Clariant further expands operating margin

• Sales up 5% in local currencies on price increases, down 6% in CHF
• EBITDA margin before exceptional items at 16.1% compared to 12.9% in the previous year
• EBIT margin before exceptional items rose to 13.4% from 10.1% in Q1 2010
• Positive cash flow from operations of CHF 17 million
• Net income of CHF 120 million compared to CHF 10 million a year ago
• Süd-Chemie acquisition closed, integration process initiated; consolidation as of 21 April 2011
• 2011 outlook: Clariant expects a stable business environment in 2011, with growth mainly coming from the emerging markets. Based on this scenario and excluding Süd-Chemie, Clariant forecasts local currency sales growth in the low single-digit range and an EBITDA margin before exceptional items above that of 2010.

CEO Hariolf Kottmann commented: “Clariant had a good start to 2011 with a strong performance across the portfolio. Our ongoing focus on delivering a sustainably better performance in the current businesses showed the expected results. By adding the recently acquired Süd-Chemie activities to our portfolio, Clariant will gain access to attractive new markets and to a strong R&D organization focusing on market segments with significant future growth potential. While continuing to manage our businesses for higher margins, the Süd-Chemie portfolio activities will speed up the execution of our profitable growth strategy.”

Clariant Q1 2011 Performance

Muttenz, 6 May 2011 – Clariant, a world leader in specialty chemicals, today announced sales of CHF 1.717 billion for the first quarter of 2011 compared to CHF 1.817 billion in the previous-year period. Sales growth in local currencies amounted to 5%. Due to the appreciation of the Swiss franc against most major currencies, sales were 6% lower in Swiss francs year-on-year.

Overall trading conditions remained stable during the quarter with no restocking activities observed as in the first quarter of 2010. At the regional level, sales growth was quite uniform across all regions with growth rates of between 4% and 7%. The impact from both the disastrous earthquake in Japan and the unrest in North Africa on the business was minimal so far.

In the first quarter, Clariant continued to consistently implement its profitable growth strategy. As a result of the focus on margin management, sales prices improved 5% year-on-year. While not fully compensating for higher raw material costs yet, sales prices increased 2% sequentially with dynamics picking up towards the end of the quarter. This successful price management, lower production costs and a high capacity utilization drove the gross margin up to 29.8% from 28.7% in the same period a year ago.

Clariant further benefited from the positive impact of the implementation of its 2009/10 cost reduction initiatives. Selling, general & administrative (SG&A) costs as a percentage of sales decreased substantially to 15.0% from 16.9% in comparison to the prior-year period. The structurally lower cost base supported the margin development. As a consequence of a better gross margin and lower costs, the EBITDA before exceptional items increased to CHF 277 million, compared to CHF 235 million one year ago. The corresponding margin rose to 16.1% from 12.9% in the previous-year period. The operating profit (EBIT) margin before exceptional items improved to 13.4% from 10.1% in the same period one year ago.

The EBITDA and EBIT margins after restructuring improved to 15.1% from 7.4% and to 11.7% from 4.1% respectively, illustrating the lower restructuring and impairment expenses after completion of the 2009/10 restructuring phase.

Cash flow from operations stood at CHF 17 million, considerably lower than the CHF 159 million achieved in the previous year. After an overly tight management of working capital towards the end of 2010, inventories returned to more normalized levels, therefore negatively impacting the cash flow from operations in Q1.

Net debt increased to CHF 250 million from CHF 126 million, resulting in a gearing (net debt divided by equity) of 13% at the end of the first quarter of 2011, slightly higher than the 7% recorded at the end of 2010.

Update on Süd-Chemie acquisition

On 21 April, Clariant completed the purchase of 96.15% of the shares in Süd-Chemie from One Equity Partners and the family shareholders. The overall transaction value amounted to approximately EUR 1.9 billion (CHF 2.5 billion). A public offer to acquire the outstanding shares from Süd-Chemie minority shareholders will be initiated before the end of May 2011. Süd-Chemie will be fully consolidated as of 21 April 2011.

After closing the acquisition, Clariant started the integration process in order to achieve a quick and seamless integration of the Süd-Chemie businesses into Clariant.

As further steps in the execution of its profitable growth strategy, Clariant has acquired the North American de-icing specialist Octagon Process LLC on 19 March 2011, and the Saskatchewan, Canada-based oil services company Prairie Petro-Chem on 1 April 2011.

Outlook 2011

Starting 2011, Clariant shifted its focus to continuous improvement and profitable growth following the completion of restructuring in 2010. While the continuous improvement initiative “Clariant Excellence” will make the lower cost basis sustainable, the company is now focusing on creating value by investing in future profitable growth.

Clariant expects global economic growth to continue in 2011 but at a slower pace than in 2010. Exchange rates for the major currencies are expected to remain volatile. Growth will mainly come from the emerging markets in Asia/Pacific and Latin America. Commodity prices are expected to continue to rise in 2011, leading to an increase in raw material costs in the mid-teens.

Clariant – excluding the recently acquired Süd-Chemie – expects 2011 sales growth in local currencies in the low single-digit range. Additional benefits from the restructuring measures taken during the last two years will improve the company’s cost position, resulting in a positive impact on the operating result. The EBITDA margin before exceptional items is therefore expected to rise above the 2010 level.

For more details, please download the PDF of the press release.

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