ANNUAL REPORT 2011

Innovation is a key driver of progress on the path to profitable growth at Clariant. In the face of stiff international competition, it is impossible to achieve lasting sales growth and generate added value without new, attractive products. A high level of commitment to Research & Development (R&D) is essential for a specialty chemicals company to position itself successfully in the global market on a long-term basis. Only through creativity and a continuously high capacity for innovation can a company react quickly to customers’ changing requirements. Thanks to a large number of innovations, Clariant has continued to be able to rise to the demands of the market and secure sustained development of both products and production processes. Innovations also ensure that the company establishes a presence at an early stage in attractive market sectors and lucrative niches.

Increasing globalization and the ever more rapidly changing conditions mean that companies must have the ability to react quickly to the requirements of the market and customers. In addition to ensuring lean and efficient structures and the optimum use of resources, Clariant also concentrates on recognizing future requirements within the context of megatrends and developing its products accordingly. For this reason, one focus of the company’s R&D activities is on innovation in the future growth areas of energy efficiency, resource management, and alternative energies as well as renewable raw materials. 

Clariant publishes current examples of these innovations on a quarterly basis in a number of forms, including animations about innovative products and their applications, on the company website under the title “Innovation Spotlight.” www.innovation.clariant.com 

The acquisition of Süd-Chemie in the year under review led to another significant expansion of Clariant’s technology platforms, which now include chemical technologies, biotechnology, catalysis, and process technology. By doing this, the company is generating further potential for the future so that it can continue pursuing its strategic goal of sustainable profitable growth, even in difficult economic conditions.

From idea to market: Clariant’s innovation process 

Innovation comprises the entire complex process from the development of an idea through to the successful market launch of a new product. In order to implement this process effectively, Clariant has set up an innovation management system which is firmly established throughout the entire Group and aligned the organizational structure of R&D accordingly. On this basis, efficient and targeted use is made of the available resources for developing new products and applications with great potential for the future. 



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Realignment of the R&D organization to increase efficiency 

The R&D organization, which was already restructured in 2010 and consists of the Group Research & Development Centers for Colorants, Surfactants and Alkoxylates, Effect Chemicals and Intermediates, Specialty Polymers, and Formulation Technology, has combined know-how and strengthened technology platforms. The work of the R&D Centers includes not only developing new molecules and polymers but also optimizing formulations. The Intellectual Property Management Department develops patent strategies together with the Business Units and thus secures Clariant’s know-how. These new solutions are then tested in the application development laboratories of the Business Units in order to assess their viability in practice. Before an R&D project is approved, the cost effectiveness of innovations is assessed by comparing the expenditure on research, production, and marketing with the expected returns. 

The company’s research strengths – at Clariant mainly chemicals, and at the new subsidiary Süd-Chemie Catalysis and Biotechnology – will generate significant synergy effects. The combination of Süd- Chemie’s experience in catalysis, enzyme technologies, fermentation and materials separation with Clariant’s expertise in chemical modification of renewable raw materials and in polymer technology opens the way for the development of, for example, new surfactants, which have considerable growth potential. 

In addition to Group R&D, the Group Technology Services function includes the organizational units Group Process Development, Group Engineering, New Business Development, and Intellectual Property Management. Using innovative process technology, Group Process Development brings chemical processes to production scale and increases the efficiency of existing chemical processes. New Business Development is responsible for developing new business outside of existing business activities. 

Innovation Excellence launched in 2011 

To make R&D even more efficient and effective, Clariant has launched a new idea-tomarket process within the Group in the form of the Clariant Innovation Excellence (CIX) initiative. CIX is the fourth pillar of Clariant Excellence and was introduced in July 2011. The idea-to-market process is implemented consistently throughout the Group and is designed to scout, scope, develop, and commercialize innovation ideas within the shortest possible time frame. Between the individual steps, the achievements are compared with the original goals and market requirements (stage gate) before the green light is given for the next stage. 

R&D workforce moved to 1 100 

As a result of the consolidation of Süd-Chemie, Clariant’s R&D workforce increased to 1 100 as of the end of 2011 – twice as many as in the previous year. 

This led to an increase in R&D expenditure from CHF 135 million in 2010 to CHF 176 million in the year under review. As a proportion of Group sales, this corresponds to an increase from 1.9 percent in 2010 to 2.4 percent. The main driver of this increase was Süd-Chemie’s traditionally high R&D expenditure. In the two new Clariant businesses, Functional Materials and Catalysis & Energy, which were added as part of the acquisition, R&D expenditure was well over 5 percent (in terms of sales). 

The R&D activities at the five R&D Centers mentioned above are located in Frankfurt/ Höchst and Gendorf (Germany), Reinach (Switzerland), Lamotte (France), and Suzano (Brazil). Another Research & Development Center is planned in Asia in the foreseeable future. After the completion of the Clariant Innovation Center in 2013, Clariant will have one of the most cuttingedge research centers in the world in Frankfurt/ Höchst. All global R&D activities will be coordinated from this center. 

