Highlights

• Q2 2024 sales decreased by 3 % organically in local currencies1 to CHF 1.056 billion as growth in Care Chemicals and Adsorbents & Additives was offset by an expected decline in Catalysts
• Q2 2024 reported EBITDA margin decreased to 15.7 % compared to 16.1 % in Q2 2023, underlying improvement excluding prior year’s disposal gain of more than 500 basis points driven by positive operating leverage and reduced sunliquid® impact
• H1 2024 sales decreased by 5 % organically in local currencies1 to CHF 2.070 billion
• H1 2024 reported EBITDA margin improved to 16.4 % compared to 15.0 % in prior year
• H1 2024 Operating Cash Flow at CHF 112 million, compared to CHF 78 million in H1 2023; strong Free Cash Flow Conversion (LTM) of 42 %
• Outlook 2024: Flat to low single-digit percent sales growth in local currency, increase in expected reported EBITDA margin by 100 basis points to around 16.0 %, medium-term targets confirmed

"Clariant delivered a strong underlying margin improvement in the second quarter of 2024 toward 16 %. This progress results from successfully implementing our leaner, customer-focused operating model and continued execution of our performance improvement programs. As a result, we benefitted from improved operating leverage as we achieved growth in our Care Chemical and Adsorbents & Additives businesses while maintaining pricing discipline. We are pleased with the improved cash generation in the first half of 2024 and the progress in our strategic initiatives. The integration of Lucas Meyer Cosmetics is well on track. In addition, our sale of the Podari plant assets and disciplined execution of the downsizing of the bioethanol business will lead to a CHF 20 million lower financial impact than originally expected. Due to this improvement, together with the strong operational performance in the first six months of 2024, we have increased our profitability guidance by 100 basis points for the full year although we expect no signs of a broad market recovery in the second half of the year. 2024 will be a meaningful step towards our medium-term targets.” said Conrad Keijzer, Chief Executive Officer of Clariant.

Second Quarter 2024 Group Discussion

Clariant, a sustainability-focused specialty chemical company, today announced second quarter 2024 sales of CHF 1.056 billion, down 3 % organically in local currency1 (3 % in Swiss francs) versus Q2 2023. Volumes remained stable while pricing decreased by 3 % year-on-year. Scope had no impact on sales with the acquisition of Lucas Meyer Cosmetics offsetting the divestment of the Quats business. 

Care Chemicals sales increased by 3 % organically in local currency, driven by strong volume growth in Industrial Applications, Personal & Home Care, and Oil Services. Scope had a positive impact of 1 % versus Q2 2023. Catalysts sales declined by 18 % in local currency against a very high comparison base, with the second quarter of 2023 being the strongest of the year. Adsorbents & Additives sales increased by 2 % in local currency versus Q2 2023, driven by volume growth in the Additives segments.

In the second quarter, local currency sales in the Europe, Middle East, and Africa region were stable organically and up 1 % including scope versus Q2 2023, as economic activity in the region remained muted. Sales in the Americas declined organically by 1 % as strong growth in Care Chemicals and a slight improvement in Adsorbents & Additives was offset by lower sales in Catalysts. Including scope (1 %), sales in the region were stable in local currency. Sales in Asia-Pacific were down 9 % (1 % related to scope) in local currency, with a 6 % organic decrease in China, as the project cycle-driven decline in Catalysts more than offset strong growth in Care Chemicals and Adsorbents & Additives. 

Group reported EBITDA decreased by 5 % to CHF 166 million, with the corresponding margin of 15.7 % below the 16.1 % margin reported in the second quarter of 2023, when profitability was elevated by a preliminary CHF 62 million gain from the Quats disposal. Excluding this disposal gain, EBITDA increased by 47 % and the corresponding margin by over 500 basis points, as growth in Care Chemicals and Adsorbents & Additives drove operating leverage. A CHF 8 million improvement in the negative operational impact from the sunliquid® bioethanol activities in Catalysts, to CHF 2 million from CHF 10 million in the prior year, also contributed to the positive margin development. Cost savings of approximately CHF 9 million from performance improvement programs contributed positively to offset inflation. Lower raw material costs (- 10 %) also supported profitability in all businesses despite lower pricing. 

There were several key developments relating to the Business Segment Biofuels & Derivatives in the second quarter of 2024. Clariant has reached an agreement with International Chemical Investors Group (ICIG) to sell the Podari plant assets for EUR 9.7 million in cash at closing. The transaction is subject to regulatory approval. Clariant also sold its Straubing assets for EUR 1.0 million, signed a sub-rent agreement for the Planegg site, and successfully terminated multiple contractual relationships. The significant progress in the downsizing of related activities of the Business Segment Biofuels & Derivatives resulted in overall restructuring below budgeted costs and thus allowed the release of some provisions. Therefore, Clariant expects that the operational, exceptional, and cash impact will be lower than originally expected. For 2024, the company now expects a negative operational impact of approximately CHF 10 million (previously up to CHF 15 million), total exceptional items of up to negative CHF 15 million (previously up to CHF 30 million), and cash outflow between CHF 80 and CHF 100 million (previously between CHF 110 and CHF 140 million).

First Half Year 2024 Group Discussion

In the first half year 2024, sales were CHF 2.070 billion, down 7 % in local currency1 (- 5 % organic in local currency) and down 9 % in Swiss francs. Pricing had a negative impact on the Group of 4 % while volumes were down 1 %. Scope was net - 2 %, and the currency impact was - 2 %.

