Switzerland : Clariant Textile, Leather & Paper Chemicals sales decline

Clariant announced a rise in 9-month sales with growth of 4% in local currencies and 6% in Swiss Francs, compared to the first tthree quarters of 2006. In absolute terms, sales rose to CHF 6.447 billion from CHF 6.090 billion a year earlier.
- Sales up 4% in local currency and 6% in Swiss Francs
- Operating cash flow almost doubled compared to the first nine months 2006 and reaches 320 million Swiss Francs
- Net income from continuing operations increased to 129 million Swiss Francs
- Profitability impacted by rising raw material and energy costs as well as unfavorable currency exchange rates
- Price increases could not offset unfavorable raw material cost development - expected full year 2007 EBIT around CHF 530 million
- Strategy implementation gathering speed:
• Site network optimization on track - 120 million Swiss Francs restructuring costs booked in the third quarter
• Pigments & Additives Division adopts cost leadership strategy
• Company adjusts operational structure in order to accelerate execution - as a consequence approximately 100 headcounts at Headquarters to be cut
- Pigments & Additives, Functional Chemicals and Textile, Leather & Paper Chemicals divisions are reviewing strategic options for selective units
A raw material cost increase of 4%, higher energy costs and unfavorable currency exchange effects resulted in enduring pressure on the gross profit that could not be compensated by 1% price increase.The gross margin decreased to 29.6% from 31.2% in the previous year. In particular, the Functional Chemicals Division was impacted by these adverse effects.

The encouraging decrease of SG&A expenses to 20.9 % of total sales from 21.5% in the previous year helped mitigate the impact of these unfavorable developments on operating income before exceptionals that declined to CHF 417 million from CHF 458 million (margin declined to 6.5% from 7.5%). The net income from continuing operations rose to CHF 129 million from CHF 108 million in the first 9 months of 2006.
Continuous demand for all division but slowdown in third quarter There was good demand for Clariant products with a retreating momentum in the third quarter and a differentiated development across businesses.
Some parts of the business – e.g. Coatings and Crop Protection – showed favorable volume increases whereas others – e.g. the Leather business – were challenged by declining demand. Also, the regional sales split showed a mixed picture. Europe remained stable, whereas Asia overall showed good growth with some slowdown the third quarter, in particular in China and India. Sales in the USA were more resilient.
Price increase initiatives across all divisions have started bearing fruit. In particular the divisions Pigments & Additives as well as Textile, Leather and Paper Chemicals managed to resist further price pressure. These efforts were accompanied by a negative impact on volume as a consequence of a strong focus on qualitative growth.
Nevertheless, the increasing momentum in pricing – in particular in the third quarter – could not offset rising raw material and energy costs. Only the Masterbatches Division was able to offset rising raw material and energy costs.