Overall trading conditions remained stable during the quarter with no restocking activities observed as in the first quarter of 2010. At the regional level, sales growth was quite uniform across all regions with growth rates of between 4% and 7%. The impact from both the disastrous earthquake in Japan and the unrest in North Africa on the business was minimal so far.

In the first quarter, Clariant continued to consistently implement its profitable growth strategy. As a result of the focus on margin management, sales prices improved 5% year-on-year. While not fully compensating for higher raw material costs yet, sales prices increased 2% sequentially with dynamics picking up towards the end of the quarter. This successful price management, lower production costs and a high capacity utilisation drove the gross margin up to 29.8% from 28.7% in the same period a year ago.

Clariant further benefited from the positive impact of the implementation of its 2009/10 cost reduction initiatives. Selling, general & administrative (SG&A) costs as a percentage of sales decreased substantially to 15.0% from 16.9% in comparison to the prior-year period. The structurally lower cost base supported the margin development. As a consequence of a better gross margin and lower costs, the EBITDA before exceptional items increased to CHF 277 million, compared to CHF 235 million one year ago. The corresponding margin rose to 16.1% from 12.9% in the previous-year period. The operating profit (EBIT) margin before exceptional items improved to 13.4% from 10.1% in the same period one year ago.

Cash flow from operations stood at CHF 17 million, considerably lower than the CHF 159 million achieved in the previous year. After an overly tight management of working capital towards the end of 2010, inventories returned to more normal levels, therefore negatively impacting the cash flow from operations in Q1.

Net debt increased to CHF 250 million from CHF 126 million, resulting in a gearing (net debt divided by equity) of 13% at the end of the first quarter of 2011, slightly higher than the 7% recorded at the end of 2010.

2011 outlook

Clariant expects a stable business environment in 2011, with growth mainly coming from the emerging markets. Based on this scenario and excluding Süd-Chemie, Clariant forecasts local currency sales growth in the low single-digit range and an EBITDA margin before exceptional items above that of 2010.