Clariant Reports Improved Operating Margin in the First Quarter 2008

Business Wire, April 30, 2008

* Sales up 3% in local currency and down 2% in CHF due to currency effects

* Price increases of 4% fully compensate for a 9% increase in raw material costs

* Operating margin before exceptionals rises to 7.9% from 7.1% in Q1/2007

* Cash Flow from operations of CHF -6 million due to seasonal effects

* Full Year outlook unchanged

MUTTENZ, Switzerland -- CEO Jan Secher commented: "The measures we have initiated to improve operational performance have started to show a positive impact. In particular our focus on increased pricing and strict cost control has contributed to the improved operating margin. While our top line growth in local currency has been satisfying in the first quarter, we closely follow the economy and are prepared to take further actions if changes should occur. Against this backdrop we stay committed to an improved operating margin and a continued strong cash flow from operations by the end of the year."

Clariant, a world leader in specialty chemicals, posted a 3% sales growth in local currency for the first quarter 2008. Adverse currency effects resulted in a negative sales growth of 2% in CHF. Total sales amounted to CHF 2.112 billion.

Clariant increased prices by 4% and was able to fully offset a 9% increase in raw material costs. The gross margin declined slightly to 30.5% from 31.1% in the strong first quarter of 2007. Compared to the full year 2007 the gross margin improved 1.3 percentage points. The gross margin year-on-year has improved for three quarters in a row despite a steep increase of raw material costs in the same period.

Clariant reduced the number of job positions by 400 in the first quarter as part of the ongoing restructuring measures. Sales, General and Administration (SG&A) costs declined to 20.7% down from 21.8% in the first quarter of 2007.

The operating margin before exceptionals improved to 7.9% from last year's 7.1%. This translates into an increased operating income before exceptionals of CHF 167 million compared to CHF 152 million in the first quarter of 2007. The net income from continuing operations declined to CHF 41 million from CHF 86 million as a result of higher restructuring costs and unfavorable currency effects. In the first quarter, foreign exchange effects had a negative impact on the operating income of CHF 36 million and another CHF 44 million on the net result.

Cash flow from operations declined to CHF -6 million from CHF 37 million in the previous year as inventories have been built up before the Easter holidays and trade payables have been reduced.

Improved pricing across the divisions

All four divisions achieved higher prices in the first quarter as a result of the company's focus on price increases and the corresponding measures that have been initiated in the previous year. Following Clariant's price over volume approach, the divisions have tackled customers with unsatisfying profitability by price increases, utilization of alternative low cost distribution channels or giving up on unprofitable business. These measures had a slightly negative effect on volumes without having materially impacted capacity utilization.

Pigments & Additives division with strong sales and margin growth

The Pigment & Additives division grew 6% in local currency (1% in CHF) compared to previous year. This favorable development was mainly influenced by good demand but also partially the result of some inventory build-up by customers. The main growth driver was the Coatings business that has benefited from robust demand in particular from the automotive industry in Europe and strong growth in Asia. The Specialties, Publication Inks and Plastics businesses also saw good growth in terms of price and volume whereas at different levels.

Geographically, demand in Asia and Latin America gained momentum, whilst sales in Europe were slightly lower. The weakness of the US market had only limited impact on the division's top line due to the relatively small exposure of Pigments & Additives to the US market.

The division significantly improved profitability due to price increases and effective cost management, although the gross margin declined slightly on a year-on-year basis.

The division has extended its joint venture with its Chinese partner Zhejiang Baihe in Hang Zhou city, province of Zhejiang. The joint venture will build a new plant for the production of Quinacridone high performance organic pigments. The investment demonstrates Clariant's strong focus on the emerging markets in Asia and in particular on mainland China, where the company already operates nine facilities.

Textile, Leather & Paper Chemicals challenged by unfavorable market conditions

The performance of the Textile, Leather & Paper Chemicals division was impacted by difficult, however different, market environments for all three businesses. Sales in local currency declined 6% (11% in CHF). The gross margin declined compared to the first quarter of 2007.

The Textile business was affected by a weak demand in the US and Europe - in particular in key markets like Italy, Spain and Turkey. Customers in India and Turkey suffered from strong currencies that negatively impacted their exports. The business managed an unprecedented price increase despite the challenging market situation. As a result, the gross margin could be increased compared to the last quarter of the previous year although it was lower than in the first quarter of 2007.