Clariant beats forecasts for 2Q07 results ........ BUT modest price increases and structural improvements have little impact

There is some optimism as the results have beaten most forecasts but with modest sales growth and concerns about profitability, Clariant is still battling to reduce costs (sales and general administration) and to try to raise prices above the the hikes it receives for raw material and energy-related costs. A case was made for negative currency impacts, but as stated by Jan Secher, the profitability remains disappointing. The detailed 2nd quarter information is available from Clariant's web site.

The paper chemicals business is part of the Textile, Leather and Paper Division which posted an organic sales growth of 3% and no improvement in profitability. The main issues are:

• continuing high increases in raw material prices (see presentation slide 11)
• price increases failing to cover raw material and other energy-related cost increases
• currency effects and the geographical split of the business between the growth regions (Asia and Latin America) and the mature markets of the USA and Europe.
  
• profitability remaining stagnant despite cuts in S&GA, inventory improvements and closures of sites

Specific mention was made of the continued strong volume growth in paper dyes and chemicals. Demand for optical brightening agents (higher whiteness paper, especially in the USA), remained high. There were few other highlights of merit and no mentions of sucess in raising prices in paper chemicals in the face of increasing pressure from non-traditional, lower cost suppliers (especially those supplying OBAs and Dyes) and the significantly larger suppliers such as Kemira and Ciba.

Mr Philippe Royer took up his new position as head of the Textile, Leather and Paper Division on the 1st July, 2007 - it certainly looks as though he has much work to do.

Clariant's share price had fallen by 6.63% on trading up to 16h00 CET today. Analysts confirm that the disappointing margin figures were to blame.

Clariant's nine months results will be reported on the 7th November, 2007.

Sunday, 05-Aug-07: More information on Clariant ......... reported rumours in the FT.