Switzerland's Clariant set for leaner, more flexible future - CEO

17 February 2009 11:13  [Source: ICIS news]

By John Baker

ZURICH (ICIS news)--Swiss speciality chemicals producer Clariant is shifting this year to a mode of continuous improvement, new CEO Hariolf Kottmann said on Tuesday at the company’s annual press conference.

“In March we will launch a programme – Clariant Excellence – that will bring all processes in our company under a stringent lean sigma regime,” Kottmann said on the day the company revealed a €140m ($179m) net loss for the fourth quarter. 

In view of the current economic conditions, he added: “In 2009 and 2010 we will focus on cash generation, cost cutting and complexity reduction.

"Clariant must become much leaner and more flexible than today, in order to react faster to a constantly changing market environment – or even anticipate some of these changes.”

Clariant could maintain cash generation in a period of declining volumes by using two levers, Kottmann said. The company was cutting capital expenditure sharply and managing net working capital, paying close attention to raw materials purchasing and production planning to minimise inventory.

Capex was cut back from October and would not be considered for increase again until the second quarter, depending on market conditions, he said.

On inventory, Kottmann added, Clariant had assembled a team of 40 to lead a global project on working capital reduction. The effects of these measures were already being noticed in the first six months, he said.

To cut costs, Clariant would focus on reducing selling, general and administrative (SG&A) costs, as “our cost base does not reflect the need of a company of Clariant’s size. Headcount reduction is a fast way to decrease our costs… and speed is particularly vital in a period of economic slowdown”, Kottmann said. 

By the end of 2009 employment would be reduced to 19,000 from a level of 20,100 at the end 2008, he said, adding that Clariant is ready to take further steps in headcount reduction should the economic environment not improve, “which in my personal opinion is very likely”.

Patrick Jany, Clariant CFO, said that the first six weeks of 2009 had seen demand volumes continue at the same depressed level as in the fourth quarter of 2008, with no signs of improvement.

However, he said that Clariant expected margins to improve in the first quarter as it was focusing on maintaining price levels while benefiting from falling raw material costs. 

Fourth-quarter prices for Clariant’s products increased at a greater rate than those for raw materials, according to Jany, who added that the company believed raw material prices peaked in the third quarter of 2008.

Clariant is confident it can still hit its key target on return on invested capital (ROIC) in 2010 of being above industry average, Jany said. ROIC in 2009 was 9%, below the industry average level of 10.3% (measured in 2007). The company trails the likes of Rhodia, BASF, AkzoNobel, LANXESS and Dow Chemical.

($1 = €0.78)

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By: John Baker
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