Citigroup lowers Swiss Clariant's 2008 outlook

18 February 2008 14:18  [Source: ICIS news]

LONDON (ICIS news)--Clariant is unlikely to achieve its 2008 outlook which forecast higher profits for the year, Citigroup said on Monday.

 

“Given the macro headwinds, the delayed impact of restructuring actions and inadequate pricing power, we believe this is unlikely,” the bank’s analysts said.

 

The company has downgraded the Swiss specialty chemicals company's 2008 estimated earnings before tax by 4% to Swiss francs (Swfr) 478m ($435m/€367).

 

Citigroup said demand for Clariant’s products was tied to economic growth and that high raw material costs were going to impact the company’s financial goals.

 

“Management intends to offset the sharp increase in raw materials through pricing actions. We remain sceptical that this is achievable,” it added.

 

“The company’s products simply lack the pricing power necessary to pass higher costs along quickly.”

 

The analysts said Clariant’s cost cutting efforts have lacked results and that they should only begin to yield benefits in late 2008.

 

The group was also going to be impacted by the exchange rate as 45% of costs are denominated in dollars, it added.

 

Citigroup maintained its hold rating on the company and gave its shares a target price of Sfr9.50. Clariant’s shares were up 0.6% on the Swiss Exchange to Swfr9.05.

 

($1 = €0.68/Swfr1.1)

By: Lucy Craymer
+44 20 8652 3214

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