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Clariant Posts Solid Full-Year 2004 Results / Sales, Net Income and Cash Flow Significantly Higher

Published on 2005-03-08. Author : SpecialChem

MUTTENZ, Switzerland -- Clariant reported solid results for the full year 2004, with sales on a like-for-like basis increasing 7% in local currency terms. Operating income before exceptional items rose by CHF 82 million to CHF 633 million, while operating margins before exceptional items climbed to 7.4%, from 6.8% a year earlier.

Operating cash flow surged to CHF 806 million, from CHF 327 million. Growth was robust across all regions, especially in the Americas and in Asia. Sales in the Fourth Quarter were strong, rising 8% in local currency terms.

"These results clearly show Clariant is back and competing with the best in the industry," said Chief Executive Officer Roland Loesser. "There is still a lot of work to be done, but we can be proud of the achievements of the past year."

Sales on a like-for-like basis for the full year totalled CHF 8.530 billion, up from CHF 8.075 billion a year earlier. Volume growth - at 9% - was particularly strong. Sales growth on a continuing basis was highest in the Americas region, up 10% in local currency terms, followed by Asia, Australia and Africa, up 8% while European sales were 3% higher.

Price Increases in the Fourth Quarter

Price increases were achieved in the Fourth Quarter in several product lines, bringing the average price erosion for the full year from above 3% down to 2%. The company said it expects to continue increasing prices in 2005. Negative factors over the year included the effect of higher raw material prices, which rose approximately 2%, and the relative weakness of the U.S. dollar against the Swiss franc. Gross margins were slightly lower, at 31.7% from 32.0% a year earlier mainly because of higher raw material prices and continuing price pressure in some businesses.

Operating income before exceptional items and amortization of goodwill improved to CHF 633 million from CHF 551 million over the same period in 2003, on a like-for-like basis. Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) grew 4%, to CHF 949 million, from CHF 916 million.

Overall, Clariant closed the financial year in excellent financial health. The company sharply reduced net debt levels in 2004, to CHF 1.090 billion, from CHF 2.905 billion a year earlier, a reduction of 63%.

Clariant's Board of Directors will propose at the Annual General Meeting on April 7, 2005 a payout of CHF 0.25 per share through a reduction of the nominal value of the shares to CHF 4.75, from CHF 5.0. One new board member will be proposed at the AGM: Dr. Klaus Jenny, an industrialist from Glarus, Switzerland, following the untimely death of Heinrich Bossard.

Transformation Process Proceeding Ahead of Expectations

The company also reported good progress on its Transformation Program, which is creating efficiencies throughout the organization, cutting costs and prioritizing businesses where it already has or is able to gain a competitive advantage. Following job cuts and the sale of several non-core business in 2004 the number of employees at year-end stood at 24,769, down from 27,008 at the end of 2003.

"We are now fully in the intense implementation phase of the Transformation Program," Mr. Loesser said. "What is particularly encouraging is the fact that we are continuing to grow on the top line quarter by quarter, while carrying out deep and wide-ranging structural improvements that will ensure our competitiveness over the long-term." CHF 150 million in cost base reductions were achieved in 2004, about CHF 50 million more than planned for the year, and the program is well on target to deliver further savings of CHF 300 million in 2005.

Clariant put in place as of Jan. 1, 2005 a new operating model that has reduced organizational complexity, created numerous synergies and enabled a sharper focus on customer needs. "Clariant is now one fully coherent company," Mr. Loesser said. "The adaptation process to achieve that coherence requires a lot of discipline and hard work from our employees throughout the company, but I am absolutely convinced this will bring major benefits going forward."

Notable Strength in Functional Chemicals and Masterbatches

Growth was strong across most business units, particularly in service-driven areas, such as Coatings, Textile Chemicals and Performance Chemicals. Businesses that continued to face pressure include Textile Dyes and Pharma Chemicals, where overcapacities in the industry prevented a satisfactory performance.

Functional Chemicals reported a 15% increase in sales in local currency terms, followed by Masterbatches, at 8%, Pigments & Additives at 6% and Textile, Leather & Paper Chemicals, at 3%. Only Life Science Chemicals posted negative numbers, with a 4% decline. EBITDA margins before exceptional items improved in every division, particularly in Pigments & Additives, where they rose to 15.2%, from 13.5% due to very strong volume growth, and in Masterbatches, where they climbed to 11.9 %, from 11.0% also because of higher volumes.

Several non-core businesses were sold in 2004, including Electronic Materials, Lancaster Synthesis, Clariant Polymers K.K. and the company's participation in SF-Chem. The company will continue to sell non-core businesses over the coming years.

Clariant's focus on innovative, service-driven business yielded encouraging results, with the company receiving positive responses from the market for several market-leading product ranges. These include in the Textile, Leather & Paper Chemicals Division, Nuva ®, an oil and water repellent finishing agent for fibers and leather, and in the Functional Chemicals Division, a range of crop protection products that permit reductions in the amounts of active ingredients deployed, thereby providing economic and environmental benefits.

Several new customer-focused centers were opened during 2004, including, in the Masterbatches Division, three ColorWorks centers, which provide customers with assistance in color design and production.

Clariant Issues Positive Outlook

Mr. Loesser issued a positive outlook for the company for 2005, expecting solid growth in sales in local currency terms and an improved operating margin before exceptional items.

"I expect a positive macro economic climate for the specialty chemicals industry, and that Clariant will continue to grow above the market," Mr. Loesser said. "We will achieve further success with the implementation of our Transformation Program, providing a strong boost to our competitiveness over the medium and long-term." Growth in 2005 will mainly be driven by increased volumes and higher prices across the group. The company anticipates negative foreign exchange affecting 2005 results in Swiss franc terms. Raw material prices are expected to increase on average by 5% to 7% over the coming year. Thanks to further improvements from the Transformation Program, the company expects to reduce the cost base by CHF 300 million compared to 2004. All factors considered, the company expects net income to rise in 2005.

Source: Clariant


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