Clariant profit drops 50% on higher costs - unconvincing presentation of results raises questions
Swiss chemicals group Clariant met market expectations, despite reporting a 50% fall (to CHF41 million or USD 39 million) in first-quarter net profit, due to higher raw materials costs. In the stage-managed presentation of the 1Q08 results, the management failed to cover over the cracks and the short-term outlook for Clariant (and similarly Ciba) looks bleak.
The basic gap remains: 9% increase in raw materials with a 4% increase in customer selling prices.
Not much was reported on the paper business except that there was a 'high impact of raw material costs'. The 'focus on increased pricing' is only an option if the market allows it and in Clariant's key segments (Dyes and FWAs) there is quality competition, especially from China and India and any attempts to significantly raise prices will result in a loss of market share. There has been a positive move to try to decentralise the business away from Swiss (Muttenz) control.
Rumours of Clariant being a take-over target remain and the share price has drifted upwards since the 30th April and now hovers just below CHF 12.
The basic gap remains: 9% increase in raw materials with a 4% increase in customer selling prices.
Not much was reported on the paper business except that there was a 'high impact of raw material costs'. The 'focus on increased pricing' is only an option if the market allows it and in Clariant's key segments (Dyes and FWAs) there is quality competition, especially from China and India and any attempts to significantly raise prices will result in a loss of market share. There has been a positive move to try to decentralise the business away from Swiss (Muttenz) control.
Rumours of Clariant being a take-over target remain and the share price has drifted upwards since the 30th April and now hovers just below CHF 12.
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