Clariant posts 19% drop in sales in Q1

Clariant, producer of specialty chemicals, said sales reached CHF1.6 billion (US$1.43 billion) in the first quarter compared to (US$1.87 billion) in the same period a year earlier, a decline of 19% in local currencies and 24% in Swiss francs. The quarter was characterized by a steep decline in demand. Volumes fell 25%, resulting in extremely low capacity utilizations, which were accentuated by the company’s strong focus on cash flow generation by reducing inventories. The substantial reduction of inventories was achieved by lowering production volumes below sales volumes. The resulting strong operating cash flow came at the expense of a lower gross margin and a negative operating margin. Margins were also negatively influenced by a substantial inventory devaluation resulting from a fast decline in raw material costs during the quarter. Compared to the fourth quarter, raw material prices fell 15% on average and 2% compared to the same period a year ago. While Clariant’s margin management was successful with 6% higher sales prices year-on-year, inventory devaluation and underutilization costs led to a decline of the gross margin to 23.6% from 30.5% in the previous year. The contributions of less cyclical businesses such as de-icing, oil services and agrochemicals could not compensate for the overall negative trend in demand. (May 6, 2009)