2nd Aug 2006 07:00
Clariant02 August 2006 August 2, 2006Media ReleaseClariant International Ltd Clariant Reports First Half Rise in SalesCash Flow Improves, Gross Margin Maintained • Organic growth of 4% plus 4% positive currency effect, totaling to 8%in Swiss Franc terms • Excellent performances in Masterbatches, Pigment & Additives; Goodrecovery in Textile, Leather & Paper • Higher energy, logistics and raw material costs weighed onprofitability • Strategic options for Specialty Fine Chemicals business unit beingstudied • Review of strategic focus and updated targets to be presented inNovember Key Financial Group Figures First Half Second QuarterContinuing operations: 2006 % of 2005* % of +/-% 2006 % of 2005* % of +/-% CHF mn sales CHF mn sales CHF CHF mn sales CHF mn sales CHFSales 4 192 100.0 3 991 100.0 2 083 100.0 2 040 100.0 Local currency growth (LC): 1% 0% - Organic growth (1) 4% 2% - Acquisitions/Divestitures (2) -3% -2% Currencies 4% 2% Gross profit 1 292 30.8 1 233 30.9 +5 650 31.2 628 30.8 +4EBITDA before exceptionals 419 10.0 421 10.5 0 195 9.4 214 10.5 -9EBITDA 390 9.3 375 9.4 +4 172 8.3 193 9.5 -11Operating income before 286 6.8 286 7.2 0 129 6.2 145 7.1 -11exceptionals Operating income 213 5.1 227 5.7 -6 62 3.0 115 5.6 -46Net income/loss from 109 2.6 144 3.6 -24 16 0.8 71 3.5 -77continuing operations Operating cash flow (total 53 -43 62 -65 operations) Discontinued operations: Sales 114 96 62 55 Net income/loss -94 -82.5 2 2.1 -95 - 3 5.5 from discontinuing operations Key Financial Group Figures (cont.) 30.06.06 31.12.05 Net debt 1 574 1 508 Equity (including minorities) 2 520 2 591 Gearing 62% 58% Number of employees* 22 448 22 623 (1) The term "organic growth" means volume and price effects excluding the impacts of changes in FX rates and acquisitions/divestitures (2) Acquisitions/divestitures in 2005 included Clariant Acetyl Building Blocks, Germany, of the Life Science Chemicals Division sold in July 2005 *2005 is restated to exclude the Discontinued operations of the Pharmaceutical Fine Chemicals business, disposed in June 2006 MUTTENZ, Switzerland - August 2, 2006 - Clariant posted a rise in sales in thefirst half of 2006, with organic growth of 4% in local currency terms and 8% inSwiss franc terms compared with the first half of 2005. A combination of higher costs for raw materials, energy and logistics as well asunchanged average selling prices weighed on results. Net income from continuingoperations declined to CHF 109 million from CHF 144 million in the correspondingperiod last year mainly due to higher restructuring charges. Operating cash flowrose to CHF 53 million compared to a negative CHF 43 million in the first halfof 2005. Jan Secher, Chief Executive of Clariant said: "Our top-line growth is good andthe majority of businesses are performing well, but overall profitability isunsatisfactory. The company has already made a lot of progress in ourTransformation Program although there is much more work to be done. We have toincrease our focus on implementation and execution to achieve our goal of strongand sustainable profitability." Raw materials rose 1% year-on-year, while energy increased 17% over the sameperiod. Nevertheless, the gross margin was maintained around last year's level,at 30.8%, partially benefiting from the Clariant Performance Improvement Programdelivering cost savings across the Group of approximately CHF 130 million. TheEBIT (earnings before interest and tax) margin before exceptional items declinedto 6.8%, from 7.2%. This margin decrease was driven mainly by higher costs intwo areas: selling, general and administrative expenses, which were incurredbecause of continued investment in improving the supply chain, and highervolumes. Good Growth Across the Group Solid demand drove good growth across most businesses. Masterbatches deliveredexcellent results, particularly in the United States. Pigments & Additives grewstrongly in volumes and showed very good performance with increased demandacross all business areas, especially plastics. Textile, Leather & Paper postedsolid sales growth compared to the previous year with strong growth in paper andencouraging developments in leather and textiles. Functional Chemicals achieved strong volumes, but results were affected by asignificant downturn in the agro industry and unsatisfactory results fordetergents. A reduction in the cost base in detergents was initiated during theSecond Quarter, including the closure of a plant in Knapsack, Germany. In the Life Science Chemicals Division, Specialty Fine Chemicals (SFC) continuedto experience very difficult market conditions, particularly in the cropprotection area. The company recently appointed an investment bank to explorestrategic options for the SFC business unit. Pharmaceutical Fine Chemicals, which is qualified during the period asdiscontinued operations recorded excellent growth, continuing the positive trendsince the start of