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February 18, 2016 01:00 AM

Clariant expands in masterbatch after posting mixed results

Plastics News Europe and PRW
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    Earnings before interest, taxes, depreciation and amortisation fell to CHF 853m in 2015, down from CHF 867m in 2014.

    Clariant announced plans on Feb. 18 to raise production of masterbatch for high temperature plastics, one day after the Swiss group said its 2015 sales were hit by the strong Swiss franc and global economic uncertainty.

    Specialty chemicals producer Clariant said it plans to invest more than CHF 7.5 million ($7.54 million) in Europe, Asia and North America to expand production capacity in color and additive masterbatches for use in engineering resins and high-temperature plastics like PEEK (polyether ether ketone). The largest part of the investment will be made at plants in Shanghai, Singapore, and at two plants in the U.S., although Clariant did not break down the investment at these facilities.

    “Global demand for high-temperature plastics and compatible masterbatches is booming,” said Jeff Saeger, who heads the expansion program for Clariant. “Fueled by new products in the automotive, small consumer electronics and electrical markets, the use of engineering materials is growing at annual rates of 7 or 8 percent, well above the growth rate of the plastics industry as a whole. Clariant has state-of-the-art capabilities in the United States to handle these materials and will now leverage that experience and expertise around the world.”

    The three U.S. masterbatch plants referenced by Saeger are in Holden, Mass.; Lewiston, Maine; and Albion, Mich.; these plants, said Clariant, “already have vast knowledge and experience in working with both engineering and high-temperature materials [processed at temperatures of 300°C or higher]”.

    However, Clariant continued: “Capabilities in Asia have previously been more limited, focusing mainly on engineering materials (like ABS, polycarbonate and certain nylons), which are processed at moderate temperatures. Customers in this region have therefore often had to source the more advanced products from overseas and thereby facing longer product development and delivery times. That is about to change.”

    The group said that in Shanghai, it is installing new equipment and implementing procedures required for masterbatch production based on engineering and high temperature resins. The new production lines and associated capabilities are expected to be ready for start-up by the end of 2016.

    In the U.S., Clariant installed equipment for processing fluoropolymers in Lewiston, Maine, in late 2015. It said new lines for specialty engineering compounds and black masterbatch for high-temperature resins will be added in Holden, Massachusetts, beginning in the first quarter of 2016.

    Clariant's full-year 2015 sales were CHF 5.8 billion ($5.83 billion), down by 5 percent from CHF 6.1 billion ($6.13 billion) in 2014, due to the strength of the Swiss franc following the Swiss central bank's decision in January 2015 to end its exchange rate linkage to the euro. But in terms of local currencies, Clariant said its sales were 3 percent higher due mainly to higher volumes.

    Earnings before interest, taxes, depreciation and amortisation fell to CHF 853 million ($857 million) in 2015, down from CHF 867 million ($871 million) in 2014.

    Group CEO Hariolf Kottmann said in a statement: “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.”

    Sales in the Plastics & Coatings business unit were CHF 2.4 billion ($2.45 billion)in 2015, a 5 percent decline from 2014 (but an increase of 1 percent in local currencies).

    At Clariant's results briefing in Zurich on Feb. 16, according to news reports, Kottmann fended off suggestions that Clariant was a takeover target or was alternatively considering divestment of its Plastics & Coatings business.

    According to ICIS News, despite persistent speculation about a potential divestment of the business unit, Kottmann said the Swiss firm, a world leader in specialty chemicals, had just carved out the three units within the division to be “strategically” better positioned for the future.

    From Jan. 1, Plastics & Coatings was comprised of Masterbatches, Additives and Pigments.

    “It [Plastics & Coatings] is not dragging [overall company's] results down. All three business areas are industry leaders. [However] Due to the nature of the business, it doesn't perform like Catalysis or Natural Resources -- neither you can't expect margins like in other divisions,” ICIS reported Kottmann saying.

    “The carve-out into three separate entities had two main reasons -- we recognized and understood that this business can't be managed like innovation-driven divisions and that it has a different business model.”

    In its 2016 outlook, Clariant said it “expects the uncertain environment, characterized 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 United States, while growth in Europe is expected to remain stable but weak”.

    But despite these conditions, Clariant said it is confident about sales growth in local currencies during 2016, along with progression in operating cash flow and EBITDA margin before exceptional items.

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