Creation of a new and stronger Clariant with sales of approximately CHF 9 billion and an EBITDA margin of around 20 % in 2021E
Intended transaction to combine Clariant`s Additives and high value Masterbatches with parts of SABIC`s Specialties business to form the Business Area High Performance Materials which will provide customers with significant benefits and strategic advantages
Remaining Plastics & Coatings business (Pigments, standard Masterbatches and Medical Specialties) to be divested by 2020
The new Clariant will benefit from an enhanced specialty portfolio, creating the basis to accelerate profitable growth and become a leading player in each of its Business Areas
Attractive prospects in Care Chemicals, Catalysis and Natural Resources with further improvements in margins
Clariant is a dedicated and strong partner providing innovative, specialized solutions for profitable growth and a sustainable tomorrow
Muttenz, September 18, 2018 - Clariant, a world leader in specialty chemicals, today announced an updated strategy and financial outlook as well as the signing of a Memorandum of Understanding with SABIC on a significant collaboration opportunity between the two companies in the area of high performance materials. The Group intends to expand more strongly by focusing on customer-specific products and solution offerings with attractive growth prospects and above average value potential.
By 2021, following the creation of High Performance Materials and the divestment of the remaining Plastics & Coatings Business Area, Clariant expects to deliver significantly higher sales of around CHF 9 billion and an EBITDA margin of approximately 20 % with an operating cash flow of more than CHF 1.2 billion.
"The portfolio upgrade together with the continuation of Clariant`s strategy enables the Group to realize a significant step change into higher value specialties, which will allow the Group to considerably augment value creation for all our stakeholders", said Hariolf Kottmann, CEO of Clariant.
The intended combination of Clariant`s Additives and high value Masterbatches (color, high temperature resins and health care) and parts of SABIC`s Specialties business will create a uniquely positioned provider of highly customer-specific high performance materials and solutions under the name High Performance Materials.
This new Business Area will offer a customer-specific, application know-how driven and competitively advantaged product range of high-performance thermoplastics for demanding thermo-electro-optical and mechanical environments, specialty additives and masterbatches in tandem with an outstanding global compounding platform. Major applications include smart electronics, health care, aerospace, automotive, robotics, additive manufacturing, renewable energy, and e-mobility. These applications demand the fulfillment of stringent customer specifications which require exclusive technology and formulation know-how.
High Performance Materials` superior ability to meet customer specifications and provide technological advantages will create the basis for an accelerated profitable growth. This foundation in tandem with cost synergies and enhanced operating efficiencies will fuel substantial profitability progression and unlock greater value creation. By 2021, sales of High Performance Materials are expected to grow to approximately CHF 4 billion from pro-forma 2017 sales of CHF 3 billion and the EBITDA margin, including synergies, to 24 - 25 % from 19.4 % in pro-forma 2017.
The combination of Clariant`s and SABIC`s offerings within Clariant is expected to result in significant synergies with an anticipated annual run-rate of CHF 100 million, realized over three years from closing. Implementation costs are estimated at CHF 80 million over the same time. The combination will be significantly EPS accretive in the first year.
Clariant will have the majority stake in the intended business combination. Depending on the definitive valuation which is to be determined by both parties in the coming months, an equalization consideration will be made by Clariant to SABIC. This, however, should not lead to Clariant`s pro forma 2019E net debt (including pensions) / EBITDA leverage ratio exceeding 2.4 x (including SABIC`s Specialties business but based on Clariant`s current portfolio set-up before disposals) and should leave the current investment grade rating unaffected. In the coming months, Clariant and SABIC will execute the carve-out of their respective businesses, conduct reciprocal due diligence and continue negotiating the transaction with the target to sign the definitive agreement by the end of the first half of 2019. Completion of the transaction is expected to take place towards the end of 2019, effective as of 1 January 2020, subject to regulatory clearances.
Divestment of the remaining Plastics & Coatings businesses
In addition, Clariant announced that by 2020 it intends to divest the Pigments, standard Masterbatches and Medical Specialties businesses which will not be included in the newly formed Business Area High Performance Materials. This divestment decision underlines Clariant`s commitment to move the portfolio into higher specialty areas and to ensure best ownership for each of its businesses. Despite being well positioned and having significantly increased their profitability over the past years, the businesses to be divested do not match the Group`s criteria to differentiate through innovation in higher growth and higher profitability areas.
Clariant`s Strategic Direction
Following a strategic review Clariant also announced new targets for 2021 in each Business Area. Profitable growth will be driven by sustainable innovations and specialized customer solutions which meet the demand for convenience, safety, sustainability and energy efficiency. With the strategic update and the resulting higher earnings quality, Clariant also changes its EBITDA margin target from previously "before exceptional items" to "after exceptional items" going forward. As a consequence, Clariant`s financial reporting will be changed accordingly beginning in 2019.
The Business Area Care Chemicals expects to continue to grow above the market, at a more accelerated pace. This additional step up in growth will result from offering more innovative sustainable solutions which meet the market`s increasing demand for convenience, renewable and natural products. The entry into new market segments will also support this above average growth. Consumer Care, which is comprised of Personal Care, Home Care, Crop Solutions as well as Health Care, will be the main driver of this Business Area`s expansion strategy. The higher degree of specialties in Care Chemicals and the offering of more highly specified solutions will drive not only growth but also increase profitability to new heights.