The Business Units also maintain around 65 technical centers – in Asia, Europe, Latin America, and North America – so that the regions can be offered technical service and technical customer projects can be supported. The development of new and the optimization of existing production processes mainly takes place in three process development centers in Frankfurt/Höchst, Gendorf, and Lamotte. Süd-Chemie’s major R&D sites are in Germany (Munich, Heufeld, and Moosburg), USA (Louisville, Palo Alto), and Japan (Toyama). 

Together with Süd-Chemie, Clariant holds over 9 500 patents and is involved in more than 140 scientific projects with external research partners. The Group’s research and development activities are thus complemented by an international network of universities, public research institutions, and partner companies, which strengthens its own R&D. Clariant sponsors young scientists by awarding scholarships to worldrenowned universities, such as ETH Zurich. 

The Project Center for Renewable Raw Materials coordinates all of Clariant’s international research and development activities in this area as well as appropriate external collaborations. Clariant is investing at least CHF 10 million in this interdisciplinary research program initially scheduled to last three years. Key objective is the replacement of petrochemical raw materials with renewable ones. At the Advanced Materials Project Center, new materials such as ceramic fibers and composites are developed.

Global Innovation Network of Clariant

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“Innovation is the basis of our business success.”

Interview with Martin Vollmer, Chief Technology Officer

Martin Vollmer
What is the importance of innovation for Clariant?

Martin Vollmer: Innovation is the basis of our business success and enables us to achieve profitable growth. Innovation also means delivering new products and services to the market which are of value for our customers. Starting point is to understand the unmet needs of our customers and to translate these needs into the right product or service offering. Moreover, innovation is directly linked to sustainability. Clariant responds with the development of safe, resource efficient and environmentally compatible chemical processes providing the basis for innovative performance products. 

You are investing considerable amounts in building a global Research & Development center. Why in Frankfurt? 

Martin Vollmer: During a classical evaluation of various locations, Industry Park Höchst in Frankfurt emerged on top of the list. There are several reasons for this: Firstly, we already have a critical mass in Frankfurt. All of our Group R&D Centers run chemical laboratories in Frankfurt. In addition, our Group Process Development team operates Clariant’s most versatile pilot plant there to speed up the development from lab to production. Many of our Business Units operate application development, testing and analytical laboratories in Frankfurt. Bundling of expertise under one roof in the new Innovation Center will foster collaboration and communication across organizational boundaries and this will certainly be a source for innovation. We will even integrate our New Business Development team and our Patent Department in the new center. Secondly, there are several universities and research institutions in the Rhine-Main region offering collaboration opportunities for Clariant. And thirdly, Frankfurt as the global hub of Clariant’s R&D has an excellent infrastructure considering the proximity of the industry park to the international airport and the excellent train network. 

How do you see the importance of collaboration with external partners such as universities and research institutions?

Martin Vollmer: This is of great importance for us. It can be considered as technology push and will be beneficial to fill the research pipeline. Open Innovation in particular is becoming more and more important. Combining knowledge and capabilities from various partners leads to new ideas and creative product concepts. The role of the industry partner is to build the bridge to the market. Clariant is currently involved in more than 140 research projects with external partners world-wide. For example, in Germany, we intensively work with the Technical University of Munich in the field of catalysis. In Switzerland, we work with the ETH Zurich and sponsor a fellowship program for Ph.D. students. This gives us access to young talents who might join Clariant after finishing their education.

Examples of recent R&D projects and product innovations

VitipureTM, ZenvivoTM, Velsan® – a unique range of chitosan-based biopolymers developed in collaboration with the company KitoZyme. It is used to make hair and skin cleansing products more moisturizing, gentle and protective. 

Clariant is already a global leader in nonhalogenated flame retardants thanks to Exolit®. Exolit® is used in particular in the electrical and electronics industries as well as in construction. A new concept has also been developed to improve fire protection of printed circuit boards in the electronics industry. 

Under the name Synergen®, Clariant is developing new crop protection products based on renewable raw materials. The special feature of the Synergen® concept is that the raw material is taken from the plant species for which the crop protection product has been formulated. This enables an increase in crop yields without damaging the plants with artificial substances. As a consequence, this bio-based surfactant product meets the market demand for “green” crop protection. 

Sunliquid® is an integrated process being developed by Clariant for manufacturing bioethanol from cellulose obtained from the leftover straw waste from food production. With this second generation bio fuel process applying enzyme technologies, Clariant is avoiding the conflict between food and fuel. 

Süd-Chemie’s selective hydrogenation ex- pertise was highlighted when the latest addition to the OleMax® series was shortlisted for the ICIS Innovation Award in 2011. OleMax 207 offers a 35 percent selectivity improvement in converting acetylene to ethylene in petrochemical operations of customers. The high conversion catalyst runs at lower temperatures and for longer cycles than competing materials, translating to EUR 1 million in annual savings for a midsized ethylene unit, and correspondingly less impact on the environment. 

Süd-Chemie began commercial production of its new battery material Life Power® P2 in December 2011. The new unit in Candiac, Canada, uses a proprietary wet process to make a high-performance cathode material based on lithium iron phosphate. Life Power P2 delivers high power, superior safety, and long cycle life to applications such as electric and hybrid vehicles and home energy storage systems. 

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