Clariant breaks through price barrier in 2008 - CEO

29 July 2008 16:42  [Source: ICIS news]

By Mark Watts

 

LONDON (ICIS news)--Clariant on Tuesday said it had seen a “paradigm shift” in 2008 where significant prices hikes could be pushed through without the risk of losing customers.

 

The Swiss specialty chemicals company achieved price increases of 5% in the first half of the year which it said fully compensated for the 11% rise in raw materials costs.

 

CEO Jan Secher said Clariant had broken through a pricing barrier after last year when customers rejected price rises despite surging raw material costs, but there was now no logic to resisting.

 

The company only achieved price increases of 1% in the first nine months of 2007, far below the approximate 30% it had aimed for.

 

Clariant said it would continue to pursue a strategy of raising prices rather than increasing volumes to maintain margins, and expected pricing-driven sales growth to continue into the second half of 2008.

 

The company said the recovery was partly caused by the ability to achieve higher prices in Asia, especially China, due to production shortages.

 

“There is a change in dynamics in Asia. Shortages are more structural than short term…the [effect of the] Olympics is just a blip in the curve,” said Secher.

 

He said the Chinese market was becoming much more competitive as local producers’ costs have risen due to an overhaul of the VAT rebate system and increasingly stringent environmental standards.

 

Clariant increased its first half operating margin before exceptionals to 7.3%, compared with 6.8% in first half 2007.

 

The company earlier reported a 42% drop in second-quarter net profits from continuing operations due to negative currency effects and higher restructuring and impairment costs. 

 

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By: Mark Watts
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