7 Jun 2016
Clariant with a good start into 2016 – improved sales and increased profitability
•First quarter 2016 sales from continuing operations increased 3 % in local currencies to CHF 1.478 billion
•EBITDA margin before exceptional items improved to 15.5 %
from 14.1 %
•2016 outlook confirmed: continued progression in operating cash flow and EBITDA margin before exceptional items
“Clariant had a good start into the year with solid sales growth and profitability improvement,” said CEO Hariolf Kottmann. “All our business areas performed well in the current mixed global economic environment and significantly expanded their EBITDA margins. This positive development in all business areas was achieved by a positive mix effect in our higher margin Business Areas as well as the first impact of the differentiated business steering in Plastics & Coatings. For 2016, we are on track to achieve our targets despite the continued challenging economic environment.”
Key Financial Data
First Quarter
in CHF million 2016 2015 % CHF % LC
Sales 1'478 1'465 1 3
EBITDA before exceptional items 229 206 11 16
- margin 15.5% 14.1%
First quarter 2016 – further improvement in profitability
Muttenz, 5 May 2016 – Clariant, a world leader in specialty chemicals, today announced first quarter 2016 sales from continuing operations of CHF 1.478 billion compared to CHF 1.465 billion in the first quarter of 2015. This corresponds to an increase of 3 % in local currencies. The sales growth was driven by higher volumes.
Growth in the Americas was good, with sales in local currencies up 11 % in Latin America and 4 % in North America. Europe was up 1 % in local currencies. Sales in the Middle East & Africa grew by 5 % in local currencies.
Lower growth came from the region of Asia. Sales decreased by 1 % in local currencies and were affected by a weak demand in China, which could not be compensated by the stronger demand of smaller economies in Asia.
The improved sales came primarily from higher growth in the Business Areas Care Chemicals and Plastics & Coatings.
In Care Chemicals sales in local currencies were up 7 %, reaching CHF 411 million driven by strong growth especially in Latin America, Asia and the Middle East & Africa. North America was behind the previous year’s level due to a weak de-icing business following a mild winter season. Overall, growth in Care Chemicals primarily stemmed from Consumer Care Products.
Sales in Catalysis declined by 4 % in local currencies to CHF 136 million primarily due to a decline in Asia (mainly in China) and Europe, which could not be compensated by good growth in North America and the Middle East & Africa. Adjusted for the Energy Storage business, which was sold in February 2015, sales in Catalysis were stable year- on-year.
Sales in Natural Resources declined by 2 % in local currencies to CHF 292 million. There was good growth in Latin America and Asia. Nevertheless, this could not offset the decline in the other regions. There was a decline in Oil and Mining Services whereas Functional Minerals continued to grow.
In Plastics & Coatings, sales in local currencies grew by 4 % to CHF 639 million. The sales increase was experienced across all regions, but was primarily driven by emerging markets.
EBITDA before exceptional items from continuing operations of Clariant reached CHF 229 million, up 16 % in local currencies year-on-year.
The EBITDA margin before exceptional items increased to 15.5 %, well above the previous year’s level of 14.1 %. Though all Business Areas improved their margins compared to the previous year, the major contributors to the margin expansion came from the improvement in Plastics & Coatings as well as in Natural Resources and was mainly driven by a positive mix effect and the impact of the differentiated business steering in Plastics & Coatings.
Outlook 2016 – to progress EBITDA margin and operating cash flow
Clariant expects the uncertain environment, characterized by a high volatility in commodity prices and currencies, to continue. In emerging markets, we anticipate the economic environment to remain challenging and with increased volatility; we expect moderate growth in the United States, while growth in Europe is expected to remain stable but weak.
For 2016, in spite of the increasingly challenging economic environment, Clariant is confident to achieve growth in local currencies, as well as progression in operating cash flow and EBITDA margin before exceptional items.
Clariant confirms its mid-term target of reaching a position in the top tier of the specialty chemicals industry. This corresponds to an EBITDA margin before exceptional items in the range of 16 % to 19 % and a return on invested capital (ROIC) above the peer group average.
Business Discussion First Quarter
Care Chemicals Business Area
First Quarter
in CHF million 2016 2015 %CHF %LC
Sales 411 391 5 7
EBITDA before exceptional items 75 70 7 11
- margin 18.2% 17.9%
Sales in the Care Chemicals Business Area increased by 7 % in local currencies and 5 % in Swiss francs in the first quarter of 2016 year-on-year.
There was strong double-digit growth in Latin America, Asia and the Middle East & Africa. Europe experienced mid-single digit growth in local currencies whereas North America was below the previous year’s level as the de-icing business was negatively impacted by the unusually mild weather conditions.
Growth was most pronounced in Consumer Care products with strong double-digit growth in Personal Care and Home Care. Crop Solutions had a mid-single digit growth versus the same period last year. The Industrial business experienced underlying good demand but was impacted by a weak de-icing business.
The EBITDA margin before exceptional items climbed to 18.2 % from 17.9 % in the previous year. The increase was primarily driven by a better product mix and new product launches.
