Edited: from annual report and “business outlook ”
Clariant says that it achieved an improved operational margin and a solid operating cash flow against the backdrop of a steep decline in demand in the last quarter of that year. However, it believes that its performance is still “lagging behind many of its peers” a position that poses a particular threat to the company in what it says is the “worst and most unpredictable economic environment the industry has seen for decades”. On this basis, it will accelerate its restructuring efforts in order to catch up with its competitors while at the same time making adjustments for declining demand in its markets.
“Many of our markets – most prominently, the US are in deep recession and unlikely to recover within the immediate future. Adverse economic conditions will impact Asia owing to its dependence on exports. Europe will also suffer from the effects of recession, reducing prospects for some of our key customers in such industries as automotive, plastics and construction”, says chief executive officer, Hariolf Kottmann.
“The Middle East and Latin America may show some resilience, but this is unlikely overall to mitigate the negative impact on our top line. In addition, our ability to predict how economic conditions will develop within the next few months or even quarters is very low”, continues Kottmann.
In order to improve and maintain its profitability, competitive position and customer service, it will introduce LeanSigma continuous improvement processes across the entire company. These processes are said will also help to safeguard the company against challenging economic developments in the future.
Individual business outlooks
Deteriorating macro-economic environment
This will continue to hit sectors such as construction, automotive and textiles, directly impacting the masterbatches industry. It will respond with cost reductions and efficiency improvements to bring costs in line with sales volumes and invested capital.
Growing environmental awareness
The trend provides the company with the opportunity to take a leadership position in developing more environmentally friendly products using natural, biodegradable, compostable and recyclable materials.
Positive long-term prospects
Despite the economic downturn, mid- and long-term prospects for the masterbatches industry remain positive and are expected to surpass gross domestic product (GDP) growth.
Pigments and additives
Slowdown in demand set to continue
Demand in Europe and North America has dropped but emerging markets continue to grow steadily.
Slowing demand, especially in automotive and housing markets, will further focus activities on sustaining margins through the continued application of LeanSigma and SG&A cost reductions.
Cost reduction is the key to success
Successfully “right-sizing” the organisation through restructuring, improved efficiency measures and the ability to search out high-value niche products is believed will be the key to surviving the economic downturn.
Textile, leather and paper chemicals
Demand to be impacted
The company states that owing to the worldwide economic slowdown, demand within the textile, leather and paper industries it will continue to suffer.
The downturn is expected to lead to industry consolidation and/or restructuring. There will be a strong drive for further efficiency gains through portfolio rationalisation and improved site networking.
Continued shift of production to emerging markets
Industrialised markets such as the EU and US will see further migration of industries to emerging markets in Asia.
Economic downturn to impact certain industry segments
Some functional markets such as construction, automotive and metal working will be impacted. However, areas not directly affected by consumer spending power, such as agrochemicals and oil services, are expected to be more insulated from the downturn.
Improving lifestyles drive demand
The underlying dynamic of improving lifestyles, especially in developing countries, is driving greater demand for food, beauty and consumer solutions in the key functional markets of industrial and home care, personal care, and crop protection. Meanwhile, economic development and increased mobility in emerging markets is expected to increase overall demand for engineering and aviation solutions.
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Financial highlights: Clariant, year ended 31 December
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Operating Profit (SF m)
Net Profit (SF m)
Total Assets (SF m)
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Clariant is a global speciality chemicals company that operates more than 100 group companies on five continents. Through the acquisition of the British fine chemicals producer, BTP, in early 2000, Clariant also manufactures intermediates and active ingredients for the pharmaceutical and agrochemical industries. Clariant grew from the Sandoz Chemicals division, which was floated on the stock market as a spin-off in the summer of 1995. German based Hoechst's Speciality Chemicals business was integrated in the summer of 1997.
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