Personal care chemicals maker Clariant expects markets to bottom out in 2020
today Oct 31, 2019
Switzerland’s Clariant expects its markets to stabilise at a lower level next year, the speciality chemicals company said on Wednesday after reporting weaker than expected earnings and sales in its third quarter.
The company, which lost its chief executive earlier this year as its joint venture with Saudi Basic Industries (SABIC) collapsed, blamed a worsening economic climate for the downturn.
In particular, Clariant was hit in its care chemicals business that supplies ingredients for soaps and shampoos. The company also felt the impact of weakness in the automobile and electronics sectors.
“From today’s point of view I would not expect any recovery, I would rather expect a stability of the current environment,” Chief Financial Officer Patrick Jany said when asked about prospects for 2020.
“We will see a counter-effect at one stage, but it is too early to say when,” Jany said. “Looking into 2020, I see a rather stable environment with a bit of fluctuation, quarter by quarter. We have to organise our company in a way to be profitable at a lower level.”
Jany said the search for a permanent CEO may carry into next year.
Clariant’s third-quarter sales fell 1% to 1.043 billion Swiss francs (816.62 million pounds), missing an average analyst forecast of 1.06 billion, according to Refinitiv data.
Core earnings (EBITDA) also declined by 1% to 169 million francs, but after exceptional items rose 6% to 151 million francs, missing expectations for 178 million.
Clariant increased its profit margin to 14.5% from 13.5%. Margins should improve during the fourth quarter, Jany said.
The Basel company maintained its 2021 outlook for continuing businesses to achieve above-market growth, higher profitability and stronger cash generation, though some analysts said those targets were too optimistic.
“Clariant did not show any underlying progress towards its too ambitious 2021 targets and today’s results do not provide more confidence,” said Vontobel analyst Daniel Buchta.
Clariant stock was down 1.6% by 0910 GMT after losing 2.5% in early trading.
A revival of the joint venture with SABIC, which holds a 25% stake in Clariant, is off the table, Jany said, since Clariant now plans to sell major portions of the business it had originally hoped to combine with the Saudis’ operations.
That plan was scrapped after a disagreement about how much Clariant would pay for the SABIC assets.
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