Clariant AG: Clariant performance well on target after solid third quarter
Sales from continuing operations in Q3 2013 grew 2% in local currencies and were 3% lower in Swiss francs, at CHF 1.443 billion, down from CHF 1.489 billion in the same period last year.
EBITDA margin before exceptional items amounted to 14.1% compared to 12.0% in Q3 2012.
Net result from continuing operations rose to CHF 129 million from
CHF 47 million in Q3 2012.Operating cash flow improved to CHF 267 million from CHF 181 million in Q3 2012.
For full-year 2013, Clariant expects further progress in sales and profitability compared to 2012 by focusing on innovation, growth and continuous cost efficiency.
CEO Hariolf Kottmann: "Clariant achieved a solid performance in the first nine months of 2013 as most businesses developed favorably under continuing challenging economic conditions around the globe. Good progress has been made in the repositioning of the business portfolio, with the divestment of underperforming businesses nearing completion. This will leave Clariant with a well-balanced portfolio that has promising long-term growth prospects in many areas of the specialty chemicals industry."
Key Financial Data
Continuing operations: | Third quarter | Nine Months | |||||||
in CHF million | 2013 | 2012 | % CHF | % LC | 2013 | 2012 | % CHF | % LC | |
Sales | 1 443 | 1 489 | -3 | 2 | 4 513 | 4 529 | 0 | 2 | |
EBITDA before exceptional items1 | 203 | 178 | 14 | 24 | 623 | 589 | 6 | 9 | |
- margin | 14.1% | 12.0% | 13.8% | 13.0% | |||||
EBIT before exceptional items1 | 132 | 109 | 21 | 37 | 417 | 391 | 7 | 11 | |
- margin | 9.1% | 7.3% | 9.2% | 8.6% | |||||
EBIT1 | 147 | 92 | 60 | 70 | 377 | 308 | 22 | 27 | |
Net result from continuing operations | 129 | 47 | 238 | 118 | |||||
Net loss / income2 | -204 | 47 | -75 | 132 | |||||
Operating cash flow2 | 267 | 181 | 154 | 184 | |||||
Number of employees2 | 18 132 | 21 202* | |||||||
Discontinued operations | |||||||||
Sales | 443 | 434 | 1 315 | 1 317 | |||||
Net result from discontinued operations | -333 | 0 | -313 | 14 | |||||
1 Third quarter 2012 and nine months 2012 restated for IAS19 (employee benefits)
2 Total group including discontinued operations
* as of December 31, 2012
Third Quarter Performance
Muttenz, October 30 2013 - Clariant, a world leader in specialty chemicals, today announced third quarter 2013 sales from continuing operations of CHF 1.443 billion compared to CHF 1.489 billion in the prior-year period. This corresponds to a 2% sales growth in local currencies that was almost entirely the result of higher sales volumes. In Swiss francs, sales decreased 3%, due to the pronounced weakness of the Brazilian real, the Japanese yen and the Indian rupee against the Swiss franc.
The economic environment remained challenging and basically unchanged compared to the first six months. In this environment, all Business Areas with the exception of Catalysis & Energy achieved local currency sales growth in the low to mid single-digit range. Care Chemicals outperformed the other Business Areas, adding 5% in sales year-on-year, with all segments and regions contributing to growth. Natural Resources managed to increase sales by 3%. Good growth in Adsorbents, Mining Services and Refinery Services outweighed a weaker Water Treatment and a temporarily softer Oil Services business. In Catalysis & Energy, Catalysts experienced some delays in the realization of new customer projects, mainly in Asia. The situation is expected to gradually improve during the fourth quarter. The startup business Energy Storage did not improve compared to the previous quarters. Sales in Plastics & Coatings recovered from the weak prior-year period, achieving 4% growth.
On a regional basis, local currency sales growth in Latin America continued at a high level with an 11% increase year-on-year. A heterogeneous development has been observed in the other regions. North America and Europe grew 2% in local currencies while Asia/Pacific lost 2%. Robust growth of 2% in China was more than offset by weakness in India and Japan. Middle East & Africa continued at a low level.
The gross margin improved to 28.1% from 27.6% in the prior-year period. An improved volume/mix effect and a stable sales price development were the main causes for the higher gross margin. Compared to the third quarter of 2012, sales prices were unchanged while raw material costs were 1% higher. Sequentially, i.e. compared to the second quarter of 2013, sales prices were equally flat and raw material costs were 1% lower.
