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Clariant Achieves Solid First Half Performance; Strong Financial Base Re-established

Published on 2004-08-10. Author : SpecialChem


MUTTENZ, Switzerland -- Clariant achieved a solid performance in the first half of the year, with sales on a like-for-like basis rising 7% in Swiss Franc terms as well as net income and operating cash flow improving significantly compared to the same period a year earlier.

Operating income rose 69%, to CHF 317 million on a like-for-like basis from CHF 188 million, operating margins rose to 7.2%, from 4.6% in 2003. Net income climbed to CHF 126 million, from a net loss of CHF 74 million in the first half of 2003.

The company was particularly successful during the period in reducing net debt, which now stands at CHF 1.840 billion, down from CHF 3.686 billion a year ago. Gearing, which reflects net debt in relation to equity capital, declined sharply to 82%, from 326% a year earlier. The equity ratio improved to 24.6%, from 12.1%. Operating cash flow increased substantially, to CHF 320 million in the first half, from minus CHF 53 million a year earlier.

"Our growth rate and operating results give us a lot be proud of," said Clariant Chief Executive Roland Loesser. "The company is now back on a strong financial footing thanks to hard work and the support of our shareholders. The Transformation Program we initiated a year ago is beginning to bear fruit, particularly in the areas of cost reduction and improved cash flow."

Volume Growth Strong

Sales in the first half were CHF 4.419 billion, up from CHF 4.118 billion in the first half of 2003 on a like-for-like basis. Volume growth-- at 9% --was particularly strong. The value of overall sales was limited by price erosion of 3%. Nevertheless, the company was able to increase prices in several product lines and generally speaking, pressure on prices weakened slightly during the period. Sales growth was strong across all regions with the exception of Europe, which remained sluggish.

Operating income before exceptional items rose to CHF 387 million, from CHF 345 million a year ago, on a like-for-like basis, yielding an operating margin before exceptional items of 8.7%, from 8.4% in 2003 despite charges related to the Transformation Program.

Financial expenses dropped substantially, mainly due to currency effects and to lower interest charges. Meanwhile, tax expenses were lower than a year ago. During the period, the company successfully completed a capital increase amounting to CHF 920 million.

Clariant's raw material costs were largely unaffected by higher oil prices in the second quarter. Mr. Loesser noted that Clariant's performance now is less impacted by the movements on the petroleum market than in previous years thanks to the sale of several business units that are relatively large consumers of petroleum derivatives.

Transformation Program Making Good Progress

Progress on Clariant's Transformation Program, which features cost-cutting, asset sales and a refocusing on core activities, was good during the first half. Among the most significant achievements of the first half was a reduction in net working capital-- despite sales growth during the period --by over CHF 200 million, from a total reduction of CHF 600 million targeted by 2007.

The company confirmed it is on track to reduce costs by CHF 100 to 120 million this year, with CHF 40 million already achieved in the first half.

"The Transformation Program has now moved into Phase Two, where it is fully operational and positively affecting every corner of our company," Mr. Loesser said. "I am pleased by the level of commitment and the energy shown by our employees at all levels. The pace of the performance improvements being carried out means that we are well on the way to restoring Clariant's status as a leader in the specialty chemicals sector."

Asset Sales: Priority on Price Rather Than Speed

Clariant announced last month agreements to sell two businesses: AZ Electronic Materials, for CHF 518 million to The Carlyle Group, and Lancaster Synthesis for CHF 32 million to Johnson Matthey. Both transactions are expected to close in the coming months. Proceeds from the sales will be used to further reduce debt and fund the Transformation Program.

The company remains committed to selling additional assets that no longer constitute Clariant's core portfolio. Mr. Loesser said: "Our priority in these sales processes is to achieve the best possible prices. Given our stronger financial position, we can take as much time as required to obtain positive results."

Mr. Loesser expects Clariant to perform satisfactorily for the remainder of 2004, but noted that because of seasonal factors, the second half of the year tends to be weaker than the first half for specialty chemical companies.

Source: Clariant

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