"Clariant had a promising start to the year with good volume growth and an increase in operating profitability," said CEO Hariolf Kottmann. "Overall, our businesses performed well in an improving but still mixed economic environment. The picture has been somewhat clouded by unfavorable currency developments, a mild winter in Europe, and an impairment charge related to the divestment of the ASK Chemicals joint venture. However, after the first three months, Clariant is well on course to meet its full-year targets."
First quarter 2014 - Good sales growth driven by higher volumes
Muttenz, 30 April 2014 - Clariant, a world leader in specialty chemicals, today announced first quarter 2014 sales from continuing operations of CHF 1.492 billion compared to CHF 1.526 billion in the first quarter of 2013. This corresponds to an increase of 5% in local currencies. The 5% organic sales growth was driven by 4% higher volumes and an increase in prices of 1%.
Good sales growth in local currencies was strongly impacted by unfavorable currency developments in the emerging markets as well as in North America. The adverse currency environment implied a sales growth of –2% in Swiss francs, mainly due to the year on year weakness of the Brazilian real, Indian rupee, Japanese yen, and US dollar.
Clariant posted strong local currency sales growth of 15% in Latin America. Sales in Asia/Pacific increased 11% in local currencies, driven by 33% higher sales in both China and India. In the Middle East & Africa region, sales were 10% higher year on year in local currencies as all Business Areas recorded growth in the region. In North America, a strong de-icing season offset the winter-related softness in other businesses, leading to 1% sales growth in local currencies. Europe was 1% lower due to unfavorable weather conditions, which particularly impacted Northern and Central Europe. Southern Europe, on the other hand, showed growth from a low base.
All Business Areas with the exception of Care Chemicals achieved mid to high single-digit sales growth. Care Chemicals was flat year on year, exclusively due to a virtually non-existent de-icing season in Europe. Excluding de-icing, growth in Care Chemicals was on a par with the other Business Areas. Catalysis & Energy opened the year on a positive note and confirmed the expected recovery in 2014. Natural Resources achieved good growth in both the Oil & Mining Services and Functional Minerals businesses. In the Plastics & Coatings Business Area, solid growth was accomplished in all areas, particularly in Pigments.
At 28.9%, the gross margin was down from 29.2% in the prior-year period due to an unfavorable sales mix and a negative currency impact. This was partially compensated by lower costs for the underutilization of production capacities and 1% higher sales prices.
The EBITDA before exceptional items from continuing operations rose 8% in local currencies and reached CHF 210 million, on a par with the CHF 209 million recorded in the previous year. The corresponding EBITDA margin improved to 14.1%, compared to 13.7% in the first quarter of 2013. The increase in margin was supported by ongoing cost discipline and higher income from associates and joint ventures compared to the previous year.
Exceptional items including restructuring, impairment, and transaction-related costs increased to CHF 99 million compared to CHF 22 million in the first quarter of 2013. This was entirely due to a CHF 84 million non-cash impairment charge related to the divestment of the ASK Chemicals joint venture, which was announced in the second quarter of 2014. As a consequence of the impairment, a net loss from continuing operations of CHF 39 million was recorded, compared to a net income of CHF 38 million in the previous year.
Following the normal seasonal pattern, operating cash flow was negative at CHF –51 million versus CHF –72 million one year ago. Operating cash flow is expected to gradually improve as the year progresses.
Net debt stood at CHF 1.562 billion and was therefore slightly higher than the CHF 1.500 billion recorded at year-end 2013. The gearing, reflecting net financial debt in relation to equity, rose to 60% from 54% at the end of 2013.
Changes in reporting structure effective since 1 January 2013
Clariant has meanwhile stringently executed the announced divestments of the five businesses Textile Chemicals, Paper Specialties, Emulsions, Detergents & Intermediates and Leather Services. With the closing on 30 September 2013, Clariant sold its Textile Chemicals, Paper Specialties, and Emulsions businesses to SK Capital. On 15 October 2013, the disposal of Detergents & Intermediates (D&I) to the International Chemical Investors Group (ICIG) was announced and closed effective as of 1 January 2014. The divestment of the Leather Services business to Stahl Holdings B.V. was announced on 30 October 2013 and is expected to close in the second quarter of 2014, subject to regulatory approval. Clariant will hold a 23% stake in the combined entity. Hence, all five businesses have been reported as "discontinued operations" since 1 January 2013.
In the first quarter of 2014, discontinued operations generated sales of CHF 66 million (Leather Services) compared to CHF 421 million (Textile Chemicals, Paper Specialties, Emulsions, Detergents & Intermediates, Leather Services) in the first quarter of 2013, and a net result of CHF –9 million compared to an income of CHF 12 million in the first quarter of 2013. The net result from discontinued operations in 2013 includes book losses, project and separation costs, and currency translation adjustments related to the divestment of the Detergents & Intermediates and the Leather Services businesses.
Outlook confirmed – Focus on performance, growth and innovation
For 2014, Clariant expects the business environment to remain challenging with heterogeneous global economic developments and volatile currency markets. The general economic environment in the emerging markets is expected to remain favorable but mixed, while moderate growth should continue in the advanced economies, in particular in the United States. In this scenario, Clariant will focus on profitably growing the four Business Areas and on cost efficiency.
For full-year 2014, Clariant expects low to mid single-digit sales growth in local currencies and an EBITDA margin before exceptional items above full-year 2013.
Clariant confirms its mid-term target of achieving 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 in 2015 and beyond.
