InterviewClariant expects higher 2013 profitability, focus is on growth

14 February 2013 13:03  [Source: ICIS news]

LONDON (ICIS)--Clariant expects higher sales and profitability in 2013 compared with last year, through a focus on growth and continuous cost efficiency, the Switzerland-headquartered specialties group’s CFO said on Thursday.

Patrick Jany said Clariant has successfully repositioned its portfolio in 2011 and 2012, and will now focus on growing its seven core businesses and a continuous cost discipline.

“This will lead to further top-line growth in local currencies and an improved profitability in 2013,” he added.

“We look forward to increased profitability due to those businesses being accretive, but also to the end of the Sud-Chemie integration which will give us additional earnings through further savings,” Jany said. Clariant completed its acquisition of Sud-Chemie in April 2011.

As part of a strategy to improve its competitive position, Clariant has been looking to divest its Leather, Detergents and Intermediates, Paper Specialties, Emulsions, and Textile Chemicals business units.

In December last year, Clariant agreed to sell the Textile Chemicals, Paper Specialties and Emulsions Businesses to SK Capital for about Swiss francs (Swfr) 502m ($546m, €408m). Private equity firm SK Capital will pay about 6.3 times estimated 2012 earnings before interest, tax, depreciation and amortisation (EBITDA) for the businesses.

“The ones remaining now being processed in a second wave in 2013 are the Detergents and Intermediates business and the Leather business.

"Currently we are preparing the data, carving out these two businesses from the rest of our operations and we will be then in the market looking at the potential interested parties in the second quarter/third quarter, which is why we expect this phase of divestments to be concluded by year-end 2013,” Jany said, adding that the proceeds of the divestments will be first used to reduce debt.

Earlier on Thursday, Clariant announced that its fourth-quarter 2012 net profit jumped almost tenfold to Swfr99m as it generated better margins compared with the previous corresponding period.

Sales from continuing operations for the three months to December 2012 increased by 1% year on year to Swfr1.51bn, while EBITDA before exceptional items grew by 6% to Swfr225m, with margin rising to 14.9% from 14.3% in the December quarter of 2011.

Jany said the growth in the EBITDA margin had been driven by a good performance in Clariant’s Catalysis & Energy and Oil & Mining Services business units, both growing steeply in a year-on-year comparison.

“Like in 2012, we expect growth in 2013 to be driven by the Catalysis & Energy and Oil & Mining Services business units but complemented by our biggest unit, Industrial and Consumer Specialties, particularly by the Personal Care unit which grew tremendously last year, which has been able to offset some weakness in the industrial markets like coatings and construction.

“This of course will be a major element to reach our 2015 targets [of an EBITDA margin of above 17% and a return on invested capital (ROIC) above peer group average],” Jany said.

From a geographical point of view, growth in the fourth quarter 2012 also came from strong Latin America and Middle East business, Jany added.

The CFO said Clariant has also benefited from lower restructuring expenses compared with the previous year, with the group’s 'Global Asset Network Optimization' (GANO) project, announced in 2009, which saw a large number of site closures and job cuts, implemented to address overcapacities and reduce costs, coming to an end.

Meanwhile, the integration of Sud-Chemie into Clariant’s network has progressed well, Jany said. He stated the integration represents around two thirds of the restructuring costs the group currently still has.

“We have implemented 70% of the [integration] measures by now, so therefore the cost of those elements are down as well,” Jany said.

For the whole of 2012, however, Clariant recorded a 5.2% decline in net profit, with EBITDA margins falling to 13.3% from 15.0%, it said. Clariant added that sales from continuing operations in 2012 were up 8% year on year to Swfr6.04bn, but operating profit declined 8% to Swfr396m.

Looking to growth in 2013, Jany said Clariant would continue to look in the market for small acquisitions which would strategically fit the group's focus.

“To support the growth of our core business units, we are always looking at other acquisitions. I think on this our policy is unchanged, we have clearly specified that we would always be looking for smaller add-ons.

“Nothing significant but smaller add-ons that would allow our core businesses to close the technological gap and close the geographical gap. Particularly in emerging markets. If there are projects to improve our footprint in countries like China, India, Brazil, those projects will certainly have a higher priority than external growth in Europe for instance.”

($1 = Swfr0.92, €1 = Swfr1.23)

By: Franco Capaldo
+44 (0)20 8652 3214

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