1st Quarter Results

 
TIDM0H9V 
 
Clariant With Strong Cash Flow Despite Continuing Weak Demand 
 
*         Sales down 19% in local currencies and 24% in CHF on weak 
  demand 
*         Operating loss before exceptionals of CHF 13 million due to 
  low capacity utilization and inventory devaluations 
*         Cash flow from operations up to CHF 156 million from  CHF - 
  6 million in Q1, 2008 due to strong focus on net working capital 
  reduction 
*         Net debt reduced to CHF 1,136 million from 1,209 million at 
  the end of 2008 
*         Outlook: Clariant expects demand to stabilize at current 
  low levels and will continue to focus on cash generation and 
  further cost reductions 
 
 
CEO Hariolf Kottmann commented: "In a low demand environment, 
 Clariant's focus on generating cash and cost savings had the 
expected results.  The strong cash flow further strengthened 
Clariant's liquidity and has increased  the financial headroom for 
the necessary restructuring. However, inventory devaluations and the 
impact of capacity underutilization costs led to an operating loss 
that was mitigated by our cost saving measures reflected in lower 
SG&A costs. We do not assume a sustainable recovery in demand. In the 
short- to mid term we will therefore accelerate restructuring and 
maintain cash generation as top priority." 
Key Financial Data 
 
+-------------------------------------------------------------------+ 
|                           |        First quarter                  | 
|---------------------------+---------------------------------------| 
| in CHF million            |  2009  |  2008   | % in CHF | % in LC | 
|---------------------------+--------+---------+----------+---------| 
| Sales                     | 1 604  |  2 112  |   -24    |   -19   | 
|---------------------------+--------+---------+----------+---------| 
| EBITDA before             |   43   |   230   |   -81    |   -73   | 
| exceptionals              |        |         |          |         | 
|---------------------------+--------+---------+----------+---------| 
| EBIT before exceptionals  |  -13   |   167   |    -     |    -    | 
|---------------------------+--------+---------+----------+---------| 
| - margin                  | -0.8%  |  7.9%   |          |         | 
|---------------------------+--------+---------+----------+---------| 
| EBIT                      |  -68   |   140   |    -     |    -    | 
|---------------------------+--------+---------+----------+---------| 
| Net loss / income         |  -91   |   41    |    -     |    -    | 
|---------------------------+--------+---------+----------+---------| 
| Operating cash flow       |  156   |   -6    |    -     |    -    | 
|---------------------------+--------+---------+----------+---------| 
| Number of employees       | 19 558 | 20 102* |          |         | 
+-------------------------------------------------------------------+ 
 
* as of 31 December 2008 
 
Muttenz, May 6, 2009 -  Clariant, a world leader in specialty 
chemicals, today announced that sales reached CHF 1.6 billion in the 
first quarter compared to CHF 2.1 billion in the same period a year 
earlier, a decline of 19% in local currencies and 24% in Swiss 
francs. The quarter was characterized by a steep decline in demand. 
Volumes fell 25%, resulting in extremely low capacity utilizations 
which were accentuated by the company's strong focus on cash flow 
generation by reducing inventories. The substantial reduction of 
inventories was achieved by lowering production volumes clearly below 
sales volumes. The resulting strong operating cash flow came at the 
expense of a lower gross margin and a negative operating margin. 
 
Margins were also negatively influenced by a substantial inventory 
devaluation resulting from a fast decline in raw material costs 
during the quarter. Compared to the fourth quarter, raw material 
prices fell 15% on average and 2% compared to the same period one 
year ago. This effect is expected to become negligible once raw 
material price volatility decreases which we expect to take place 
already in the second quarter this year. While Clariant's margin 
management was successful with 6% higher sales prices year-on-year, 
inventory devaluation and underutilization costs led to a decline of 
the gross margin to 23.6% from 30.5% in the previous year. 
 
The contributions of less cyclical businesses such as de-icing, oil 
services and agrochemicals could not compensate for the overall 
negative trend in demand. A reasonably good economic environment in 
Latin America and first signs of stabilization in some Asian 
countries could not offset the collapse of demand in the mature 
markets of the United States and Europe. 
 
Sales, General & Administration (SG&A) costs were reduced to CHF 357 
million from CHF 437 million in the first quarter 2008. As a result 
of the lower sales the SG&A ratio in percentage of sales increased to 
22.2 % from 20.7%. Hence the group reported an operating loss before 
exceptionals of CHF 13 million and a negative operating margin 
 before exceptionals of -0.8%. 
 
The Masterbatches Division lowered its breakeven point and returned 
to an operating profit after a flat fourth quarter 2008. The 
Functional Chemicals Division benefited from a satisfactory but 
weaker demand and the successful implementation of cost reduction 
measures. Functional Chemicals positively contributed to the 
operating result. Customers of the Textile, Leather & Paper Chemicals 
as well as Pigments & Additives Divisions continued to destock their 
inventories, leading to a significant capacity underutilization 
therefore to an operating loss before exceptionals in both divisions. 
 
In the short term, Clariant will focus its restructuring efforts on 
the unprofitable divisions. The Pigments & Additives Division will 
continue to implement cost saving measures and optimize production in 
order to adjust its capacity to the lower demand. In order to 
sustainably improve the operating performance of the Textile, Leather 
& Paper Chemicals Division, the three Business Units will be 
separated  by the end of the year. This will enhance the operational 
and strategic flexibility to tackle the performance issues according 
to the individual needs of the particular Business Unit. 
 
In the first quarter, restructuring costs amounted to CHF 51 million 
compared to CHF 23 million in the previous year. Since the beginning 
of the year, job positions have been reduced by roughly 540. 
Personnel costs excluding currency effects decreased by 8%. The Group 
recorded a net loss of CHF 91 million compared to a net income of CHF 
41 million in the previous year. The better financial result, due to 
a beneficial foreign exchange rate development, mitigated the 
negative effect from the lower operating income on the net result. 
 
Operating cash flow reached CHF 156 million compared to CHF -6 
million in the first quarter of the previous year. A stringent focus 
on inventory reduction and trade receivables were the main drivers of 
the favorable cash flow development. The cash position of the group 
improved to CHF 438 million from CHF 356 million. 
 
Clariant further strengthened its balance sheet by reducing net debt 
by CHF 73 million to CHF 1.14 billion since year end 2008. The 
company has no refinancing needs before mid 2011. 
 
 
Outlook 
 
Currently there is no evidence that the global economy will recover 
soon from the depressed levels seen in recent months. However, some 
markets stabilized during the first quarter. The first signs of a 
partial demand improvement were noted in some Asian and Latin 
American countries. 
Based on this scenario Clariant anticipates a continuing weak 
development in sales during the coming months. 
 
In this challenging environment, the company will maintain its focus 
on cash generation  and adjusting its production capacities to the 
low demand. The already started significant cost reductions- in 
particular in the SG&A area - will result in an improved 
profitability in the next quarters. 
 
Going forward Clariant will continue to  restructure forcefully with 
estimated restructuring costs of CHF 200-300 million in 2009. 
 
For 2010, Clariant confirms its target of a sustainable 
above-industry average return on invested capital (ROIC). 
 
 
- end - 
 
 
Contacts 
 
Media Relations 
Arnd Wagner               Phone              [phone] 
 
Investor Relations 
Ulrich Steiner               Phone              [phone] 
 
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