InterviewClariant's masterbatches business plans further expansions

20 February 2013 17:01  [Source: ICIS news]

LONDON (ICIS)--Clariant's Masterbatches segment plans to further expand in high-growth markets in the Asia-Pacific, Middle East and eastern Europe, as part of a strategy to improve its financial performance, Hans Bohnen, the head of the business unit said on Wednesday.

The business unit will also continue to improve its cost structure, particularly in Europe, and further shift its product portfolio towards high-end applications, Bohnen added.

Over the last two years, Switzerland-based Clariant's Masterbatches business has invested Swiss franc (Swfr) 60m ($65m, €48m) into its expansion. Around 70% of that went on growth into emerging markets, while 30% was more for the segment's optimisation, largely in Europe, he said.

“We have started to look into Asia, we have started to look into the [India, Middle East, Africa] region, and we have looked into the Latin region. In China we already have a very strong production footprint. We have four plants in Beijing, Guangzhou, Shanghai and Taipei, which were all built in the mid-2000’s – they are new and have room for expansion.

“Outside of China there are very attractive regions in the Asia-Pacific region, such as Indonesia. We took the decision to build a new masterbatches site in Indonesia at our existing Clariant site in Tangeran. This will be a substantial investment that will double our capacity in Indonesia and provide us with the opportunity to expand within the next 5-10 years.”

“In the Middle East region we have invested heavily into our Saudi Arabia operations. We have already a strong footprint in Riyadh – we doubled the floorspace by buying the site that was located next to us, which significantly increases our additives and colour volumes," Bohnen added.

Clariant has also invested in order to expand production in Turkey to supply parts of the Middle East, and also in Mexico to serve the domestic market in Latin America.

In addition, the Masterbatches business is looking to lift the performance of its European operations by expanding in the central and eastern European (CEE) economies.

"We have started already at the end of 2011 and implemented most of this during 2012, and believe we will start to see the benefits of this in 2013. The entire production network in Europe we started to optimise in the past 18 months," he added.

For the first quarter of 2013, Masterbatches expects the ground-breaking of a new site in Poland that will also serve as an operational centre for other business units. 

He said: “In Europe, the group wants to expand in the CEE economies – the growth rates there are still interesting for us, and when you talk about growth in Europe this is where you have to be.

"That is why we took the decision to build a new plant in Poland, which will double our capacity in the country – the ground-breaking will begin in March and plans to be onstream in the first quarter [of] 2014. We will also move some of the product from western Europe into central Europe to take advantage of lower production costs.”

“For us its a perfect location because we are very close to our customers. We also build not just to put in existing equipment but also for room for expansion within the next 5, 6 [or] 7 years," Bohnen said.

Clariant has also invested in Russia, following an agreement to acquire the assets of Euromaster – a limited liability company based in the country specialising in the manufacture of masterbatches – in December 2009 for an undisclosed sum.

The transaction covered Euromaster's fixed assets, including land, buildings and equipment, as well as current assets such as inventory.

Bohnen said: “We invested a lot into this plant and we also move equipment from western Europe [into] Russia. You see a shift of assets from western Europe to eastern Europe and into Russia to capture the market that is growing there.

“We also need to invest due to the consolidation of certain products into our existing technologies in the western European sites. In order to increase productivity, some of the investment goes into or bigger sites in order to ensure we have economies of scope with our latest technologies.”

During the fourth quarter of 2012, Clariant’s Masterbatches business unit saw sales fall by 1% year on year in local currencies to Swfr250m, while earnings before interest, tax, depreciation and amortisation (EBITDA) before exceptional items fell by 2% to Swfr23m. 

Its EBITDA margin was flat year on year at 9.2%, as the effect of slightly lower volumes was compensated by cost savings and the execution of continuous improvement measures.

The group said sales were higher in Latin America but unchanged in Europe, where weakness persisted in Germany and southern Europe – partially offset, however, by solid growth in the UK, Poland, and the Nordic countries.

“In contrast to the other regions, Asia-Pacific, North America and Middle East and Africa experienced a slight year-on-year decline in the fourth quarter,” Clariant said.

“Although the market environment was stable overall, Masterbatches noticed a more pronounced seasonal weakness than usual at the end of 2012,” it added.

For the full year, sales fell by 1% in local currencies to Swfr1.12bn from 2011, while EBITDA before exceptional items was flat at Swfr132m.

Bohnen said the group witnessed a good first half of the year, with Europe even showing encouraging developments, albeit on a lower level than in years before.

He said: "We also had very good business developments in North America and Asia and also in the IMEA region.

"The second half was weaker, particularly in Europe, which pulled down the business unit to some extent in the fourth quarter.”

The business unit also saw a weaker fourth quarter than expected in North America.

However, Bohnen said improvements in the Masterbatches unit's performance can be seen at the beginning of 2013.

"Overall the fourth quarter was not really encouraging, but we see now in the first month of this year a clear upward trend. We are getting back to the volumes and demand seen in the first quarter of 2012," he said.

($1 = Swfr0.92, €1 = Swfr1.24)

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

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