• Sales from continuing operations decreased by 5 % in local currency to CHF 3.860 billion
• EBITDA margin preserved at 15.0 % in a challenging environment compared to a comparable EBITDA margin of 15.7 % in 2019
• Net result for the total Group at CHF 799 million
• Strong cash conversion to an operating cash flow of CHF 369 million
• Proposed nonrecurring regular distribution of CHF 0.70 per share, taking into consideration the performance of 2019 and 2020
• Outlook: Q1 2021 will still be negatively impacted by the COVID-19 pandemic; focus on pandemic mitigation and transformation of portfolio to achieve above-market growth and higher profitability
“In 2020, Clariant has successfully weathered the effects of the COVID-19 pandemic due to our resilient portfolio and successful execution of our performance improvement programs,” said Conrad Keijzer, CEO of Clariant. “The reshaping of our portfolio towards a higher specialty value is progressing well. We will continue to execute Clariant’s strategy to differentiate through innovation, sustainability, portfolio, growth, and performance. We are taking a step up in our commitment to sustainability by announcing our new sustainability targets.”
Full Year 2020 – Clariant’s 2020 robust results due to its focused specialty chemicals portfolio and execution of performance programs
Clariant, a focused, sustainable and innovative specialty chemical company, today announced full year 2020 continuing operations sales of CHF 3.860 billion, compared to CHF 4.399 billion in 2019. This corresponds to a decrease of 5 % in local currency and 12 % in Swiss francs due to depreciating currencies versus the Swiss franc. Pricing had a positive impact on the Group. However, the modest sales increase in Business Area Catalysis could not offset the lower volumes in Care Chemicals due to diminished Aviation activities and in Natural Resources due to depressed Oil demand.
In an unprecedentedly weak environment marked by COVID-19, oil oversupply and adverse currency volatility, the full year 2020 results exhibited a notable robustness. The 15.0 % EBITDA margin in full year 2020 was slightly above the nine month 2020 result of 14.8 %, as anticipated. These results therefore clearly reflect the superiority of Clariant’s specialty portfolio as well as the effectiveness of Clariant’s business continuity programs and performance measures. Amid the COVID-19 pandemic, Clariant was able to preserve business continuity through stringent safety and contingency measures, thus avoiding disruption while cooperating closely with customers and suppliers along the value chains. Clariant also ran special mitigation programs to assure strong cash flow generation via working capital reduction, non-strategic capex cuts and spend avoidance. In addition, Clariant relaunched its efficiency program in continuing operations with a reduction of approximately 600 positions to generate annual savings of CHF 50 million. In discontinued operations, the efficiency program progressed to reduce an excess of 200 positions for savings of CHF 20 million. Rightsizing measures were also initiated to reduce or transfer approximately 1,000 positions to avoid remnant cost subsequent to the conclusion of the divestments. The efficiency programs already contributed with CHF 20 million in continuing operations and CHF 8 million in discontinued operations in 2020 and are anticipated to be fully implemented by 2022.
From a regional perspective, Asia remained resilient, growing sales by 4 % with notable growth in India while China increased sales by 6 % in local currencies. Latin America also increased revenues by 7 % in local currency. Sales in Europe declined by 8 %, followed by the Middle East & Africa, where sales were down 13 %. The 14 % slowdown in North America was attributable to lower demand in the Aviation business and Oil Services.
Catalysis reported slight sales growth of 1 % in local currency, reflecting a sequential improvement throughout 2020 after a slow start in the first quarter. Resilient Petrochemicals sales and a significantly increased contribution from emission-control catalysts in India contributed positively. Excluding the feeble Aviation business in the first and fourth quarter, Care Chemicals sales reflected a positive development (reported -5 %). The 8 % sales decrease in Natural Resources is attributable in particular to lower volumes in oil and in the industrial applications amid softer demand during the COVID-19 pandemic.
Full year 2020 continuing operations EBITDA reached CHF 578 million due to the weaker sales in COVID-19-exposed segments, but particularly the difficult environment in Aviation and Oil. This development, amplified by weakening currencies, contributed to the absolute EBITDA contraction, resulting in an EBITDA margin decline to 15.0 % from 15.7 % (reported 10.5 %) in the previous year when excluding the one-off CHF 231 million provision, which was booked in the second quarter of 2019.
In Care Chemicals, profitability improved due to growth in Consumer Care in tandem with stringent margin and cost management. The EBITDA margin in Catalysis declined as a result of the less favorable product mix, particularly in the first and fourth quarter, and the efficiency program provision. Natural Resources profitability weakened as a result of the challenging environment but was close to the prior year on an underlying basis.
In 2020, the net result for the total Group increased to CHF 799 million from CHF 38 million in the previous year. The gain on the disposal of the Masterbatches business of CHF 723 million as well as the partial reversal of CHF 55 million of the EU fine provision had a positive impact. The net result was negatively affected by the volume-driven weaker absolute profit, negative currency effects as well as expenses for the efficiency and rightsizing programs. The expenses of these performance improvement programs in 2020 are approximately CHF 141 million which is broken down as CHF 49 million (efficiency) in the continuing operations and CHF 92 million (incl. CHF 68 million for rightsizing and CHF 24 million for efficiency) in the discontinued operations.
