Clariant AG (CLN) is exploring the sale of units with 1 billion Swiss francs ($1.09 billion) in revenue as Chief Executive Officer Hariolf Kottmann focuses the Swiss company on chemical catalysts and other higher-margin products.
Exiting additives used in textiles, paper and emulsions is a mid- to long-term goal, and the Muttenz-based company has yet to test the market for interest, Kottmann said in an interview today. All options are being considered, including a sale to private equity or strategic bidders as well as joint ventures.
The $2.7 billion acquisition of catalyst maker Sued-Chemie last year has given Kottmann the basis to extend a revamp by enabling disposals that would have been financially crippling to Clariant before. The CEO is resurrecting shelved plans to exit paper, textiles and emulsions after spending three years cutting costs and moving production to lower-cost sites in Asia.
“This used to be the strategic backbone of the company, so it would have killed Clariant if we had decided to divest in 2009,” Kottmann said. “Now all these businesses are profitability leaders.”
Clariant gained as much as 6.7 percent to 13.19 francs in Zurich trading, buoyed by a decision to resume dividend payments and better-than-estimated profit. With the help of Sued-Chemie, earnings before interest, taxes, depreciation and amortization rose 42 percent to 241 million francs in the fourth quarter. JPMorgan estimated 204 million francs. Sales jumped 13 percent to 1.92 billion francs, beating a 1.86 billion-franc estimate from a Bloomberg survey.
Clariant stock was trading at 12.74 francs as of 10:50 a.m., bringing its year-to-date advance to 37 percent this year. Shareholders will receive a 30-centime payout, the first dividend since 2008, according to data compiled by Bloomberg.
“Given the extent of volume weakness in the fourth quarter it’s a strong performance,” said Paul Satchell, an analyst at Collins Stewart. “The size of the payout is likely to be well received.”
Kottmann forecast a “low-single-digit” increase in annual sales in local currency as a recovery in the U.S. gathers pace in the second half, with profit margins holding steady as the benefits from efficiency gains feed through.
There has been a “stabilization” in demand in January and February and decreasing demand in China and India is likely to ease. Kottmann reiterated a 2015 Ebitda margin goal of 17 percent. First-half earnings will be lower because of stronger comparative results in the year-earlier period.
Kottmann mandated all division managers to formulate a business plan and make their case for their operations to remain within the company.
The lower-margin leather chemicals unit “made the cut,” though its heads are under pressure to meet goals over the next three to five years, he said. The company will reassess whether to keep the unit after that time, Kottmann said in the interview. The CEO has no plans to make acquisitions in that area, he said.
Clariant separately announced the departure of Chairman Juerg Witmer at the annual investors’ meeting on March 27, to be replaced by vice-Chairman Rudolf Wehrli. Board member Klaus Jenny will also step down, the company said.
The businesses earmarked for sale are being prepared so that they can operate in an independent way.
“We have to clean up our portfolio step by step,” Kottmann said. “If we want to find solutions for textiles, paper and emulsions for detergents and intermediates, that’s enough on our plate.”
To contact the reporter on this story: Sheenagh Matthews in Frankfurt at firstname.lastname@example.org
To contact the editor responsible for this story: Benedikt Kammel at email@example.com