The Basel-based chemical company Clariant expanded its margins in the third quarter despite the sharp rise in energy costs. However, she is also announcing a restructuring that will primarily affect plants in Germany.
Almost 30% of Clariant employees work in Germany. The picture shows the headquarters in Pratteln.
The German chemical industry is in crisis, but the Swiss supplier Clariant does not want to be upset. Unlike BASF and other competitors from the neighboring country to the north, the Muttenz-based group is not considering relocations from Germany and other European countries.
«Extra workload is absolutely manageable»
As the head of the group, Conrad Keijzer, explained to the NZZ, in the past third quarter one was confronted with rapidly increasing energy costs. Keijzer put the increase at 60 percent compared to the same period last year. However, emphasized the manager from the Netherlands, the share of energy costs in sales has only increased from 5 to 6 percent. “Such an additional burden is absolutely manageable.”
According to CEO Conrad Keijzer, Clariant was able to pass the higher energy costs on to customers in full.
Keijzer pointed out that competitors recently had to shoulder significantly higher cost increases. For historical reasons (in 1997 the specialty chemicals business of the former Höchst Group was taken over) Clariant also has extensive activities in Germany. Of the almost 11,500 employees, almost 3,300 or 29 percent work in German plants. However, the group started earlier than other chemical companies to give high priority to sustainability issues, especially in the area of energy supply and energy saving.
The relevant topics have already been systematically tackled under the leadership of the long-serving CEO Hariolf Kottmann, which is now paying off. Kottmann was appointed CEO in 2008 and served – with a brief hiatus – until early 2021, when he was replaced by Keijzer. Meanwhile, Keijzer is striving to push sustainability even further at Clariant.
No more dealings with small drilling companies
The company has now decided to sell its North American land oil activities to the Indian company Ketal. The Group accepts a value adjustment of 245 million Swiss francs, which will be charged to the income statement in the fourth quarter.
According to Keijzer, the company is not only getting rid of a business area with modest margins. Working with small drilling companies, as the unit is doing in the US state of Texas, no longer fits Clariant’s sustainability strategy. Unlike large oil companies, such customers are often less receptive to using innovative chemical products to reduce their environmental impact.
Cost increases passed on to customers
Despite the additional burden due to the sharp rise in energy prices, Clariant succeeded in increasing the return on sales at operating cash flow level (EBITA) from 15.5 to 16.8 percent in the third quarter. Sales jumped 27 percent to CHF 1.3 billion, with price effects accounting for a high 18 percentage points and volume increases for 9 percentage points.
Keijzer said that the increased energy costs could be passed on to customers in full. Very few competitors have succeeded in doing this. BASF, for example, had to accept a slump in the Ebitda margin from 13.9 to 10.3 percent in the third quarter. The group announced a cost-cutting program that will focus on Germany and other locations in Europe.
Share price falls significantly
However, Clariant’s convincing quarterly results did not prevent the company’s share price from correcting itself by almost 5 percent by midday on Thursday. Investors must have registered with concern that the increase in volumes in crisis-ridden Europe also slowed in the case of Clariant. This gave him food for thought, also because all business areas were affected, Keijzer admitted.
To make matters worse, the group is still busy cleaning up legacy issues from the Kottmann era. In addition to the write-down related to the divestiture of its land oil operations, the Company announced that it would record restructuring charges in the fourth quarter. It will be a substantial sum, said Keijzer.
Too many managers
The restructuring is related to a further streamlining of the structures in the company’s administration. It is likely to cost several hundred jobs and hit Germany in particular. Certain jobs will also be lost in Switzerland, where Clariant currently has 405 employees.
Since last year, more than 1,000 jobs have been cut at Clariant to eliminate redundancies that arose after the sale of the two large business areas of masterbatches and pigments. Within the company, criticism was raised that the management apparently used the knife especially for the lower ranks and spared members of the higher management. Now more and more managerial positions are to be cut.
Kottmann, who liked to think big and wanted to expand the medium-sized chemical company Clariant into an industry heavyweight with sales of CHF 10 to 15 billion, allowed himself a bloated organization. In any case, Keijzer, who came to the company from outside, was amazed that there were up to 11 hierarchical levels between him and the workers in the group’s factories. They have now been reduced to a maximum of six. At the same time, the number of business areas was reduced from 5 to 3 and the top management was reduced from 9 to 5 members.