Financial Review FULL YEAR 2018

Transcription

1 Financial Review FULL YEAR 2018 CLARIANT INTERNATIONAL LTD Rothausstrasse Muttenz Switzerland

2 Page 1 of 16 Key Financial Group Figures CHF m 2018 % of sales CHF m 2017 % of sales Sales Local currency growth (LC): 5% Organic growth 1 5% Acquisitions/divestitures 0% Currencies 1% Gross profit EBITDA before exceptional items* EBITDA* Operating income before exceptional items* Operating income Net income Basic earnings per share (CHF/share) Adjusted earnings per share (CHF/share)* Operating cash flow Other key figures total Group: Net debt Equity (including non-controlling interests) Gearing 46% 52% Return on invested capital (ROIC)** 10.1% 10.2% Number of employees Throughout this statement the term organic growth is used to mean volume and price effects excluding the impacts of changes in FX rates and acquisitions/divestitures. * See Definition of Terms of Financial Measurements on pages 4 and 5. ** Clariant calculates ROIC by dividing NOPLAT before exceptional items by the average net capital employed. NOPLAT is calculated by taking the operating income before exceptional items adjusted by the expected tax rate. Net capital employed also considers operating cash and capitalized operating leases.

3 Page 2 of 16 FINANCIAL DISCUSSION FULL YEAR Sales and Net Results 2018* Sales increased by 5 % organically in local currency. In Swiss francs, sales increased by 4 % compared to the previous year. The gross margin for the full year 2018 was 29.2 % of sales compared to 29.8 % recorded in the prior-year period due to a less favorable product mix. Selling, general and administrative costs decreased in 2018 to 19.8 % of sales compared to 20.3 % in Research and development costs remained at CHF 209 million in the full year of 2018 at a comparable level to the previous year at CHF 211 million. Income from associates and joint ventures of CHF 130 million in the full year of 2018 was above the level of the previous year (CHF 103 million), mainly driven by the income from the participation in Stahl. The net financial result decreased to CHF -81 million in 2018 in comparison to CHF -59 million in Excluding the currency result, the financial result was CHF -81 million for the full year of 2018 compared to CHF -65 million in While the financial expenses remained unchanged, the decrease was caused by the reduction of financial income to CHF 19 million in 2018 from CHF 35 million in Tax expense of CHF 109 million was recorded in 2018 compared to CHF 135 million tax expense recorded in the prior year. In 2018, there was no material adjustment of deferred tax assets due to US tax reform as in the prior year, leading to an improved effective tax rate. The recorded tax expense was adversely impacted by one-time events and the non-recognition of deferred tax assets on tax losses incurred by subsidiaries mainly in USA, China and Canada as their recoverability was not considered probable. Net income amounted to CHF 356 million in the full year of 2018, which was above the CHF 302 million net income reported in the same period of * The fully consolidated Süd-Chemie India Pvt Ltd. (SCIL) joint venture is included as of 1 April 2017.

4 Page 3 of 16 Balance Sheet Key Figures December 2018 Cash Flow Total assets decreased to CHF billion as of 31 December 2018 from CHF billion at the end of 2017 mainly due to the decrease in non-current assets driven by lower PPE and intangible assets. This decrease is a result of disposals and currency differences. Investments in associates and joint ventures decreased to CHF 368 million from CHF 508 million at the end This is the net effect of the dividends paid mainly by Infraserv companies in Germany, the reduction of the stake in Stahl from 19.7 % to 14.8 % and the subsequent reclassification of the remaining stake to financial assets. Short-term deposits decreased to CHF 26 million from CHF 47 million at the end of This figure includes short-term deposits with an original maturity between 90 and 365 days. Current financial debts decreased to CHF 529 million from CHF 567 million at the end of December Equity increased to CHF billion from CHF billion at the end of This was mainly due to the net profit for the period amounting to CHF 356 million, to treasury share transactions amounting to CHF 9 million, to the net investment hedges amounting to CHF 28 million and to the effect of fair value adjustment on financial assets amounting to CHF 2 million. The positive effects on equity as of end of December 2018 were partially offset by a distribution from capital contribution reserves of CHF 165 million, by the negative currency translation effect of CHF 146 million, by dividends paid to non-controlling interests amounting to CHF 16 million and by the combined effect of actuarial gains on retirement benefit obligations and a negative return on pension plan assets amounting to a negative CHF 22 million, net of deferred tax. Cash flow from operating activities before changes in working capital and provisions was a positive CHF 802 million for the full year of 2018 compared to a positive CHF 759 million for the full year of Working capital (including changes in provisions and changes in other current assets and liabilities) increased by CHF 55 million compared with an increase of CHF 230 million for the full year of Income taxes paid also include the settlement of a tax audit in the amount of CHF 83 million. This payment was fully provided for and had no impact on the income statement. Net cash generated from operating activities was a positive CHF 530 million for the full year of 2018 compared to a positive CHF 428 million for the full year of Investments in PPE and investments in intangible assets were CHF 237 million and CHF 20 million, respectively, for the full year of 2018, compared to CHF 248 million and CHF 31 million, respectively, for the full year of Financing activities mainly include the distribution to the shareholders of Clariant and to non-controlling interests, proceeds from and repayments of financial debt, and the related interest paid and received. Net debt decreased to CHF billion from CHF billion at the end of December This figure includes current and non-current financial debts, cash and cash equivalents, shortterm deposits and financial instruments with positive fair values reported under other current assets. Gearing, which reflects net financial debt in relation to equity, including non-controlling interests, decreased to 46 % from 52 % at the end of 2017, as a result of the decrease in net debt.