For the Business Area Catalysis, Clariant targets continued above market growth rates by maintaining and capitalizing on its innovation leadership and strong licensing partnerships. Within Catalysts, the introduction of highly innovative and customer-specific catalysts is the key driver for future growth. Sustainable solutions such as the reduction of hazardous materials, thereby providing a much improved toxicological profile also adds to the growth. The Business Line Biofuels & Derivatives will contribute to the growth acceleration which is mainly driven by the global search for more climate-friendly energy sources and the legal frameworks set out in Europe, the US and China. Clariant expects to generate sales of at least CHF 100 million from licenses for the sunliquid® technology and bioethanol sales from the production plant in Romania. The contribution from both, Biofuels & Derivatives and new customer specific catalysts will significantly expand the profitability of the Business Area Catalysis by 2021.
Within the Natural Resources Business Area the Oil & Mining Services activities are expected to build up momentum as general demand and a rebound of the oil market improves the industry outlook. Differentiated business steering according to the changing business landscapes combined with technology and innovation will result in sustainable strong growth. Within Functional Minerals growth will be driven by entering new regional markets and moving into new applications through innovations such as smart and active packaging within feed and agro. As a consequence of the growth in both Business Units the profitability of Natural Resources will further improve.
The remaining Plastics & Coatings Business Area, including Pigments, standard Masterbatches and Medical Specialties, will continue to be managed using differentiated business steering. Pigments and standard Masterbatches are anticipated to grow in line with GDP while Medical Specialties are expected to grow more quickly in accordance with their underlying end market in health care packaging. The profitability of Pigments and standard Masterbatches is expected to sizably improve via stringent cost management, while Medical Specialties will benefit from innovations resulting in profitable growth.
Summary
With Clariant`s new High Performance Materials Business Area and the compelling outlook at Care Chemicals, Catalysis and Natural Resources, the Clariant Group will be able to provide an enhanced portfolio and solution offering. This will facilitate the Group`s ability to better realize its full potential and deliver higher growth and profitability faster. The resulting increase in earnings quality and operating cash flow will enable the group to uphold an attractive dividend policy, i.e. to increase or at least maintain the absolute dividend amount in Swiss francs every year. Clariant is a dedicated and strong partner who provides innovative, specialized solutions for profitable growth and a sustainable tomorrow.
Clariant makes step change into higher value specialties*
*Reporting structure as of 01.01.2019
The new, stonger Clariant
Step change into higher value specialties
Creation of Business Area High Performance Materials (HPM) through the combination of Clariant`s Additives & high value Masterbatches with parts of SABIC`s Specialties business
HPM will be a uniquely positioned provider of highly customized high performance materials and solutions
Divestment of Pigments, standard Masterbatches and Medical Specialties by 2020E
Attractive prospects in Care Chemicals, Catalysis and Natural Resources
Portfolio upgrade allows Clariant to be focused around customer-specific, technologically advanced applications with high growth and value generations
Creation of High Performance Materials
Signing of a Memorandum of Understanding to form newly created Business Area High Performance Materials
Clariant to hold the majority stake in the combination
Equalization consideration will be made by Clariant to SABIC, valuation dependent
Realization of cost synergies and enhanced operational efficiencies of CHF 100 mio until end 2022E
Net debt (incl. pensions) / EBITDA pro-forma 2019E leverage* not to exceed 2.4 x based on the current portfolio
Completion expected end 2019, effective as of 1 January 2020, subject to reciprocal due diligence and regulatory clearances
Significantly EPS accretive in first year (2020E)
Financial Highlights
Sales to reach approx. CHF 9 bn in 2021E post creation of HPM and divestments
Sales growth upgrade to 5 - 6 %, driven by the Group`s enhanced growth profile
EBITDA margin after exceptional items to rise to approx. 20 % by 2021E
Operating cash flow increase to above CHF 1.2 bn in 2021E
* including SABIC`s Specialties business and Clariant`s current portfolio set-up (before divestments)
Analyst and Investor Conference Call and Webcast Information
We will hold a conference call and live webcast for analysts and investors this Tuesday, September 18, 2018 at 11:15 a.m. CEST and 10:15 a.m. BST.
The conference call will be available via webcast and can be accessed from the company`s website at Clariant.com or by using the following link: Webcast Link
Replay Information
The webcast replay will be available for replay beginning September 18, 2018 at 1:00 p.m. CEST on the Clariant home page for 30 days.
Follow us on Twitter, Facebook, Google Plus, LinkedIn.
This media release contains certain statements that are neither reported financial results nor other historical information. This document also includes forward-looking statements. Because these forward-looking statements are subject to risks and uncertainties, actual future results may differ materially from those expressed in or implied by the statements. Many of these risks and uncertainties relate to factors that are beyond Clariant`s ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behavior of other market participants, the actions of governmental regulators and other risk factors such as: the timing and strength of new product offerings; pricing strategies of competitors; the Company`s ability to continue to receive adequate products from its vendors on acceptable terms, or at all, and to continue to obtain sufficient financing to meet its liquidity needs; and changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Clariant does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these materials.
Clariant is a globally leading specialty chemicals company, based in Muttenz near Basel/Switzerland. On 31 December 2017 the company employed a total workforce of 18 135. In the financial year 2017, Clariant recorded sales of CHF 6.377 billion for its continuing businesses. The company reports in four Business Areas: Care Chemicals, Catalysis, Natural Resources, and Plastics & Coatings. Clariant`s corporate strategy is based on five pillars: focus on innovation and R&D, add value with sustainability, reposition portfolio, intensify growth, and increase profitability.
This announcement is distributed by Nasdaq Corporate Solutions on behalf of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein. Source: Clariant AG via GlobeNewswire HUG#2216347