Care Chemicals sales decreased by 6 % in local currency (- 2 % organic in local currency). In Catalysts, sales decreased by 11 % in local currency with declines in all segments against a strong comparison base. Adsorbents & Additives sales decreased by 5 % in local currency due to a relatively strong first quarter in the prior year in the Additives segments.

In the first half of the year, sales decreased by 9 % in the Europe, Middle East, and Africa region in local currency, due to continued muted demand in Europe (- 8 %). Sales declined by 4 % in the Americas, largely attributable to scope (- 5 %), with organic local currency sales growth in the US and Brazil. Sales in Asia declined by 7 % versus the first half of 2023, with China reporting a 3 % decrease.

Group EBITDA decreased by 1 % to CHF 339 million against the prior year, when the disposal of the Quats business in Care Chemicals resulted in a preliminary CHF 62 million gain. The corresponding margin increased to 16.4 % from 15.0 %. Raw material and energy costs decreased by 10 % and 12 %, respectively, while the execution of the performance improvement programs resulted in additional cost savings of CHF 20 million in the first half year 2024. A CHF 16 million improvement in the negative operational impact from the sunliquid® bioethanol activities in Catalysts, to a total of CHF 7 million, also contributed to the improvement.

The total Group net result was CHF 176 million versus CHF 232 million in the previous year, when extraordinary tax income of CHF 40 million and the preliminary disposal gain of CHF 62 million had a positive impact. The absence of these factors, along with lower sales, resulted in the decline. 

Cash generated from operating activities for the total Group was CHF 112 million, compared to CHF 78 million in the first half of 2023, as a result of higher earnings. The Free Cash Flow conversion (LTM) increased to 42 % from 36 % reported at the end of 2023.

Net debt for the total Group increased to CHF 1 644 million versus CHF 755 million recorded at the end of 2023. This development is largely attributable to the additional debt assumed for the acquisition of Lucas Meyer Cosmetics, and the resulting net debt to EBITDA ratio (LTM) stood at 2.7x at the end of the second quarter. Clariant was active in the debt market during the first half of 2024 to finance this acquisition and successfully issued EUR 500 million of debt in certificates of indebtedness ("Schuldschein"). These have terms of 3.5 years to 7 years with an average interest rate (fixed and floating) of around 4.9 %. In addition, Clariant issued a CHF 350 million dual-tranche senior unsecured bond of CHF 200 million (3 years at 2.375 %) and CHF 150 million (7 years at 2.75 %).

ESG Update

Clariant’s Scope 1 and 2 total greenhouse gas emissions fell to 0.51 million tons in the last twelve months (July 2023 to June 2024), a decline of 6 % from 0.54 million tons in the full year 2023. The total indirect greenhouse gas emissions for purchased goods and services (Scope 3) also decreased by 4 %, from 2.28 million tons in the full year 2023 to 2.20 million tons in the last twelve months. These results demonstrate continued progress toward reaching the Group’s 2030 emissions reduction targets.

Clariant Launches PTFE-free Solutions to Address Global PFAS Challenges 

The growing concern over the environmental and health impacts of PFAS chemicals, particularly PTFE, has catalyzed a significant shift in the coatings and packaging industries. For example, with PTFE-based polymer processing aids finding their way into millions of tons of plastics for packaging applications, regulatory pressure and increased sustainability awareness are driving the urgent need to replace PTFE. For the last 18 months, Clariant has been launching a comprehensive portfolio of PTFE-free solutions for metal coatings, inks, and plastic packaging applications. 

Clariant's new offerings provide market-ready solutions that match the performance of their PTFE-containing predecessors while enhancing sustainability. Most recently, Clariant launched a PTFE-free processing aid for packaging polymers at Chinaplas in Shanghai in June 2024 to continuously meet the demands of customers globally. These PFAS-free additives contain no inorganic content or silicone components and preserve high performance while meeting current and foreseeable regulatory requirements. 

Outlook

For the full year 2024, Clariant expects to see a continued easing of the inflationary environment but no significant economic recovery, with macroeconomic uncertainties and risks remaining. Therefore, Clariant expects flat to low single-digit percent sales growth (previously: low single-digit percent) in local currency. Growth in Care Chemicals, including the impact of the acquisition of Lucas Meyer Cosmetics, and in Adsorbents & Additives is expected to compensate for second half year uncertainties in the Catalysts recovery phasing. 

Reported EBITDA margin is expected to improve to around 16 %, up 100 basis points from the previous estimate of around 15 %, and includes the impact of the Lucas Meyer Cosmetics acquisition, which is progressing in line with expectations. The increase is supported by the strong performance in the first half of the year and a reduced sunliquid® impact. As a result of the successful steps taken in downsizing its biofuels activities and the divestment of the Podari plant assets, Clariant now expects an operational impact of up to negative CHF 10 million (previously up to negative CHF 15 million) and an exceptional impact of up to negative CHF 15 million (previously up to negative CHF 30 million). Cost savings benefits from restructuring programs are expected to deliver CHF 32 million in 2024. 

Clariant reiterates its expectation that 2025 will be a year of continued, albeit significant, recovery in profitability. In 2025, on the basis of an expected 3 %– 5 % improvement in key end market demand, Clariant expects to achieve EBITDA margin of 17 %– 18 %, and free cash flow conversion at the targeted level of around 40 %. Clariant remains committed to its medium-term targets as end markets recover and growth normalizes over the next two to three years. Clariant will adopt an agile response to the economic environment and remain resolute in its plans to achieve the medium-term targets. The company is well positioned to achieve these targets as the accretive impacts of the Lucas Meyer Cosmetics acquisition and investments in China are realized. In addition, benefits from increased cost savings are expected.