5 Page 4 of 16 DEFINITION OF TERMS OF FINANCIAL MEASUREMENTS (UNAUDITED) The following financial measurements are supplementary financial indicators. They should be considered in addition to, not as a substitute for, operating income, net income, operating cash flow and other measures of financial performance and liquidity reported in accordance with International Financial Reporting Standards (IFRS). EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is calculated as operating income plus depreciation of PPE, plus impairment and amortization of intangible assets, and can be reconciled from the Condensed Financial Statements as follows: EBITDA CHF m Operating income Depreciation of PPE Impairment 16 + Amortization of intangible assets EBITDA EBITDA before exceptional items is calculated as EBITDA plus expenses for restructuring, impairment and transaction-related costs less impairment and gain/loss on disposals. EBITDA before exceptional items CHF m EBITDA Restructuring, impairment and transaction-related costs* Impairment (reported under Restructuring, impairment and transaction-related costs) 16 + Loss/gain from the disposal of activities not qualifying as discontinued operations** 54 3 EBITDA before exceptional items Operating income before exceptional items is calculated as operating income plus restructuring, impairment and transaction-related costs and gain/loss on disposals. Operating income before exceptional items CHF m Operating income Restructuring, impairment and transaction-related costs* Loss/gain from the disposal of activities not qualifying as discontinued operations** 54 3 Operating income before exceptional items * Restructuring, impairment and transaction-related costs 2018: CHF 93 million (2017: CHF 180 million), of which: Cost of goods sold CHF 11 million (2017: CHF 10 million); Selling, general and administrative costs CHF 81 million (2017: CHF 158 million); Research and development expenses CHF 1 million (2017: CHF 8 million). Income from associates and joint ventures CHF 0 million (2017: CHF 4 million an expense). ** Loss/gain from the disposal of activities not qualifying as discontinued operations 2018: CHF 54 million loss (2017: CHF 3 million gain) reported under Selling, general and administrative costs, not including income from associates and joint ventures.

6 Page 5 of 16 Adjusted earnings per share is the earnings per share adjusted for the impact of exceptional items, assuming an adjusted income tax rate of 26% for the period. Adjusted earnings per share CHF m Operating income before exceptional items Amortization of intangible assets Finance income Finance costs Adjusted income before taxes Adjusted income taxes Adjusted net income Thereof attributable to non-controlling interests Thereof attributable to shareholders of Clariant Ltd Weighted average number of shares outstanding Adjusted earnings per share attributable to shareholders of Clariant Ltd (CHF/share) Net debt is the sum of current and non-current financial debt less cash and cash equivalents, short-term deposits and financial derivatives with positive fair values. Net debt CHF m Non-current financial debt Current financial debt Cash and cash equivalents Short-term deposits Financial derivatives with positive fair values 7 7 Net debt

7 Page 6 of 16 CONDENSED FINANCIAL STATEMENTS OF THE CLARIANT GROUP Consolidated balance sheets ASSETS CHF m % CHF m % Non-current assets Property, plant and equipment Intangible assets Investments in associates and joint ventures Financial assets Prepaid pension assets Deferred income tax assets Total non-current assets Current assets Inventories Trade receivables Other current assets Current income tax receivables Short-term deposits Cash and cash equivalents Total current assets Assets held for sale Total assets EQUITY AND LIABILITIES CHF m % CHF m % Equity Share capital Treasury shares (par value) 8 10 Other reserves Retained earnings Total capital and reserves attributable to Clariant shareholders Non-controlling interests Total equity Liabilities Non-current liabilities Financial debts Deferred income tax liabilities Retirement benefit obligations Provision for non-current liabilities Other liabilities Total non-current liabilities Current liabilities Trade and other payables Financial debts Current income tax liabilities Provision for current liabilities Total current liabilities Total liabilities Total equity and liabilities

