Clariant, a sustainability-focused specialty chemical company, recently announced second quarter 2023 sales of CHF 1.084 billion, compared to CHF 1.301 billion in the second quarter of 2022. This corresponds to a 7% decrease in local currency and 17% lower sales in Swiss francs. Pricing was flat year-on-year, while volumes decreased by 5%. Divestments (North American Land Oil and Quats businesses) as well as the consolidation of the US Attapulgite business had a net negative scope effect of 2%. Currency impacted sales in the quarter by - 10%. Sales growth was strong in the Business Unit Catalysts, which partially compensated for the weakness in the Care Chemicals and Adsorbents & Additives Business Units.

In the second quarter, local currency sales were down 10 % in the Europe, Middle East & Africa region. Care Chemicals and Adsorbents & Additives sales weakened, while Catalysts was strong in the Middle East. Sales in the Americas decreased by 11%, primarily because the improvement in Adsorbents & Additives from the integration of the US Attapulgite business was unable to offset lower Care Chemicals sales (due in part to the disposal of the North American Land Oil business). Sales in Asia-Pacific were stable, despite an 8% decline in China, as growth in Catalysts balanced out lower prices and volumes at Care Chemicals and Adsorbents & Additives.

Care Chemicals sales decreased by 17% in local currency in the second quarter of 2023. This development was primarily driven by a volume decline with lower sales in both Consumer and Industrial Applications versus a challenging comparison base. Catalysts sales rose by 30% in local currency with growth in all business segments. Adsorbents & Additives sales decreased by 12% in local currency due to weaker demand for Additives in particular, against a very strong second quarter in 2022.

Group EBITDA decreased by 19% to CHF 175 million, and the corresponding 16.1% margin was below the 16.6% reported in the second quarter of the previous year which included a CHF 22 million gain from the Scientific Design divestment. Positive profitability impacts included pricing measures in Catalysts and Adsorbents & Additives, as well as the preliminary CHF 62 million gain from the Quats disposal in Care Chemicals. Performance programs cost savings of approximately CHF 14 million addressed remnant cost from divested businesses and contributed positively to offset inflation. However, these factors did not offset the impact from lower volumes that negatively affected production utilization in certain businesses, together with restructuring charges of CHF 18 million, and a CHF 10 million negative operational impact from sunliquid?. Inventory devaluation resulting from lower raw material prices (- 12%) in the second quarter of 2023 weighed on the profitability as well. 

In the first half year 2023, sales were CHF 2.284 billion, compared to CHF 2.563 billion in the first half year 2022. This corresponds to a decrease of 3% in local currency (- 2% organic in local currency) and a decrease of 11% in Swiss francs. Pricing had a positive impact on the Group of 4% while volumes were down 6%, scope (arising from divestments and an acquisition) was net - 1%, and the currency impact was - 8%.

In the first half year 2023, sales decreased by 5 % in the Europe, Middle East & Africa region in local currency, primarily due to weak demand in Germany (- 18%). The 3% sales contraction in the Americas is largely attributable to an 11 % decline in the US, where the result was impacted by the divestment of the North American Land Oil business and force majeure declarations in the first quarter. Sales in Asia declined by 2% versus the first half of 2022, with China reporting a 12% decrease.

Care Chemicals sales decreased by 9% in local currency in the first half year 2023 versus a challenging comparison base. The prolonged destocking cycle continued to impact demand in key end markets in Care Chemicals as well as Additives. In Catalysts, the top line was up by 25% in local currency, propelled by Propylene and Syngas & Fuels. Adsorbents & Additives sales decreased by 8% in local currency due to weaker demand for Additives, against a particularly strong first half year in 2022.

Group EBITDA decreased by 22% to CHF 342 million as profitability was negatively impacted by lower volumes, a CHF - 23 million impact from sunliquid? (excluding restructuring charges in the second quarter), the CHF - 11 million fair value adjustment of the Heubach Group participation in the first quarter, restructuring charges of CHF 20 million, as well as inventory devaluation. The disposal of the Quats business in Care Chemicals contributed a preliminary CHF 62 million gain while pricing effects overall remained positive. Raw material cost decreased by 5%, and the execution of the performance improvement programs resulted in additional cost savings of CHF 22 million in the first half year 2023. As a result of these factors, the EBITDA margin decreased to 15.0% from 17.0%.

In the first half year 2023, the total Group net result was CHF 232 million versus CHF 386 million in the previous year. The result was lifted by the strong business performance in Catalysts, the preliminary CHF 62 million gain from the Quats disposal, as well as the positive impact on the tax rate from the reassessment of provisions related to prior years. In the first half year 2022, the net result had been lifted by the gain on the disposal of the Pigments Business Unit in discontinued operations. 

Cash generated from operating activities for the total Group increased significantly to CHF 78 million from CHF - 17 million in the first half of 2022. This notable improvement was mainly attributable to the disposals and Clariant’s active working capital management.

Net debt for the total Group increased to CHF 908 million versus CHF 750 million recorded at the end of 2022. This development is largely attributable to reduced liquidity due to the payment of dividends.

From a macroeconomic perspective, Clariant expects to see no substantial economic recovery in the second half of 2023, while uncertainties and risks related to the economic environment remain. For the full year 2023, Clariant expects to achieve sales between CHF 4.55 – 4.65 billion, including a net divestments/acquisition impact of around CHF - 150 million relating to the Quats, North American Land Oil, and Attapulgite transactions as well as an expected approximate 5 – 10% negative FX translation impact. The full year 2023 reported EBITDA is expected between CHF 650 – 700 million (14.3% – 15.1% reported EBITDA margin), including a preliminary CHF 62 million gain from the Quats divestment and approximately CHF 30 million in restructuring charges. Clariant expects an increased negative annualized sunliquid? impact to be counterbalanced by savings benefits from the restructuring programs and an easing inflationary environment, given the current economic outlook.

The Group has become a true specialty chemical company and remains committed toward its 2025 ambition to deliver profitable sales growth (4 – 6% CAGR), a Group EBITDA margin between 19 – 21%, and a free cash flow conversion of around 40%.