For 2016, the Business Area Care Chemicals expects continued solid sales growth in Personal Care and Home Care driven by new innovative products and sustainable solutions like its GlucoTain® range of innovative sugar-based surfactants for Consumer Care formulations.
Future growth is anticipated to be accompanied by new capacity such as in Clearlake,
U.S. with ethoxylation, which came on stream in the first quarter of 2016. Additionally, Care Chemicals will invest in markets, where it is underrepresented. Clariant has recently announced a strategic partnership with BioSpectrum in Korea. BioSpectrum is a leading developer and supplier of specialty active cosmetics’ ingredients derived from Asia’s diverse flora which have proven benefits.
Catalysis Business Area
First Quarter
in CHF million 2016 2015 %CHF %LC
Sales 136 138 -1 -4
EBITDA before exceptional items 26 25 4 3
- margin 19.1% 18.1%
Sales in the Business Area Catalysis decreased by 4 % in local currencies and 1 % in Swiss francs in the first quarter of 2016 compared to a very strong first quarter 2015. Sales growth for the Business Area was impacted by the missing sales from the Energy Storage business, which was sold in February 2015. Excluding this effect Catalysis was stable in local currencies in the first quarter 2016 year-on-year.
The decline in the first quarter of 2016 was driven by a very weak demand in China as some refill business and several new projects were delayed due to the economic environment as already seen in the last three quarters. This decline could not be compensated by the good demand in North America and in the Middle East & Africa.
However, the EBITDA margin before exceptional items increased to 19.1 % in the first quarter of 2016 from 18.1 % in the same period of the previous year. The increase was due to an improved product mix.
Even though Catalysis quarterly growth rates can vary substantially due to timing and size of shipments, fundamentals for Catalysis remain solid mid-term based on Clariant’s portfolio strength, innovation capability, global footprint and growing partnership. A new innovation includes the new chloride guard catalyst, which was launched at the Nitrogen & Syngas 2016 Conference in Berlin, Germany in February this year. In combination with its high performing low temperature shift catalyst, it enables ammonia and hydrogen producers to increase production efficiency.
Natural Resources Business Area
First Quarter
in CHF million 2016 2015 %CHF %LC
Sales 292 317 -8 -2
EBITDA before exceptional items 52 51 2 15
- margin 17.8% 16.1%
Sales in the Natural Resources Business Area decreased by 2 % in local currencies and by 8 % in Swiss francs compared to a strong first quarter in the previous year.
Natural Resources saw growth in local currencies in Latin America and Asia, which however could not compensate the decline in North America, Europe as well as the Middle East & Africa.
The Oil and Mining Services business had a negative sales performance versus a very strong first quarter 2015. In North America, the growth in the U.S. oil business could not offset the weakness in Canada. Asia, the Middle East & Africa, Latin America and Europe were all below prior year’s level.
Functional Minerals experienced solid sales growth in local currencies. Sales growth was driven primarily by emerging markets, i.e. Asia, Latin America and the Middle East & Africa. Europe and North America were also above prior year’s level. Growth was mainly driven by the edible oil purification business in emerging markets as a result of changing eating habits in this region.
Despite a low top-line level the EBITDA margin before exceptional items improved to
17.8 % versus 16.1 % the year before due to strict cost control and disciplined margin management across the business units.
Despite the slower start, Natural Resources anticipates a low single-digit sales growth in 2016. While Functional Minerals is expected to continue to grow particularly in emerging markets, the decline in oil prices might impact the short-term dynamics in Oil and Mining Services.
Plastics & Coatings Business Area
First Quarter
in CHF million 2016 2015 %CHF %LC
Sales 639 619 3 4
EBITDA before exceptional items 105 84 25 26
- margin 16.4% 13.6%
Sales in the Plastics & Coatings Business Area increased by 4 % in local currencies and by 3 % in Swiss francs year-on-year.
All regions showed growth in local currencies. Latin America reported double-digit sales growth in local currencies, while Europe, Asia, North America and the Middle East & Africa had single digit growth.
In Pigments, sales grew across all regions, with Asia driven by a stable business in China and very strong growth in India. In addition, the growth in Coatings and in Special Applications year-on-year contributed to the positive development.
In Masterbatches, sales also grew across all regions. North America, Latin America and the Middle East & Africa contributed most to the growth. Across the segments there was particular growth in areas of Packaging, Consumer Goods and Medical Specialties.
Additives sales were stable versus a good first quarter in 2015. Positive development was primarily experienced in the Americas and Europe, while China demand in Electronics segment remained weak. Polymer Additives & Waxes remained strong with some market weakness still seen in Flame Retardants.
The EBITDA before exceptional items grew significantly by 26 % in local currencies to CHF 105 million year-on-year. This was the result of a better mix effect as well as the effect of the differentiated business steering in Plastics & Coatings since the beginning of January 2016.
In 2016 Plastics & Coatings will continue to focus on delivering absolute EBITDA and cash flow generation.
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