8 Page 7 of 16 Consolidated income statements CHF m % CHF m % Sales Costs of goods sold Gross profit Selling, general and administrative costs Research and development Income from associates and joint ventures Operating income Finance income Finance costs Income before taxes Taxes Net income Attributable to: Shareholders of Clariant Ltd Non-controlling interests Basic earnings per share attributable to the shareholders of Clariant Ltd (CHF/share): Diluted earnings per share attributable to the shareholders of Clariant Ltd (CHF/share):

9 Page 8 of 16 Consolidated statements of comprehensive income CHF m Net income Other comprehensive income: Remeasurements: Actuarial gain/loss on retirement benefit obligations Return on retirement benefit plan assets, excluding amount included in interest expense Fair value adjustment on financial assets 2 Total items that will not be reclassified subsequently to the income statement, gross Deferred tax on remeasurements 1 36 Total items that will not be reclassified subsequently to the income statement, net Net investment hedge Cash flow hedges 1 Currency translation differences Share of other comprehensive income of associates and joint ventures 3 Effect of the reclassification of foreign exchange differences on previously held net investments in foreign entities 2 2 Total items that may be reclassified subsequently to profit and loss Deferred tax effect Total items that may be reclassified subsequently to the income statement, net Other comprehensive income / loss for the period, net of tax Total comprehensive income for the period Attributable to: Shareholders of Clariant Ltd Non-controlling interests 9 24 Total comprehensive income for the period

10 Page 9 of 16 Consolidated statement of changes in equity Other reserves CHF m Total share capital Treasury shares (par value) Share premium reserves Hedging reserves Cumulative translation reserves Total other reserves Retained earnings Total attributable to equity holders Noncontrolling interests Total equity Balance 31 December Net income Net investment hedge Remeasurements: Actuarial gain/loss on retirement benefit obligations Return on retirement benefit plan assets, excluding amount included in interest expense Deferred tax on remeasurements Currency translation differences Share of other comprehensive income of associates and joint ventures Effect of the reclassification of foreign exchange differences on previously held net investments in foreign entities Total comprehensive income for the period Distributions Dividends to non-controlling interests Transaction with non-controlling interests Employee share & option scheme: Effect of employee services Treasury share transactions Balance 31 December Changes in accounting policy Balance 1 January Net income Cash flow hedge Net investment hedge Remeasurements: Actuarial gain/ loss retirement benefit obligations Return on retirement benefit plan assets, excluding amount included in interest expense Deferred tax on remeasurements Currency translation differences Fair value adjustment on financial assets Effect of the reclassification of foreign exchange differences on previously held net investments in foreign entities Total comprehensive income for the period Distributions Dividends to non-controlling interests Employee share & option scheme: Effect of employee services Treasury share transactions Balance 31 December The impact of change in accounting policy includes CHF 4 million related to IFRS 9 implementation. See Note 2

11 Page 10 of 16 Consolidated statements of cash flows CHF m Net income Adjustment for: Depreciation and amortization Impairment and reversal of impairment 16 Impairment of working capital 23 4 Income from associates and joint ventures Tax expense Net financial income and costs Loss/(gain) from the disposal of activities not qualifying as discontinued operations 54 3 Other non-cash items Total reversal of non-cash items Dividends received from associates and joint ventures Payments for restructuring Cash flow before changes in working capital and provisions Changes in inventories Changes in trade receivables Changes in trade payables Changes in other current assets and liabilities Changes in provisions (excluding payments for restructuring) 52 4 Cash generated from operating activities Income taxes paid Net cash generated from operating activities Investments in property, plant and equipment Investments in intangible assets Investments in financial assets, associates and joint ventures 4 10 Sale of property, plant and equipment and intangible assets 14 6 Changes in short-term deposits Changes in current financial assets 5 1 Business acquisitions 58 Proceeds from the disposal of associates and financial assets Proceeds associated to disposals of activities not qualifying as discontinued operations Net cash provided by/used in investing activities Sale of treasury shares 82 Distributions from the reserves to the shareholders of Clariant Ltd Dividends paid to non-controlling interest Proceeds from financial debts Repayments of financial debts Interest paid Interest received Net cash provided by/used in financing activities Currency translation effect on cash and cash equivalents 20 9 Net change in cash and cash equivalents Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

