29 Jul 2008

Clariant announce first half results - questions remain for paper chemicals

These are tough times for the speciality chemicals industry and Clariant continues to struggle to achieve a competitive strategy. The first half results show:

  • Sales reduction (in CHF term) with a small increase if sales are measured in local currencies
  • 42% fall in Q2 net profits
  • Heavy reliance on China for raw materials requiring higher inventories.
  • S&GA costs up at over 20% despite significant staff culling and efforts at cost reduction.
  • Some progress in increasing prices but difficulties in recovering energy and raw material costs
The paper chemicals business in Clariant is part of the Textile, Leather and Paper Division (TLP) and again the performance of all three businesses was poor. The first half results and report highlight the following points for the paper business:
  • 'Volume decline' - in management speak this means a loss of business
  • Reliance on China for raw materials (especially for optical brightening agents - OBAs) - a lack of strategic vision lead to higher prices having to be paid and probably higher inventories (see earlier blog). In the report it states that this has lead to, '... an unprecedented raw material cost escalation that could not be compensated for by the significant price increases that were realised.'
  • The announcement that Clariant will close one of its key European paper chemical production sites (see earlier blog) in Horsforth, Leeds, UK.
With all the turmoil in the paper chemicals market, it will be interesting to see what commitments, if any, Clariant makes to this segment. The reading of the first half results seems to indicate that the future for Clariant is in other businesses (eg Masterbatches, Functional Chemicals) ......... look out for the 'portfolio shaping', as they say.

What others are saying - Bloomberg, Gulf Times, Basler Zeitung,

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