A change in strategy for its plastics-related businesses helped Clariant International Ltd. raise its sales by 40 million Swiss francs to CHF 5.847 billion (5.5 billion euros), or a 2 percent increase in local currency terms. EBITDA before exceptional items increased by 4 percent in Swiss francs and reached CHF 887m (834 million euros).
CEO Hariolf Kottmann said: “Our good business performance was primarily achieved by means of a continued shift to high margin specialties, the impact of the differentiated steering in Plastics & Coatings as well as good cost management.
From January 2016, Clariant started a separate subsidiary for Plastics & Coatings which is now “steered” to growth in absolute profit (EBITDA) and cash generation. All of Clariant’s other business areas continue to focus on growth in EBITDA margin.
Plastics & Coatings is the group’s largest segment and accounted for 43% of group sales in 2016. But its profit margin has underperformed Clariant’s other business areas for some years.
The Plastics & Coatings business area includes masterbatches, additives and pigments. Sales in local currencies increased by 4 percent in 2016 to CHF 2.525bn (2.37 billion euros) due to a good sales performance in all regions.
The EBITDA before exceptionals in Plastics & Coatings grew by 18 percent in Swiss francs to CHF 368m (346 million euros) in 2016. “This rise largely reflects a better product mix, higher capacity utilization, and the positive effect of the differentiated business steering, implemented at the beginning of 2016,” said Kottmann.
He denied speculation that the separation of the Plastics & Coatings business area had been done to prepare it for a sell-off, so Clariant could purchase a higher-margin business.
He told a meeting of financial analysts there is “currently no project for divesting plastics and coatings and making a multi-billion Swiss francs acquisition on the other end of the spectrum”.
Kottmann said at the meeting: “When we explained the carve-out to market [in 2016], we always said we want to allow and we want to force our management for differentiated steering. And from today's point of view, I think, including the stronger demand of the market and differentiated steering in Plastics & Coatings, the recipe works. Everything currently, from a financial point of view, looks very nice. We also said that this carve-out would give us certain kind of strategic flexibility.”
In Clariant’s outlook for 2017, Kottmann said the group will continue to focus on growing through innovation, taking internal and external growth opportunities, and cost efficiency.
“For 2017, Clariant expects the uncertain environment, characterized by a high volatility in commodity prices, currencies, as well political uncertainties, to continue,” he said. “Moderate growth is anticipated in the United States, and growth in Europe is expected to remain stable. We also expect that the economic environment for emerging markets will remain challenging and volatile.