Cost reduction improves Clariant’s leather performance

30 July 2009

In a company statement it said that all divisions contributed positively to operating income before exceptional items. The decisive cost-saving measures in the Textile, Leather & Paper Chemicals Division positively impacted on the profitability of all three businesses. The Pigments & Additives Division significantly reduced its costs following underutilisation of capacity due to the fact that destocking had eased and order intake had stabilised. The Functional Chemicals Division continued to be the most resilient against the decline in demand.

Net income remained negative (CHF-61 million) in the reporting period mainly due to the restructuring and impairment costs of CHF74 million but also resulting from the weak operating income.

The previously announced reduction of 1350 job positions has now been completed bringing a total of 1423 job positions reduced. An additional 500 job positions will be cut in 2009. The Clariant statement reports that the positions to be cut have been identified and implementation has begun. Further reductions in 2009 and 2010 will follow in line with the company's goal to close the performance gap to its peers and to adjust the company's structure to the global recession. It is not clear how many, if any, of the job losses will come from the leather division which is currently in the process of being separated out.

Clariant ceo, Hariolf Kottmann, commented: ‘Our focus on generating cash, decreasing costs and reducing complexity has shown results, both in terms of cash flow that remained strong and operating income. However, we are still challenged by unprecedented low demand and don't expect a quick recovery. Hence, we are continuing with our efforts to reduce costs, generate cash and simplify our operating structure in order to close the performance gap to our peers and gain further operational and strategic flexibility.'

Outlook

Clariant assume that the global economy will only slowly recover. Consequently, Clariant sales in local currencies are predicted to remain weak until the end of the year, approximately in the range of 16-20% below 2008.

The company says that it will maintain its focus on cash generation by decreasing its net working capital. At the same time, the cost-saving and restructuring measures will continue to favourably impact the operational result, which will then also increasingly contribute to cash generation. Based on this scenario, Clariant anticipates a further improved operating income before exceptional items for the full year compared to the first half of 2009.

 



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