Clariant reports strong profitability on solid sales

• Q3 sales up 8% in local currencies, nine month sales up 14% in local currencies 
• Q3 operating income before exceptional items increased 70% to CHF 182 million compared to CHF 107 million year on year.
• Q3 operating income margin before exceptional items reached 10.6% compared to 6.3% a year ago.
• Q3 cash flow from operations amounted to CHF 173 million, driven by strong operating result and sustainable Net Working Capital management, compared to CHF 193 million in the previous year period.
• Outlook: For the remainder of the year, Clariant expects stable trading conditions. Based on this expectation, the results to date and the ongoing restructuring efforts, Clariant guides for sales growth in the high-single digit percentage range in local currency and an operating margin before exceptionals for the full-year above 9%.

CEO Hariolf Kottmann commented: "Overall, Clariant has further improved in the first nine months. Sales growth was solid, profitability improved and cash flow remained strong. Our efforts to generate cash, decrease costs and reduce complexity have progressed according to plan. In addition, we were able to offset the rising raw material costs with higher sales prices and maintained the gross margin at a high level. In the traditionally weaker fourth quarter, we forecast trading conditions to remain unchanged. By the end of 2010, a solid basis for Clariant will have been established that allows us to shift our focus from restructuring to profitable growth."
 
Key Financial Data

¹ as of 30 September 2010                    ² as of 31 December 2009

Clariant Q3, 2010 Performance

Muttenz, November 03, 2010 - Clariant, a world leader in specialty chemicals, today announced sales of CHF 1.709 billion for the third quarter of 2010 compared to CHF 1.691 billion year on year. Sales growth in local currency amounted to 8%. Due to the appreciation of the Swiss Franc against most major currencies, sales growth in Swiss Francs was reduced to 1%.

The demand for the products and services of Clariant remained solid. All Business Units (BU) recorded good sales growth in local currency compared to an already high basis of Q3 2009 sales. Sequentially, sales were lower, showing the return to normal seasonality.

From a regional perspective, sales growth in North America and Europe was particularly strong. This reflects a catch up in demand from the mature markets which recovered later from the financial crisis than the emerging markets.

Clariant managed to compensate for a 2% rise in raw material costs by an increase of sales prices of 1% sequentially. The gross margin amounted to 27.9% compared to 25.3% in Q3, 2009 resulting from both better capacity utilization and sales price increases. As raw material costs are predicted to continuously uptake in the coming months, Clariant will further implement price increases where necessary.
As a result of the ongoing focus on cost reduction, SG&A costs decreased to 15.6% of sales, compared to 17.3% a year ago. In absolute terms, SG&A costs fell to CHF 267 million from CHF 292 million in the same period a year ago.

Consequently the operating income before exceptional items increased 70% to CHF 182 million compared to CHF 107 million year on year. The operating income margin before exceptional items improved to 10.6% from 6.3% in the previous year.

Restructuring and impairment costs reached CHF 45 million. The number of job positions was reduced by 227 during the quarter, to 17,041 at the end of the third quarter. Due to the ongoing restructuring efforts the number of job positions will further decrease until the end of the year to well below 17,000 compared to 17,536 by year-end 2009.

The company recently announced the finalization of its Global Asset Network Optimization (GANO) assessment with measures affecting the sites in Reinach (Switzerland), Nanterre (France), McHenry (USA), Delta (Canada), Sefakoy (Turkey), Guatemala City (Guatemala), Roha (India), and Shizuoka (Japan). The implementation of all GANO measures announced in 2009 and 2010 will be finalized by 2013 and deliver cost savings of at least CHF 100 million per year.

The net income increased to CHF 109 million compared to CHF 25 million year on year - also positively impacted from a one-off tax gain of CHF 45 million.

Resulting from a strong operating result and sustainable Net Working Capital management the cash flow from operations amounted to a high CHF 173 million and came close to the CHF 193 million from the third quarter of 2009.

The company's cash position - including an investment of CHF 643 million in short-term deposits - further improved to CHF 1 272 million from CHF 1 140 at year-end 2009.

Clariant continued to reduce its net debt to CHF 302 million from CHF 545 million at the end of 2009. The gearing - net debt divided by equity - improved to 16%, compared to 29% by year-end 2009.

CFO Patrick Jany commented: "Clariant had a good third quarter. As expected, year-on-year sales growth was lower in the third quarter than in the first half-year 2010, due to the higher basis in the year-earlier period. Nevertheless our stringent restructuring efforts as well as our ability to offset higher raw material costs with sales price increases resulted in an improved profitability and an excellent cash generation."

Outlook

Clariant expects trading conditions to remain stable for the remainder of the year. In addition, raw material costs are expected to rise further but at a lower pace than in the first nine months of the year.

Clariant will continue to focus on generating cash, decreasing costs and reducing complexity. The ongoing restructuring program will be finalized by the end of 2010 and the focus will then shift to profitable growth. Some of the measures - in particular related to the GANO activities - will not be completely implemented before 2013.

Based on the expected stable trading conditions, the nine months result and the continuing restructuring efforts, Clariant aims for a high single digit sales growth in local currency and an EBIT margin before exceptionals of above 9% for the full year. The cash flow from operations will remain strong.

Clariant confirms its target of a sustainable, above-industry-average return on invested capital (ROIC) by the end of 2010.

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Clariant - Exactly your chemistry.

Clariant is a global leader in the field of specialty chemicals. Strong business relationships, commitment to outstanding service and wide-ranging application know-how make Clariant a preferred partner for its customers.

Clariant, which is represented on five continents with over 100 group companies, employs around 17 000 people. Head-quartered in Muttenz near Basel, Switzerland, it generated sales of CHF 6.6 billion in 2009. Clariant is organized into ten Business Units: Additives; Detergents & Intermediates; Emulsions; Industrial & Consumer Specialties; Leather Services; Masterbatches; Oil & Mining Services; Paper Specialties; Pigments; and Textile Chemicals.

Clariant is committed to sustainable growth, which is derived from its own innovative strength. Clariant's world-class products and services play a key role in its customers' manufacturing processes and add value to their end products. The company's success is based on the know-how of its people and their ability to identify new customer needs at an early stage and to work together with customers to develop innovative, efficient solutions.

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