Clariant increases operating cash flow whilst growing sales and profitability

"Clariant considerably expanded its operating cash flow in 2016 while reporting sales growth and profitability improvement,” said CEO Hariolf Kottmann. "Our good business performance was primarily achieved by means of a continued shift to high margin specialities, the impact of the differentiated steering in Plastics & Coatings, as well as good cost management. For 2017, we are confident that we will achieve our targets, ie growth in local currency, progression in operating cash flow, absolute EBITDA and EBITDA margin before exceptional items in spite of a continued challenging economic environment.”
Clariant, a world leader in specialIty chemicals, has announced full year 2016 sales of CHF5.847bn compared to CHF5.807bn in 2015. This corresponds to a 2% growth in local currency driven by higher volumes.
For the full year, local currency growth was strongest in Asia and the Middle East & Africa at 4%. In Asia the strong growth was mainly supported by China and India. In North America and Europe sales growth was 2%. Latin America grew at a level of 1%.
The improved sales performance for the full year resulted from strong growth in Care Chemicals and Plastics & Coatings. In Care Chemicals, sales in local currency increased by 5% to CHF1465M. In Plastics & Coatings, sales in local currency progressed by 4% to CHF2525M. The good sales performance in Plastics & Coatings was seen across all regions.
Despite the difficult market environment, sales in Natural Resources grew by 2% in local currency and amounted to CHF1184M. There was a decline in the Oil and Mining Services business, which was compensated by acquisitions and the continued growth in Functional Minerals. Sales in Catalysis declined by 8% in local currency, reaching CHF673M due to portfolio mix effects and lower demand in Asia and North America.
EBITDA before exceptional items increased by 4% in Swiss francs and reached CHF887M, compared to CHF853M in the previous year. The profitability improvement was driven by Care Chemicals and Plastics & Coatings.
The corresponding EBITDA margin before exceptional items of 15.2% was significantly above the previous year’s level of 14.7% mostly due to a sharp increase in Plastics & Coatings. Margins in Care Chemicals and Natural Resources were stable and both delivered at the higher end of the respective margin guidance. As anticipated, Catalysis was below the previous year’s level largely due to lower demand in Asia and North America.
Net income climbed to CHF263M from CHF227M in the previous year. The 16% increase yr-on-yr resulted from the continued expansion in absolute EBITDA, lower finance costs and an improvement in the tax rate.
Operating cash flow rose significantly by 29% to CHF646M compared to CHF502M yr-on-yr. This improvement is primarily attributable to higher profit, lower cash out for exceptional items and lower income taxes paid.
Net debt was CHF1.540bn compared to CHF1.312bn recorded at year-end 2015 as a result of the bolt-on acquisitions in 2016.
The continued improvement in performance that Clariant achieved despite the difficult economic environment, allows the Board of Directors to propose a dividend of CHF0.45/share to the Annual General Meeting. This sum reflects an increase of 12.5% yr-on-yr. The distribution is proposed to be made from the capital contribution reserve which is exempt from Swiss withholding tax.

Fourth Quarter 2016 – Further progress in profitability
In the fourth quarter of 2016, sales grew by 3% in local currency to CHF1.548bn. Excluding acquisition effects in the Oil and Mining Services business, yr-on-yr sales were stable. On a regional level, sales grew at 6% in Europe driven by volume increases. In the Middle East & Africa, sales were up 7% in local currency. Asia grew at 4% in local currency with further improvement in China. Latin America saw a decline of 17% led by a weakening demand in Brazil, while North America advanced by 14% in local currency as a result of the bolt-on acquisitions.

Care Chemicals reported sales of CHF378M with local currency sales growth of 5%. In Plastics & Coatings, sales rose by 3% in local currency to CHF594M, with a strong sales performance in each of the three businesses Masterbatches, Pigments and Additives. Sales in Natural Resources were CHF345M, up 7% in local currency. This growth was driven by Functional Minerals and acquisitions in the Oil and Mining Services business. Catalysis sales were 6% lower in local currency to CHF231M, against a high comparable base in the previous year.
EBITDA before exceptional items rose by 3% in Swiss francs to CHF235M driven by the differentiated steering in Plastics & Coatings. As a result, the EBITDA margin before exceptional items increased to 15.2% in the fourth quarter.

Outlook 2017 – Continued progression in profitability and operating cash flow generation
Clariant expects the uncertain environment, characterised by a high volatility in commodity prices, currencies as well as political uncertainties, to continue. In emerging markets, we anticipate the economic environment to remain challenging and volatile; we expect moderate growth in the USA, while growth in Europe is expected to remain stable.
For 2017, in spite of a continued challenging economic environment, Clariant is confident to be able to achieve growth in local currency, as well as progression in operating cash flow, absolute EBITDA and EBITDA margin before exceptional items.
Clariant confirms its mid-term target of reaching a position in the top tier of the specialty chemicals industry. This corresponds to an EBITDA margin before exceptional items in the range of 16% to 19% and a return on invested capital (ROIC) above the peer group average.

Full Year
Sales in the Plastics & Coatings Business Area increased by 4% in local currency and 3% in Swiss francs for the full year of 2016.
In Masterbatches, sales increased across all regions. Europe, North America, Latin America, Asia and India contributed most to the growth. Across the segments, the areas of Packaging, Fibers, Engineered Polymers, Additives and Medical Specialties performed particularly well.
In Pigments, all regions had a good sales performance with particular strength in Asia, mainly driven by India and China. Predominantly Plastic Applications, as well as Special Applications contributed to the good development year-on-year.
Additives achieved sales growth across all regions, mainly driven by strong demand in Europe and Asia. The good sales development was supported by all business lines.
The EBITDA before exceptional items grew significantly by 17% in local currency to CHF368M yr-on-yr. This rise largely reflects a better product mix, a higher capacity utilisation and the effect of the differentiated business steering implemented at the beginning of 2016.

Fourth Quarter
Sales in the Plastics & Coatings Business Area rose by 3% in local currency and 1% in Swiss francs yr-on-yr.
In Masterbatches, there was good sales performance in Europe, North America and Asia. In Pigments, growth was most pronounced in Asia and the Middle East & Africa. Additives sales also advanced in the fourth quarter of 2016 reflecting a better development in Europe, North America and Latin America.
The EBITDA before exceptional items grew significantly by 27% in local currency and increased to CHF68M in the fourth quarter compared to a weak quarter in the previous year.
Plastics & Coatings continues to develop customised solutions and products for the needs of its end markets. These offerings in combination with the focus on the differentiated business steering are expected to further enhance growth possibilities and overall performance in the businesses.