Clariant eyes strong first-half 2022 despite headwinds

Morgan Condon

20-May-2022

LONDON (ICIS)–Clariant is making gains towards its 2025 financial targets, driven by a strong first half of 2022, CEO Conrad Keijzer asserted at its delayed 2021 financial results announcement on Thursday.

Keijzer stated that the Swiss firm expects to achieve strong local currency sales growth in the first half of 2022 and is aiming to improve margins on earnings before interest, tax, depreciation, and amortisation (EBITDA).

The long-awaited results came following the conclusion of an investigation into Clariant’s accounting practice, with a restatement of full-year results for 2020 and 2021.

He conceded that the ambition to grow the EBITDA margin is not without risk due to the continued inflationary and volatile environment and resulting pressures from the war in Ukraine.

“Actually if you look at the start of the year, we see a strong first quarter, and we see that momentum continue into the second quarter,” said Keijzer in an analyst call following the publication of the results.

“I think it is fair to say that the second half – for all of us in the chemicals industry – has more challenges than the first half.”

The first quarter of 2022 is tipped to have stronger top-line growth than the fourth quarter of 2021, although a 21% increase in raw materials costs, with increasing energy prices and logistics constraints, have acted as headwinds.

There has been some slowdown in China in the second quarter in line with lockdowns in the country, and sentiment has also softened in Europe, particularly Germany.

The firm is yet to disclose financial details for the first quarter 2022 results ahead of the announcement date, scheduled for 15 June.

Keijzer indicated that the current economic backdrop will not have the same rebound effect that followed the spread of COVID-19 in late 2020 and into 2021.

In the second half of 2021, markets experienced restocking as high demand drove producers to replenish inventories, but a repetition of this is not expected for the same period this year.

CLARIANT TRANSFORMATION
The company continues to balance its transformation into a purely specialty player with the demands of its shareholders.

“We’re selling mature businesses like healthcare, packaging, masterbatches, pigments… we have concluded this [and] we have shared the success of the transformation with the shareholders [with an] extraordinary dividend,” said outgoing CFO Stephan Lynen.

“I think it’s a spot on remark [citing Keijzer] that to bring the businesses to the full potential also requires organic investments, both on acquisitions and restructuring. This has some expenses, which we have to finance and therefore income which we’re generating is also used for that. However, we’re still paying a dividend, which is definitely very noteworthy also to peer comparisons.”

Part of this transition includes Clariant’s so-called right-sizing programme, which remains on track, with efficiency measures leading to a saving of Swiss francs (Swfr) 17m in the fourth quarter of 2021.

One investment highlighted in the analysts’ call included the Swfr60m Chinese site in Daya Bay, producing flame-retardant materials for the country’s electric vehicle market as part of Clariant’s ‘made in China for China’ strategy, with start-up expected in 2023.

Clariant’s portfolio pivot demonstrates that the company has identified that the best possible growth is with industries that hold sustainability as an essential component that will continue to drive growth.

Focus article by Morgan Condon

Thumbnail picture: Clariant’s office building in Pratteln, Switzerland (Source: Clariant)

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