Clariant significantly improves cash flow

Full-year 2015 sales rose by 3% in local currencies to CHF5.807bn
EBITDA margin before exceptional items rose 50 basis points to 14.7%
Operating cash flow improved significantly to CHF502M
Net result from continuing operations was at CHF227M, comparable with previous year
2016 outlook: continued progression in profitability and cash flow generation despite increasingly challenging economic environment

"Despite the challenging economic environment throughout the year, we continued to improve our performance again and have shown resilience," said CEO Hariolf Kottmann. "Clariant has significantly improved its cash flow and expanded its EBITDA margin on the back of a good performance of the Business Areas Care Chemicals, Catalysis and Natural Resources. With this positive development we have been able to offset the negative impact of the stronger Swiss franc and deliver a net result comparable to 2014. For 2016, in spite of the economic environment anticipated to become even more demanding, we want to further progress in profitability and cash flow generation by continuously launching new innovative solutions particularly in our higher margin Business Areas.”

Full-year 2015 – significant improvement in cash flow generation
Clariant has announced full-year 2015 sales of CHF5.807bn compared to CHF6.116bnin 2014. This corresponds to a 3% growth in local currencies mainly driven by higher volumes. Due to the strong currency headwind, sales in Swiss francs decreased by 5%.
Growth in the Americas was good, with sales in local currencies up 19% in Latin America and 4% in North America. Europe was 1% lower in local currencies impacted by a weaker end-market demand.
Lower growth came from the regions Asia Pacific and Middle East & Africa. Sales in Asia Pacific decreased by 1% in local currencies and were affected by a weak demand in China, which could not be compensated by the stronger demand of smaller economies in Asia. In the Middle East & Africa region, sales were down 6% yr-on-yr in local currencies.
The improved business performance stemmed primarily from higher growth in the Business Areas Care Chemicals, Catalysis and Natural Resources. In Care Chemicals sales in local currencies were up 4%, reaching CHF1.445bn. Adjusted for the portfolio change, on a like-for-like basis, growth in local currency was 6% yr-on-yr.
Sales in Catalysis rose by 4% in local currencies to CHF704M fuelled by strong growth in Petrochemicals and Syngas. Sales growth yr-on-yr was impacted by the divestment of the Energy Storage business in February 2015. On a like-for-like basis sales in Catalysis have grown by 7% yr-on-yr.
Despite the difficult market environment, sales in Natural Resources grew by 4% in local currencies reaching sales of CHF1.217bn primarily driven by the Oil and Mining Services business.
In Plastics & Coatings, sales in local currencies grew slightly by 1% to CHF2.441bn, despite the very challenging environment in Pigments resulting from the weak demand in Europe and China.
The gross margin of 30.8% was above the previous year’s level of 29.0%, benefiting from a positive mix effect, lower raw material costs and reclassification of costs to SG&A.
The EBITDA before exceptional items from continuing operations reached CHF 853 million up 8 % in local currencies yr-on-yr resulting from a favourable volume mix.
The EBITDA b.e.i. margin increased to 14.7% by 50 basis points above the previous year’s level. The margin expansion came predominantly from the Business Areas Care Chemicals, Catalysis, as well as Natural Resources, which all significantly increased the EBITDA margins throughout 2015 compared to the previous year. In Plastics & Coatings, margins decreased due to the increasing challenging markets especially in Pigments throughout 2015.
Net income from continuing operations amounted to CHF227M comparable to CHF235M in the previous year. The lower tax expense could offset the higher financial costs, as well as the lower gains from divestments versus 2014. The tax rate in 2015 was 24.3%, significantly lower than the previous year.
Operating cash flow rose significantly to CHF502M vs CHF334M yr-on-yr stemming from a sustainable net working capital management.
Net debt at CHF1.312bn was slightly higher compared to the CHF1.263bn recorded at year-end 2014.

Despite the more difficult economic environment as well as the significant appreciation of the Swiss franc, the solid performance allows the board of directors to propose to the Annual General Meeting a dividend of CHF0.40/share at the same level as in the previous year following an 11 % dividend increase the year earlier. The distribution is proposed to be made from the capital contribution reserve that is exempt from Swiss withholding tax.

Fourth quarter 2015 – More margin expansion
In the fourth quarter of 2015, Clariant sales grew by 4% in local currency to CHF1.526bn. Due to the strong currency headwind, sales decreased by 4% in Swiss francs. Volumes were up 4% yr-on-yr.
In Q4, growth stemmed from the higher growth business areas, primarily Catalysis and Natural Resources. Care Chemicals reported sales of CHF370M up only 3% in local currencies impacted by a very weak de-icing business due to the mild weather in Q4. Catalysis sales in local currencies grew by 6% to CHF241M yr-onyr. Sales in the Natural Resources Business Area were up 7% in local currencies to CHF329M and sales in Plastics & Coatings were CHF586M, an increase of 3% in local currencies.
On a regional level, Latin America achieved double-digit growth in local currencies of 19%. North America increased sales by 2% in local currency, Europe was up 1% in local currency, while Asia was down 1% yr-on-yr.
The gross margin was higher yr-on-yr, at 30% compared to 28.8% thanks to a better mix effect, lower raw material costs and reclassification of costs to SG&A. The EBITDA margin before exceptional items expanded to 15.0% from 14.6% in the Q4 of 2014 primarily driven by Catalysis and Natural Resources.
Net income from continuing operations was CHF 24 million. This is above the previous year figure on a like-for-like basis adjusting for the one-time book gain from disposals relating to land sales in India in Q4 2014.
Operating cash flow amounted to CHF306M, compared to CHF321M yr-on-yr.

Outlook 2016 – to progress EBITDA margin and operating cash flow
Despite the difficult environment in 2015, Clariant could demonstrate its ability to sustainably improve its business performance by continuously launching new innovative products and solutions particularly in its higher margin Business Areas Care Chemicals, Catalysis and Natural Resources.
Clariant expects the uncertain environment, characterised by a high volatility in commodity prices and currencies, to further deteriorate. In emerging markets, we anticipate the economic environment to become more challenging and with increased volatility; we expect moderate growth in the USA, while growth in Europe is expected to remain stable but weak.
For 2016, in spite of the increasingly challenging economic environment, Clariant is confident to achieve growth in local currencies, as well as progression in operating cash flow and EBITDA margin before exceptional items.
Clariant confirms its mid-term target of reaching a position in the top tier of the speciality 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.