Clariant delivers resilient performance
Clariant announced first quarter sales of CHF 1.945 billion, compared to CHF 1.717 billion in the previous-year period. Sales grew 18% in local currencies and 13% in Swiss francs, mainly driven by the acquisition of Süd-Chemie. On a like-for-like basis, sales declined 2% in local currencies year-on-year.
The first quarter was a continuation of the trend seen in the fourth quarter of 2011. Sequentially, Catalysis & Energy weakened as it entered its low season while the seasonally strong businesses like de-icing and refinery had a weak performance due to unfavorable weather conditions. This was compensated by a solid growth in the non-cyclical Business Units and a pick-up in demand, particularly in Masterbatches, towards the end of the quarter.
In a year-on-year comparison, however, the quarter was weaker due to economic headwinds, an unfavorable currency development and the absence of restocking activities. In this environment, ongoing robust demand was observed in the non-cyclical Additives, Catalysis & Energy, Functional Materials, Industrial & Consumer Specialties, and Oil & Mining Services Business Units, contributing around 50% to total sales and 60% to EBITDA.
Oil & Mining Services achieved the highest growth with local currency sales up in the 20 percent range. Sales in the other non-cyclical BUs grew more moderately. Due to a mild winter in North America and a cold but dry winter in Europe, the seasonal de-icing and refinery businesses recorded low demand. Although seasonally weaker compared to the third and fourth quarter, Catalysis & Energy achieved a very strong order intake above previous years in the first three months, confirming ongoing strength in this business. Business activity in the mature BUs Textile Chemicals, Paper Specialties, Leather Services, and Emulsions Detergents & Intermediates remained subdued. All regions showed double-digit growth in local currencies with the exception of Europe which was heavily impacted by the euro crisis, mainly in Southern areas.
The double-digit increase in sales was the result of a 14% volume increase and 4% higher sales prices year-on-year. On a comparable basis, i.e. excluding acquisitions, volumes were 6% lower, reflecting both weaker demand in some Business Units and a deliberate loss of less profitable businesses. Compared to the first quarter 2011, the negative effect from currency movements softened somewhat but still impacted the top-line by 5%.
The gross margin decreased to 28.2% from 29.8% in the previous-year period but significantly increased from the comparable underlying 26.0% recorded in the fourth quarter of 2011. This development reflects the declining demand year-on-year, resulting in lower capacity utilization mainly in Masterbatches and Pigments. The recovery from Q4 2011 underlines the slightly improving business conditions compared to the final quarter of last year. Compared to the previous-year quarter, sales prices increased 4% and raw material costs 2%, therefore positively contributing to the gross margin of the Group. Sequentially, raw material costs were marginally lower while prices remained flat.
EBITDA before exceptional items decreased to CHF 236 million (margin 12.1%) from CHF 277 million (margin 16.1%) a year ago. The decline in profitability is explained by a lower gross margin, higher SG&A costs, the usual seasonal weakness of the catalysts business, and a high comparable base one year-ago. The operating profit (EBIT) before exceptional items fell to CHF 160 million (margin 8.2%) from CHF 230 million (margin 13.4%), again reflecting the aforementioned factors and the higher depreciation and amortization for the former Süd-Chemie businesses. Restructuring and impairment costs of CHF 41 million versus CHF 29 million were mainly related to the integration of Süd-Chemie and additional projects related with sustainable cost reductions. Net income was CHF 20 million compared to CHF 120 million one year ago.
After the extreme volatility in 2011, foreign exchange markets are starting to level out; however, there was still a slightly negative impact of currency movements on EBITDA and EBIT, which were therefore lower at CHF –5 million and CHF –2 million respectively.
Cash flow from operating activities of CHF 6 million was below to last year’s CHF 22 million as inventories have been increased in some Business Units in anticipation of progressively higher demand going into the second quarter. As a percentage of sales, net working capital reached 20.6%.
Net debt remained basically constant at CHF 1.754 billion compared to CHF 1.740 billion at year-end 2011. This resulted in a gearing (net debt divided by equity) of 59% at quarter-end.
Outlook 2012
Clariant confirms its outlook for 2012 with the publication of its full-year figures. Raw material costs are expected to rise in the mid-single-digit range while exchange rates should remain stable compared to the beginning of the year. In its base case scenario, Clariant expects that after a weak start to 2012, the global economy will strengthen progressively in the course of the year. Therefore, results for the first half-year are expected to be lower compared to the high base of the first half of 2011, with an improvement in the second half-year 2012. For full-year 2012, Clariant expects further sales growth in local currencies and sustained profitability.
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