the year. The business was sold to TowerBrook CapitalPartners, effective June 30. Looking at the regional picture during the first half of the year, organic salesgrowth in Asia was 4%, including 14% in China. In the Americas, sales grew 5%,including 7% in the United States, while in Europe sales increased 3%, including3% in Germany. Sharper Focus "Delivering shareholder value is and will remain our absolute priority, meaningthat all of Clariant's activities are ultimately aimed at increasing return oninvested capital," Mr. Secher said. "An important way for us to achieve thisgoal is to continue reducing costs on a permanent basis." "Previous forecasts underestimated the persistence of high raw material prices,the amount of change required to transform Clariant as well as the rate we wouldbe able to achieve that change," Mr. Secher added. "We are dedicated to fullydelivering the potential of the Transformation Program, but more time isneeded." "Many measures to increase efficiency and productivity are already in place, butthe speed at which the results are coming through is not yet satisfactory," Mr.Secher said. "We must strengthen the focus and drive harder to make sure that wehave sufficient improvements on an ongoing basis." The company is currentlyengaged in a review of its operational effectiveness and strategic focus, theresults of which will be presented in November. Pigments Facility Opens in China A new facility to produce high performance red and yellow pigments opened in theSecond Quarter in Hangzhou, southwest of Shanghai. The facility is the result ofa joint venture between Clariant's Pigments & Additives Division and HangzhouBaihe Chemical Co. Ltd, a privately owned company with a turnover ofapproximately USD 60 million. Production will meet growing demand from bothinternational customers with facilities in China and local Chinese customers. The Second Quarter also saw the opening of a ColorWorks center in Merate, nearthe international design capital Milan. The center, part of the MasterbatchesDivision, is the seventh of its type, specializing in integrating color intoearly design stages, accelerating new products to market and encouraging moreeffective use of color to increase customers' brand recognition. There are otherColorWorks centers in New York, Sao Paulo and Singapore. Value-Based Pricing Initiatives Launched In the Second Quarter, the company began wide-ranging initiatives to improve itspricing capabilities. These initiatives will be implemented over the next 16months, with positive results expected over the medium- to long-term. Thecompany is also preparing to launch the Clariant Academy, a dedicated center inSwitzerland focused on leadership development and building excellence across thecompany in the areas of sales, marketing and continuous improvement processes. Outlook for 2006 Taking into account a broadly stable macro-economic environment, the companyanticipates for its continuing operations for the full year: Good sales growthin local currency terms; a total of CHF 250 million in cost base reductions; rawmaterial and energy prices to remain at high levels; an improvement ofapproximately CHF 60 million in operating income before exceptionals, from CHF100 million expected previously, and a satisfactory net income. - end of release - Calendar of Corporate Events November 7, 2006 Nine Month 2006 Results February 20, 2007 Full Year 2006 Results; Annual Media Conference April 2, 2007 Annual General Meeting Contacts Media Relations Fax +41 61 469 69 99 Walter Vaterlaus Phone +41 61 469 61 58 Rainer Weihofen Phone +41 61 469 67 42 Investor Relations Phone +41 61 469 67 48 Fax +41 61 469 67 67 Holger Schimanke Phone +41 61 469 67 45 Fabian Hildbrand Phone +41 61 469 67 49 Clariant - Exactly your chemistry. Clariant is a global leader in the field of specialty chemicals. Strong businessrelationships, commitment to outstanding service and wide-ranging applicationknow-how make Clariant a preferred partner for its customers. Clariant, which is represented on five continents with over 100 group companies,employs around 22,500 people. Headquartered in Muttenz near Basel, Switzerland,it generated sales of around CHF 8.2 billion in 2005. Clariant's businesses are organized in five divisions: Textile, Leather & PaperChemicals, Pigments & Additives, Functional Chemicals, Life Science Chemicalsand Masterbatches. Clariant is committed to sustainable growth springing from its own innovativestrength. Clariant's innovative products play a key role in its customers'manufacturing and treatment processes or else add value to their end products.The company's success is based on the know-how of its people and their abilityto identify new customer needs at an early stage and to work together withcustomers to develop innovative, efficient solutions. www.clariant.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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