Operating cash flow for the Group declined to CHF 369 million from CHF 509 million in the previous year due to the payment of a fine issued by the European Commission of CHF 166 million and due to the absolute contraction from adverse currencies and demand decline. Excluding the payment of this fine, the operating cash flow for the Group rose to CHF 535 million based on a high cash conversion driven by the execution of the performance measures.
Net debt for the total Group decreased to CHF 1.040 billion versus CHF 1.372 billion recorded at the end of 2019, supported by the strong operating cash flow generation as well as the remaining Masterbatches disposal proceeds post the extraordinary dividend. With the latter, Clariant is funding the European Commission fine, the restructuring program and investments in the transformation towards its mid-term targets.
The Board of Directors recommends a regular distribution of CHF 0.70 per share to the Annual General Meeting based on the Group’s solid combined performance in 2019 and 2020. This proposal should not be interpreted as a recurring distribution as the proposed amount takes into consideration the Group’s performance of the past two fiscal years, the withholding of the ordinary dividend in 2020 as well as all shareholder commitments. The distribution is proposed to be made from a share capital decrease by way of a par value reduction.
Fourth Quarter 2020 – Strongest quarterly results of the year 2020
In the fourth quarter of 2020, sales from continuing operations declined by 2 % in local currency and by 9 % in Swiss francs to CHF 1.022 billion. Care Chemicals and Natural Resources were negatively affected by lower volumes, which were partially mitigated by the strong growth in Catalysis.
On a regional basis, the expansion in Asia was lifted by high double-digit growth in India as well as in South Korea, while revenue growth in Latin America and Europe also progressed in local currency. In contrast, sales in North America declined in double-digits, largely due to a difficult environment in the Oil Services business as well as the feeble Aviation business in Care Chemicals. Sales in the smallest region, the Middle East & Africa also decreased sharply.
Catalysis sales improved by 12 % in local currency, mainly attributable to a profound sales increase in emission-control catalysts in India as well as an improvement in Specialty Catalysts and Petrochemicals. Care Chemicals reported a 4 % sales decrease as a result of the difficult environment for Aviation in the main European and North American markets. Sales in Natural Resources declined by 8 % in local currency as a strong recovery in Additives as well as resilient demand in Functional Minerals could not offset the decline in Oil and Mining Services.
The continuing operations EBITDA decreased by 24 % in Swiss francs to CHF 159 million, including the disadvantageous currency effects, and the margin declined to 15.6 % from 18.5 % given a very high comparison base in the previous year. Nevertheless, the margin run rate in the fourth quarter improved over the 14.8 % generated in the first nine months of 2020. Despite the softer Aviation business, the profitability advanced in Care Chemicals, driven by a more favorable product mix and stringent margin management. The EBITDA declined significantly in Catalysis as a result of the lofty comparison base in the previous year and a proportionally higher sales contribution from lower-margin businesses. Natural Resources’ profitability weakened due to the continued difficult environment in Oil Services and Refinery.
For the full year 2020, sales in discontinued operations declined by 32 % in local currency and by 37 % in Swiss francs. On a like-for-like basis, excluding Healthcare Packaging sales from the full year 2019 as well as the Masterbatches sales from the second half of 2019, sales in local currency slightly decreased by 3 % as a result of the difficult economic environment amid COVID-19. In the fourth quarter, like-for-like Pigments sales increased by 1 % in local currency.
For the full year 2020, the EBITDA margin was positively impacted by the gain on the disposal of the Masterbatches business in the third quarter of 2020. In the fourth quarter, the EBITDA margin was negatively influenced by the CHF 68 million provision for the rightsizing program. Excluding the effect of this provision, the EBITDA margin increased slightly compared to the previous year.
Outlook – Focus on specialty portfolio and performance improvement to achieve above-market growth, higher profitability and stronger cash generation in the mid-term
Clariant anticipates that the COVID-19 pandemic will still negatively impact sales, especially in Natural Resources, in the first quarter of 2021 versus the pre-COVID-19 comparable base in the first quarter of 2020. Despite rising feedstock prices Clariant aims to defend its margin levels in the first quarter of 2021 versus the prior year and will continue to focus on the safety of its employees, support to its communities, business continuity to its customers and stringent execution of its performance programs. This will be the fundament for taking the next step in 2021 to achieve above-market growth, higher profitability, and stronger cash generation in the mid-term.
Clariant is executing its five-pillar strategy by focusing on innovation, adding value with sustainability, repositioning the portfolio, intensifying growth – particularly in Asia and China – and improving performance. The Group is strengthening its Environmental, Social and Governance ambitions in order to lead through sustainability and innovation. This becomes particularly evident in the increased ambition of CO2 reduction from base year 2019 until 2030 by 40 % for scope 1 and 2. In addition, Clariant is introducing the CO2 reduction by 14 % for scope 3 as a new target. In addition to these targets, Clariant is launching solutions to improve the CO2 footprint of its customers (handprint), such as the sunliquid® investment. Clariant is committed to reducing climate change and contributing to the United Nations Sustainable Development Goals.