Clariant unveils wide-reaching corporate transformation program

Ink World, Oct, 2003

Roland Losser, Clariant's new chief executive, has announced a wide-reaching corporate transformation program that will significantly reduce debt, cut costs and reestablish the group as one of the leading specialty chemicals companies.

The program, which is the result of an extensive internal review, includes the sale of the Cellulose Ethers and Electronic q Materials businesses and the closure of four agrochemicals plants. Overall, the pro gram targets more than CHF 1.5 billion in proceeds from asset sales and aims to increase the pre-tax return on invested capital (ROIC) within the next three to four years to at least 12 percent, up from the current level of approximately 7 percent.

For the first half year, Clariant's cost reduction measures launched at the beginning of the quarter resulted in savings of approximately CHF 60 million, including management bonus cuts. These measures will have further positive effect over the next 18 months. Amid a challenging market environment, sales grew 2 percent in local currencies, but declined 7 percent in Swiss franc terms to CHF 4.3 billion. After an exceptional charge of CHF 142 million relating to a previously announced plant closure, the company reported a net loss for the second half of CHF 49 million, compared with a net income of CHF 145 million in the year earlier period.

"We are not satisfied with these results and they underline our determination to refocus the company and significantly improve our performance over both the short- and long-term," Mr. Losser said.

In detailing the new strategy, Mr. Losser said Clariant will focus mainly on businesses where it can combine its strong customer service capabilities with its leading-edge surface and color technology. Mr. Losser said that in addition to Cellulose Ethers and Electronic Materials, several other businesses will be sold.

The businesses Clariant has decided to sell are either not central to the new focus, carry high investment requirements or cannot achieve leading market positions. Interest shown by potential buyers has been highly encouraging and the company is confident of achieving the target of raising more than CHF 1.5 billion in proceeds.

Clariant also has several under-performing businesses where the company, after having considered all options, believes internal restructuring must be the first priority. This restructuring includes the Life Sciences division, where four Custom Synthesis plants producing agrochemicals in the U.S. and in Germany will be closed, resulting in a workforce reduction of approximately 200 employees.

"The transformation program, which is to be activated immediately, marks a major shift in focus and determination," Mr. Losser said. "Ultimately it will make Clariant a stronger, more profitable company."

Mr. Losser gave a cautious outlook for the remainder of the year. "We expect little or no help for the rest of 2003 from a market environment that remains difficult," he said. "Nevertheless, we are confident that we will make steady progress, particularly in terms of net debt reduction. This transformation program leaves me very confident about Clariant's future. We are well aware of the challenges we face, but we have the right team and the right focus to get the job done."