3Q08 Results: Clariant show glimmers of improvement - paper chemicals still a problem.

Clariant announced its third quarter results for 2008 and there is a glimmer of improvement in the company performance, although the textile, leather and paper (TLP) business continues to be a problem.  The shares which had crashed to all-time lows showed some recovery.  Speculation continues that Clariant is preparing to be split up and that something will have to be done with the uncompetitive TLP business.

Clariant posted third-quarter net profits of CHF 78 mio compared to a loss of CHF 51 mio in the same period last year.  Sales decreased slightly to CHF 2.o9 bn and EBITDA increased from CHF 132 mio to CHF 198 mio.  So, some glimmer of improvement.

What of the paper business?  Buried in the TLP division, which continues to decline, there is little sign of a new strategy and leadership.  The only solution seems to be 'cost leadership' which is OK if you are a big volume producer.  The core business of OBAs and Dyes continues to face stiff competition and although the closures of Horsforth and Selby sites in the UK may help the TLP Division it does little to help the competitiveness of the paper chemicals business - moving production to high-cost Switzerland and loosing key personnel is not a recipe for a successful future.  There is little mentioned in the 3Q08 report about the paper business except for a statement, 'The bottom line of the Paper Business suffered from an unprecedented hike in raw material costs.'  Yes, there has been a big hike in raw material prices, but Clariant's 'unprecedented' position regarding dye and OBA raw materials is of their own making (see earlier blogs).

This next year will be the making or breaking of Clariant's paper business.

For another view: Yahoo Finance - Clariant Downgraded to "Sell"