Clariant successfully completes restructuring in 2010

Profitability to further improve in 2011

17-Feb-2011 - Switzerland

Clariant announced that 2010 sales totaled CHF 7.120 billion, compared to CHF 6.614 billion in 2009. This represents an increase of 13% in local currency and 8% in Swiss francs.

The double-digit sales growth in local currency was the result of the robust global economic growth supported by restocking activities in parts of the portfolio in the first half of the year. All regions reported double-digit sales growth in local currencies. In the course of the year, demand returned to normal seasonal patterns, with lighter demand during the summer months and a slowdown in industrial production towards the end of the year. Lower idle facility costs, successful price management and lower production costs resulting from the benefits of the restructuring program pushed the gross margin from 23.5% in the year-ago period to 27.9%.

During the reporting period, Clariant continued to focus on reducing its Selling, General & Administration (SG&A) costs. As a percentage of sales, SG&A costs made further progress and decreased substantially from 17.6% to 16.5% in comparison to prior year period. As a result of the improved gross margin and the lower cost base, operating income (EBIT) before exceptional items increased to CHF 696 million, compared to CHF 270 million in the previous year. The corresponding margin rose from 4.1% in 2009 to 9.8%.

This year marked the end of the restructuring program, with all business units contributing to the strong operating profits by reducing their cost levels and optimizing their structures and processes. Restructuring and impairment costs amounted to CHF 331 million, mainly in connection with site closures within the global asset network optimization program (GANO), and a further reduction in headcount. The number of job positions was reduced from 17,536 at year-end 2009 to 16,176. In the reporting period, Clariant returned to a net income of CHF 191 million compared to a net loss of CHF 194 million in the previous year.

Clariant's ability to generate cash remained strong despite a double-digit year-on-year increase in sales volumes. Cash flow from operations reached CHF 642 million, driven by a combination of better operating results and tight management of net working capital.

Clariant further strengthened its balance sheet by increasing its cash position to CHF 1,419 million, compared to CHF 1,140 million in 2009. At the same time, net debt was reduced to CHF 126 million, from CHF 545 million at the end of 2009. The company's gearing (net debt divided by equity) was 7% at the end of 2010, significantly lower than the 29% recorded at the end of 2009.

Outlook 2011

Starting 2011, Clariant shifted its focus on continuous improvement and profitable growth after restructuring has been completed in 2010. While the continuous improvement initiative "Clariant Excellence" launched in 2009 will make the lower cost basis sustainable, the company now focuses on creating value by investing in future profitable growth.

For 2011, Clariant expects global economic growth to continue but at a slower pace than in 2010. Exchange rates of the most important currencies are expected to remain volatile. Growth will mainly come from the emerging markets in Asia/Pacific and Latin America. After remaining momentarily stable in the second half of 2010, commodity prices are expected to rise again in 2011. Clariant expects raw material costs to increase in the high single-digit range.

Clariant expects 2011 sales growth in local currencies in the low single-digit range. Additional benefits from the restructuring measures taken during the last two years will improve the company's cost position, resulting in a positive impact on the operating result. The EBITDA margin before exceptional items is therefore expected to rise above 2010 level.

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