHF 184 million in the second quarter of 2009, compared to CHF 33 million in the comparable previous-year period. This substantial increase has been achieved through a stringent reduction in net working capital, in particular due to tight inventory management. The cash position in the group improved to CHF 545 million from CHF 438 million at the end of the first quarter of 2009.

In addition, Clariant's cash position and debt maturity profile have been further improved by launching a CHF 300-million Convertible Bond shortly after the closing of the second quarter. The available financial headroom remains at more than CHF 2 billion. The Bond has a coupon of 3% and matures on 7 July 2014. The conversion price was set at CHF 8.55 per share, a premium of 30% to the prevailing share price on the date of issuance. The bond will be booked in the third quarter of 2009.

The company has further strengthened its balance sheet by reducing net debt by CHF 224 million to CHF 985 million compared to year-end 2008. The gearing – net debt divided by equity – was at 51% on 30 June 2009.

In line with Clariant's focus on cash generation as well as cost and complexity reduction, the company intends to simplify its operational structure effective January 1, 2010. The divisional management layer will be removed. 10 Business Units will have full profit and loss responsibility including ownership of their assets. The new structure will create more operational and strategic flexibility. This move will not only foster entrepreneurship and accountability, but also create a platform to improve Clariant's profitability Business Unit by Business Unit and – going forward – facilitate portfolio measures where applicable.

Outlook
Clariant assumes that the global economy will only slowly recover. Consequently, Clariant sales in local currencies are predicted to remain weak until the end of the year, approximately in the range of 16-20% below the previous year.

The company will maintain its focus on cash generation by decreasing its net working capital. At the same time, the cost-saving and restructuring measures will continue to favorably impact the operational result, which will then also increasingly contribute to cash generation. Based on this scenario, Clariant anticipates a further improved operating income before exceptional items for the full year compared to the first half of 2009.

Going forward Clariant will continue its restructuring efforts with estimated restructuring costs of CHF 200-300 million in 2009 and further job reductions in 2009 and 2010.

For 2010, Clariant confirms its target of a sustainable above industry average return on invested capital (ROIC).

Clariant

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