Clariant Q4 op income up 6.7%; share price falls

20 February 2007 11:26  [Source: ICIS news]

LONDON (ICIS news)--Clariant reported a 6.7% increase in year-on-year fourth quarter operating income at Swiss francs (Swfr) 112m ($90.5m/€68.9m) on Tuesday, with UBS analysts calling the results disappointing and the share price falling.

Earnings before interest, tax, depreciation and amortisation (EBITDA) were up 13.8% at Swfr 182m.

Sales rose 3% from the same period last year to Swfr 2.01bn, above UBS expectations at Swfr 2.008bn and consensus at Swfr 1.999bn.

Selling prices remained stable and material costs increased year-on-year, the Swiss specialty chemicals company said.

“We expect 2007 to be another good year for top-line growth,” said Jan Secher, chief executive.

“We are fully committed to delivering on our medium term goals with clear focus in 2007 on improving cash flow.”

However, UBS analysts said in a note to clients that operative outperformances came exclusively from lower corporate costs, like the final elimination of restructuring costs, and came earlier than expected.

They added that this would not be a positive for 2007 as it already discounted going forward.

The textiles, leather and paper chemicals division’s operating income fell to Swfr 36m in the fourth quarter from Swfr 38m a year earlier. Sales were Swfr 1m lower at Swfr 570m.

While paper chemicals continued its strong growth, textile chemicals were stable from the same period in 2005 and leather chemicals saw some decline.

The pigments and additives unit’s operating income dropped 51% to Swfr 21m. Sales were up 2.4%, however, at Swfr 467m.

“Despite notably higher volumes, the competitive environment remains a challenge for the industry. Prices remain under pressure. Operating margins were adversely affected by a margin squeeze coupled with a change in the product mix,” the company said.

The masterbatches division reported operating income up 5.8% year-on-year at Swfr 19m on sales 6.5% higher at Swfr 296m.

The functional chemicals unit’s operating income was down 20% at Swfr 60m despite sales growth in all business areas of 6% to Swfr 604m.

Operating income for the life sciences division slumped to Swfr 55m from Swfr 129m with sales dropping Swfr 10m to Swfr 73m.

The company said the business suffered a decline in sales compared with the previous year due to a weakening in demand amid stable prices, coupled with higher raw material costs. Operating profits suffered from lower capacity utilisation rates.

Clariant added that Asia led its growth in 2006, with organic sales rising 7% to Swfr 1.87bn. China remained a key growth market with a sales increase of 20%. India and Turkey also posted double-digit growth rates.

In Europe, sales were up 5% and the company achieved organic growth of 4% in the Americas.

UBS kept its target share price for Clariant at Swfr 15 with a Reduce 2 rating. "We remain cautious on Ciba/Clariant due to their exposure to a weak US dollar, raw materials and slower volumes," the analysts said.

"Also, recent takeover speculation was disqualified by the CEO this morning. Clariant is to stay independent," they added.

The company’s share price fell by 3.33% to Swfr 20.35 at 4:19 GMT in afternoon trading.

($1 = Swfr1.2/€1 = Swfr1.6)

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