Year-on-year, the EBITDA before exceptional items from continuing operations improved 24% in local currencies and 14% in Swiss francs to CHF 203 million from CHF 178 million. Lower SG&A costs and a one-time gain related to the valuation of acquired assets over-compensated the currency impact on EBITDA. The EBITDA margin rose to 14.1% compared to 12.0% for the continuing operations in the previous-year period.
Exceptional items were positive at CHF 19 million mainly attributable to a one-time gain from the joint venture transaction with Wilmar. This compares to exceptional items of CHF -14 million one year ago. As a result of a higher EBITDA and a positive tax income of CHF 20 million, the net result from continuing operations significantly improved to CHF 129 million from CHF 47 million a year ago.
Operating cash flow was CHF 267 million versus CHF 181 million in Q3 2012. As expected, the cash outflow from the first two quarters 2013 has been for the most part reversed as the operating result improved and net working capital followed the normal seasonal pattern. For the remainder of the year, cash generation continues to be a priority of the Group with a further improvement in the fourth quarter expected.
Capital expenditure increased compared to the previous year, reaching CHF 92 million compared to CHF 67 million. The increase is related to investments into the new Clariant Innovation Center in Frankfurt, Germany, and expansion projects to drive profitable growth.
Net debt decreased to CHF 1.691 billion from CHF 1.945 billion at the end of the second quarter 2013. This was mainly due to a first cash inflow from proceeds of the disposal of Textile Chemicals, Paper Specialties and Emulsions that closed by the end of September. At year-end 2012, net debt was CHF 1.789 billion.
Gearing (net financial debt in relation to equity) improved and stood at 62% compared to 67% at year-end 2012.
Outlook 2013
The repositioning of the portfolio in 2011 and 2012 has lifted Clariant to a sustainably higher level of profitability, reflected in an increase in EBITDA margin in the first nine months of the year and the third quarter of 2013 compared to the corresponding previous-year periods.
The environment in which Clariant operates has not significantly changed over the past few months. Although a further stabilization has been observed in the mature markets, a broad-based economic recovery is not expected. In addition, uncertainties remain high in the emerging economies. Going into the fourth quarter, Clariant expects an overall stable but mixed business environment.
In this scenario, Clariant will focus on innovation, growth and cost efficiency. This will lead to further top-line growth in local currencies and an improved profitability in 2013. For the mid-term, Clariant confirms its 2015 targets of an EBITDA margin of above 17% and a return on invested capital (ROIC) above the peer-group average.
Changes in reporting structure and restatements effective 1 January 2013
Effective 1 January 2013, Clariant has regrouped its seven Business Units for reporting purposes into four Business Areas: Care Chemicals (BU ICS), Catalysis & Energy (BU Catalysts, Energy Storage business), Natural Resources (BU Oil & Mining Services, BU Functional Minerals), and Plastics & Coatings (BU Additives, BU Masterbatches, BU Pigments). In addition, the Medical Specialties business has been reallocated from BU Functional Minerals to BU Masterbatches. Restatements for 2012 have been made accordingly.
At Group level the introduction of IAS 19 (revised) (pension accounting) as of 1 January 2013, is reflected in restated figures for the period. For the third quarter of 2012 including discontinued operations, IAS 19 had a positive impact of CHF 4 million on EBITDA and EBIT, while net income decreased by CHF 2 million. For the full-year 2012, the positive impact of IAS 19 on EBITDA and EBIT was CHF 18 million, while net income declined by CHF 10 million.
In 2012, Clariant announced it would be looking for strategic options for the five businesses Textile Chemicals, Paper Specialties, Emulsions, Detergents & Intermediates and Leather Services. In a first phase, Clariant announced on 27 December 2012 an agreement to sell its Textile Chemicals, Paper Specialties and Emulsions businesses to SK Capital, a US-based investment firm. The transaction was closed on 30 September 2013. On 15 October 2013, the disposal of Detergents & Intermediates to International Chemical Investors Group (ICIG), a privately owned industrial holding company focusing on mid-sized chemicals and pharmaceutical businesses, was announced. The plan to sell the Leather Services business to Stahl has been announced on 30 October 2013. Hence, all five businesses have been reported as "discontinued operations" from full-year results 2012.
In the third quarter of 2013, discontinued operations generated sales of CHF 443 million compared to CHF 434 million in Q3 2012 and a net result of CHF -333 million compared to zero income in Q3 2012. The net result from discontinued operations includes book losses, project and separation costs, and currency translation adjustments, related to the divestment of Textile Chemicals, Paper Specialties, Emulsions, and impairment recorded for Detergents & Intermediates.
-end-
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