Edited: from annual report 2008 and “business outlook 2009”
Clariant says that in 2008 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 this environment, the company says that it will adapt its structures to the economic situation by “decisively downsizing the company and reducing expenditure”, in particular secretarial, general and administration (SG&A) costs. It will significantly decrease personnel costs and further reduce its workforce by an additional 1,000 positions on top of the approximate 2,200 reduction announced in 2006.
In order to finance its restructuring activities, its focus in 2009 will be on cash generation as loans are either not available or not affordable in the current financial crisis.
“We can neither predict how serious the global economic crisis will be nor how long it will last. However, we are preparing ourselves for challenging times ahead by focusing on cash generation, decreasing costs and reducing complexity”, says 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
Masterbatches
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, albeit at a slower pace than during the first six months of 2008.
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, particularly in the first half of 2009.
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.
Raw material prices to decline
Having risen sharply in 2008, industry-wide raw material prices are likely to soften in 2009.
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.
Functional chemicals
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.
Raw material prices are expected to soften in most areas
Cost cutting through performance improvement initiatives will accelerate in 2009 to maintain margins.
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.
Please see Interview: Clariant mulls future of textile and leather units on ICIS news
ICIS Chemical Business magazine has unveiled the ICIS Top 100 Chemical Companies, with rankings based on 2008 sales.
A PDF of the ICIS Top 100 Chemical Companies is available for download on ICIS connect.
See the article and analysis of the ICIS Top 100 on ICIS news.
Financial highlights: Clariant, year ended 31 December
|
|
2008 |
2007 |
2006 |
2005 |
2004 |
|
Sales (SF m) |
8,071 |
8,533 |
8,100 |
7,728 |
8,530 |
|
Operating Profit (SF m) |
530 |
539 |
592 |
533 |
636 |
|
Net Profit (SF m) |
-37 |
5 |
-78 |
192 |
159 |
|
Total Assets (SF m) |
5,946 |
7,285 |
7,188 |
7,180 |
8,100 |
|
Diluted earnings per share (SF) |
-0.16 |
0.44 |
0.54 |
1.12 |
-- |
|
Number of Employees |
20,102 |
20,931 |
21,748 |
22,132 |
23,383 |
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