Clariant Reports 2008 Results
February 20, 2009
MUTTENZ, Switzerland – Clariant has announced sales of CHF 8.1 billion for the full year 2008 compared to CHF 8.5 billion in 2007. This translates into a 1 percent growth in local currency and a 5 percent decline in CHF.
Clariant went through two distinct phases during fiscal year 2008. In the first nine months, the company continued to benefit from a stable demand and could cope with rising raw material costs and adverse currency movements by substantially increasing sales prices. In the fourth quarter, Clariant was significantly impacted by an unprecedented decline in global economic activity that led to a weaker demand from customer industries such as textile, leather, automotive and construction. Other markets, such as agrochemicals, oil services or de-icing, showed resilience against the downturn. Clariant countered the unfavorable demand development in the fourth quarter by reducing temporary employees and overtime as well as extended plant shutdowns over Christmas.
The company offset a 15 percent increase in raw materials costs in 2008 by sales price increases of 7 percent. Due to low capacity utilization in the fourth quarter, the gross margin was slightly down to 28.7 percent from last year’s 29.2 percent. Because of Clariant’s strong focus on SG&A costs reduction, the operating margin before exceptional items improved to 6.6 percent from 6.3 percent in the previous year. The operating income before exceptionals reached CHF 530 million compared to CHF 539 million in 2007.
By the end of 2008, Clariant had reduced roughly 1,650 job positions out of the reduction target of approximately 2,200 that was announced in 2006. The activities to reduce SG&A costs, as well as the production site closures that were previously announced, proceeded as planned. Restructuring and impairment costs related to those activities amounted to CHF 141 million. Total restructuring and impairment costs were at CHF 321 million. The group recorded a net loss of CHF 37 million.
The operating cash flow remained solid in 2008 and reached CHF 391 million despite a negative impact from inventory buildup in the first nine months. This compares to an operating cash flow of CHF 540 million in the previous year.
The balance sheet of the company remains solid. Clariant was able to reduce its net debt by 11 percent to CHF 1.21 billion from CHF 1.36 billion. The interest expenses also developed favorably, falling to CHF 85 million from CHF 107 million in 2007. The company will not face maturities in capital markets for almost three years as all mid- and long-term debt was refinanced under favorable conditions between April 2006 and July 2008. Therefore, the liquidity of the Clariant Group is strong and the company is prepared for a potential further economic downturn.
In this challenging environment, Clariant will accelerate several actions to address both the unsatisfactory performance and the economic slowdown. Cash generation through significantly decreasing net working capital and spending discipline will be the prevailing priority for 2009 in order to create the financial headroom for decisive restructuring.
Following this approach, Clariant will rapidly and forcefully implement the announced significant decrease in personnel costs by reducing 1,000 job positions in addition to the 2,200 announced in 2006. Also, Clariant will simplify its organization in order to unwind additional cash generation and cost savings potential – in particular in the SG&A area. Restructuring costs in 2009 will amount to approximately CHF 200 to 300 million.
Reflecting the current uncertainties in the economic environment, the Board of Directors will recommend to Clariant’s 14th General Assembly to suspend dividends, grants or payouts to shareholders for 2008.