Clariant’s profitability remains resilient in a difficult economic environment

“In the first quarter of 2020, Clariant is facing an unprecedented economic environment along with the entire industry. However, our solid quarterly EBITDA margin reflects the attractiveness of the group’s flexible business product portfolio, which is particularly difficult and highly uncertain. The profitability level of last year is still maintained in the environment,” said Hariolf Kottmann, Executive Chairman of Clariant Transition. “We will continue to make every effort to reduce the impact of the new crown epidemic and protect the safety of employees. Clariant’s transformation plan will also continue to advance in full.”

The first quarter of 2020: Sales decline in difficult environments, but EBITDA margins remain flexible

Shanghai, China/Muttonz, Switzerland, April 30, 2020 – Clariant, a dedicated, sustainable, and innovative specialty chemical company, today announced that its continuing operations sales totaled 1.019 billion Swiss francs in the first quarter of 2020. Compared with 1.164 billion Swiss francs in the first quarter of 2019, sales in local currencies fell by 6%, and due to the adverse effects of exchange rate fluctuations, sales fell by 12% in Swiss francs.

Affected by the mild winter and the new crown epidemic, the group faced a low-demand market environment in the first quarter of 2020. Based on a strong balance sheet and liquidity position, relevant efforts to minimize the impact of the epidemic have been fully put in place. Clariant continues to ensure employee safety first, and at the same time runs business continuity-related plans and implements cash reduction measures.

In terms of different regions, despite the impact of the new crown epidemic on China, sales in Asia are developing steadily, and the report shows that the contraction is only in the low single digits. In local currency terms, the Middle East and Africa and Latin America have the strongest growth. Sales in North America declined slightly, while the European region was significantly weaker, which was attributed to the sharp decline in aviation business caused by mild weather conditions.

Despite these challenges, due to the expansion of oil and mining services sales in the first quarter of 2020, sales in the natural resources business segment increased by 2% in local currencies. Due to the considerable adverse effects of the particularly mild winter weather, the aviation business was significantly weaker. In local currency, sales in the care chemicals business area fell by 14% in local currency. In local currency, sales in the catalyst business area fell by 6%, partly due to the transfer of previously communicated forward sales to the fourth quarter of 2019.

Affected by changes in sales in the first quarter of 2020, EBITDA from continuing operations fell by 14% in Swiss francs to 157 million Swiss francs. In particular, the weak performance of the aviation business of care chemicals, and the weaker profitability of catalysts due to lower sales and exchange rate effects. Despite this, due to the rapid and effective implementation of cost control measures, the EBITDA margin remained at a steady level of 15.4%, compared with 15.7% in the same period last year.

Discontinued business

In the first quarter of 2020, sales of discontinued operations (masterbatches and pigments) fell by 6% in local currencies and 12% in Swiss francs. However, if compared on a peer-to-peer basis, excluding the sales of the medical packaging business in the first quarter of 2019 (the business was divested in October 2019), organic sales remained unchanged in local currency. Part of the reason for the decrease in the absolute value of EBITDA was the sale of the medical packaging business, the one-time cost of the efficiency enhancement plan of the pigment business, and the spin-off of discontinued operations. Therefore, the improvement in basic performance is due to good profit margins and effective cost management.

Prospects: In the medium term, focus on product portfolio, achieve growth above the market average, obtain higher profitability and stronger cash generation

Clariant is a dedicated, sustainable, and innovative specialty chemical company that aims to achieve above-market growth and profitability through innovation and sustainable development. Through the divestiture of the medical packaging business in 2019, as well as the announced sale of the masterbatch business and the planned divestiture of the pigment business, the group has greatly reshaped its product portfolio.

Looking ahead to 2020, Clariant expects that the new crown epidemic will have a negative impact on sales and profitability. The group quickly established a crisis management team, focusing on employee safety, community support, ensuring business continuity, and cash generation. The new crown epidemic is expected to have a greater impact in the second quarter of 2020. Clariant has prepared for different situations to create flexible performance and continue to advance the transformation plan.

In the medium term, Clariant expects that its continuing operations will achieve higher-than-market growth, higher profitability and stronger cash generation based on its three pillar businesses and a high-value specialty product portfolio.

(Editor in charge: admin)