SABIC entrance underpins future strategy, no regrets on Huntsman – Clariant CFO

LONDON (ICIS)–Clariant’s board has no regrets over the failed merger with Huntsman as the actions of a few shareholders leading to the deal’s downfall did not mean management made the wrong decision at the time, according to the company’s CFO this week.

Patrick Jany said the company’s main aim was, and still is, to ensure that its potential is fully reached.

“I think we were totally happy with the idea of the merger, it would have been a great value creator for all shareholders… Now our focus is to make sure the company continues as it is, because we believe we have a strong potential to develop this company, with good capabilities and improving results.”

Jany said that despite the disappointment with the deal’s collapse, the arrival of SABIC on the scene is a great opportunity to continue Clariant’s aim of long-term value creation, adding that SABIC’s commitment to a near-25% stake is proof that the Saudi firm believes in Clariant’s past strategies.

“It’s a great credit to what’s been done before and it opens up a whole new future in terms of business possibilities, in terms of developing the business both on our side and of course on the SABIC side.”

Clariant’s CEO Hariolf Kottmann told reporters present the company’s financial results press conference on Wednesday that SABIC had confirmed to him on numerous occasions that it did not intend on pursuing a complete takeover of Clariant, stressing that the investment was a “strategic” one rather than financial.

Asked what would happen if SABIC was to change its mind, Jany reiterated what Kottmann said but did admit that, because the company continues to be floated on the stock exchange, anyone can buy shares and try take over the company.

That remains a possibility even though Jany said Clariant has a “clear understanding” that SABIC will not pursue that path.

“They have an interest in us being a really focused specialty chemicals company, who, as a shareholder, they get value from. I think that history has always shown that if you try to integrate a specialty chemicals business into a larger company… It doesn’t really work.”

Clariant delayed the release of its strategy update due to be announced on Wednesday as it is working on a new strategy with the input of SABIC. The update’s publication has now been postponed until SABIC receives all regulatory approvals to purchase its 25% stake at the company, expected for July.

Jany stressed that, despite the delay, business will continue as normal.

“I think the business must go on and, as you can see from the results, we are growing and we are innovating in the market. Nothing’s on hold, we always keep working,” he said.

“2017 was a particular year, 2018 will probably be different, but it is certainly going to be a year full of action.”

The CFO was speaking after Clariant released its fourth-quarter and full-year 2017 financial results in Zurich, results which he was very pleased with, especially in the wake of what was a turbulent year for the company.

Jany said he was actually surprised by the performance in the catalyst business, an industry that picked up sooner than expected, although Clariant’s services to the oil and gas industry continued to disappoint on the back of the sector’s weak fundamentals.

Equally disappointing were results in terms of cash flow, which fell by 34% in 2017 compared to the previous year to Swiss francs (Swfr) 428m ($462m).

“Clearly, cash flow is not where we would ideally like it to be, and we are certainly not satisfied by the result,” said Jany, who pointed to one-off costs as the main driver of the weak figure.

“The whole merger exercise and the defence against White Tale clearly cost a lot of money. We guided for above [Swfr] 50m for costs associated to that, which makes a difference.”

Tax reforms in the US also had a negative impact, Jany explained, with the company guiding for a one-off negative impact of approximately Swfr45m.

The economic environment in Brazil weighed down on certain segments in Latin America although Jany said he was confident the situation is set to improve from this point on.

“I think [the recovery] is happening already. During Q3 [third quarter 2017] you had the first signs that [the crisis] was slowing down and reaching the end of the wave. In Q4, performance was much better,” he said.

“It’s really coming up from the lows. It’s still compared to a low base but it is going up. It’s a good indication for 2018.”

Another emerging market where Clariant has a strong presence is India, where economic reforms are, according to Jany, starting to pay off.

The Indian government introduced in 2017 the goods and services tax (GST), equivalent to the value added tax (VAT) in other countries, as well as monetary reforms to fight tax evasion and corruption.

“India is a bigmarket and is important to us. We see a lot of potential. [The country] has had its bumpy rides with new VAT laws which depressed demand a bit. But in the beginning of the year demand is [coming] back,” concluded Jany.

($1 = Swfr0.93)

Pictured: Clariant CFO Patrick Jany
Picture source: Clariant

Interview article by Niall Swan