Global growth in 2012 with increasing risks
Since mid-2011, economic experts have become much more cautious in their forecasts for the global economy in 2012. According to the Organisation for Economic Cooperation and Development (OECD), the uncertainties resulting from the global financial crisis have had a huge impact on the real economy. The OECD is therefore only forecasting growth of 1.6 percent for the more than 30 OECD member states. The developing and emerging markets are again the driving force behind this growth. The experts are forecasting growth of 8.5 percent for China. By contrast, the industrial nations are clearly suffering the effects of the financial crisis. The eurozone economy is likely to post only marginal growth of 0.2 percent. A number of member states are even expected to see a fall in Gross Domestic Product. The United States is set to generate growth of 2.0 percent thanks to fiscal policy support in what is an election year. Following the collapse in its economy triggered by the disaster in 2011, Japan is also likely to post 2.0 percent growth in 2012. However, the OECD warns that the forecasts are subject to considerable uncertainty due to the numerous open issues relating to the euro crisis; it therefore does not rule out the possibility of a global recession if the economic environment worsens.
Cautious forecast for the chemical industry in 2012
The performance of the chemical industry in 2012 will be closely tied to global economic growth. Economic experts are accordingly cautious in their forecasts. The upturn recorded in the chemical industry in 2011 is expected to slow considerably in 2012. The German Chemical Industry Association (VCI) has significantly lowered its estimates and expects only a slight increase in chemical production. Entrepreneurs and consumers appear increasingly unsettled by the unresolved issues of the global debt crisis, and their ordering practices have become correspondingly more conservative. Experts are therefore predicting no significant potential for price rises in 2012. The industry will, however, benefit on the cost side from more stable raw material prices. The moderate growth in the industry will be largely driven by continuing rising demand in the growth regions of Asia, Latin America, and Eastern Europe.
Outlook for 2012 involves major uncertainties
After completion of restructuring in 2010, Clariant’s strategic focus in 2011 shifted to continuous improvement and profitable growth. In 2012, Clariant will continue to systematically implement the next steps in its transformational process with a focus on the integration of Süd-Chemie, on completing measures from restructuring initiated in 2009/10 and on portfolio management. In this context, Clariant is considering several strategic options for the Business Units Textile Chemicals, Paper Specialties, Emulsions, and Detergents & Intermediates, with the goal to be realized in the mid- to long-term.
An accurate forecast for 2012 is difficult given the high level of economic uncertainty. Clariant will monitor the developments closely and respond rapidly, where necessary. Raw material costs are expected to rise in the low single-digit range while exchange rates should remain stable compared to the beginning of the year. In its base case scenario, Clariant expects that after a weak start into 2012, the global economy will progressively strengthen in the course of the year. Therefore, results for the first half-year are expected to be lower compared to the high base of the first half of 2011, with an improvement in the second half-year 2012. For the full-year 2012, Clariant expects further sales growth in local currency and a sustained profitability.
Further cost reductions through completion of Project Clariant
Further progress in sustaining the improved returns already realized in the Group will be achieved by systematically continuing to implement the measures launched as part of Project Clariant. For example, additional cost savings totaling CHF 60 million are expected by mid-2013 after implementation of improvements in the production network under the Global Asset Network Optimization program (GANO) is completed in mid-2012. The smaller businesses acquired in 2011 have been successfully integrated and will continue to make a full contribution at operating level as of 2012.
Integration of Süd-Chemie is proceeding according to plan
The integration of Süd-Chemie is progressing as planned, and all project teams are working hard to deliver to promise. Current knowledge and experience confirms the forecast that integration by 2013 will result in a rise in EBITDA of CHF 90 to 115 million. Because of integration-related synergies and Clariant Excellence initiatives, around 700 jobs will probably be cut worldwide, especially administrative positions. Production improvement measures should also contribute to these savings. Those measures are planned to be implemented from 2012 to 2014.
Foundation for sustainable, long-term profitable growth through 2015
Clariant has set ambitious goals for the years through 2015 in expectation of a moderate upward trend in the global economy and stable exchange rates. By continuing to systematically implement the strategy initiatives Project Clariant and Clariant Excellence, we intend to improve the profitability of the company and all Business Units. We will also increase investments in the Group’s research and development, and expand the innovation pipeline significantly by implementing Innovation Excellence. The focus, furthermore, will be on broader expansion into the fast-growing emerging market regions. The company will increase its market share particularly in China, India, and Brazil. The profitability of the current portfolio will be analyzed on a continuous basis. We will also make targeted acquisitions in the future to strengthen the product pipeline and the company’s regional presence, but will also consider divestments, if necessary.
By implementing these basic strategic goals for 2015, Clariant intends to increase Group sales to more than CHF 10 billion and EBITDA before exceptional items to over CHF 1.7 billion, with an EBITDA margin before exceptional items of more than 17 percent a further target. ROIC should continue to be above the industry average, based on these objectives.