12 Page 11 of 16 NOTES TO THE CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of preparation of financial statements These financial statements are the condensed consolidated financial statements (hereafter the consolidated financial statements ) of Clariant Ltd, a company registered in Switzerland, and its subsidiaries (hereafter the Group ) for the twelve-month period ended on 31 December The condensed consolidated financial statements, which do not contain all the information that International Financial Reporting Standards (IFRS) would require for a full set of financial statements, have been prepared in accordance with IFRS and with the accounting policies set out in the Clariant Financial Report for the year ended The accounting policies applied are consistent with the ones applied at year-end 2017, with the exception of those financial positions and elements of income and expenses regulated by IFRS 9 and IFRS 15, which became effective as of 1 January For more information on the effect of these standards see Note 2. These consolidated financial statements were approved on 11 February 2019 by the Board of Directors. The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets, liabilities, and disclosure of contingent liabilities at the date of the consolidated financial statements. If, in the future, such estimates and assumptions, which are based on management s best judgment at the date of the consolidated financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change. 2. New accounting standards The Group has applied the following standards and amendments for the first time: IFRS 9 Financial Instruments IFRS 15 Revenue from Contracts with Customers Classification and Measurement of Share-based Payment Transactions Amendments to IFRS 2 Annual improvements Cycle Transfers to Investment Property Amendments to IAS 40 Interpretation 22 Foreign Currency Transactions and Advance Consideration The Group had to change its accounting policies and made certain adjustments as of 1 January 2018 following the adoption of IFRS 9 and IFRS 15. The other amendments listed above did not have any impact on the amounts recognized in prior periods and are not expected to significantly affect the current of future periods. IFRS 9, Financial Instruments, addresses the classification, measurement and derecognition of financial assets and financial liabilities and introduces new rules for hedge accounting and a new impairment model. To a large extent, the Group s financial assets are made up of trade receivables measured at amortized costs and other current assets which are measured at fair value. The rules for the determination of any need for impairment of trade receivables are such that they did not result in any material difference under IFRS 9 compared to the accounting rules under IAS 39. The Group only holds a small amount of equity investments as of 1 January 2018 and their measurement at fair value has only a moderate impact on the financial statement. Short-term deposits consist of money market funds of a duration between three and twelve months placed with banks of high quality. Fair value fluctuations of these instruments are only minimal. The Group continues to measure all financial liabilities at amortized cost; thus, no change in measurement has taken place. The Group has designed its hedging activities in a way that the change in accounting rules from IAS 39 to IFRS 9 did not result in any changes in hedge accounting. Also, the Group does not engage in additional hedge accounting as a result of the introduction of the new rules regarding hedge accounting. The impact of the new standard amounted to a total of CHF 4 million net of tax, which resulted from the measurement at fair value of some participations in other companies that were previously measured at amortized cost and that were recognized in the opening balance of IFRS 15, Revenue from contracts with customers, deals with revenue recognition and establishes principles for disclosing useful information about revenue and cash flows arising from these contracts. This standard replaces IAS 18, Revenue, and IAS 11, Construction Contracts, and related interpretations. It is effective for accounting periods beginning on or after 1 January Clariant as a manufacturer and seller of industrial goods is engaged to the largest extent in transactions that are accounted for in the same manner under IFRS 15 as under the previous standards. Administrative procedures are such that contracts with customers are readily identifiable once they are agreed upon. Performance obligations for products and services can be identified by individual product numbers, which are also invoiced individually, allowing for the determination and allocation of the transaction price. Revenues from the sale of goods are recognized at a point in time.

13 Page 12 of 16 Services are normally invoiced separately and commensurate with the services rendered and thus recognized over time. As an industrial company with a large number of customers placing relatively small orders at a time, the Company does not incur substantial contract-related costs. in companies engaged in activities closely related to those of Clariant. These shareholdings are valued at fair value using Level 3 methods to determine the fair value. The participations amounted to a total value of CHF 198 million at 31 December 2018 and are reported as part of financial assets. Sales of goods and services are recognized in line with the requirements of IFRS 15, Revenue from contracts with customers. Revenue is measured based on the consideration the Group expects to receive in exchange for the goods or services. Revenue from sales of goods is recognized in the income statement when control has been transferred to the buyer, which is usually upon delivery, at a fixed or determinable price, and when collectability is reasonably assured. Delivery is defined based on the terms of the sale contract. Revenue from services is recognized when the respective services have been rendered. Revenue is reported net of sales taxes, returns, discounts and rebates. Rebates to customers are provided for in the same period that the related sales are recorded based on the contract terms. As a consequence the recognition and valuation rules required by IFRS 15 did not have any material impact on the financial statements of the Group. 3. Seasonality of operations The Group operates in industries where significant seasonal or cyclical variations in total sales are not experienced during the financial year. 4. Investments in associates and joint ventures Clariant reduced the stake in Stahl LUX 2 from 19.7 % to 14.8 %. Income from associates and joint ventures includes CHF 59 million resulting from the partial disposal of the participation in Stahl and subsequent revaluation of the remaining shareholdings to the fair value. The amount was allocated to the Business Areas. 5. Fair value measurement All derivative financial instruments held by the Group at the end of 2018 are classified as Level 2 as defined by IFRS 13 Fair Value Measurement. Clariant is also the owner of a number of small-scale participations 6. Restructuring, impairment and transactionrelated costs During 2018, Clariant recorded restructuring expenses in the amount of CHF 14 million, mainly pertaining to projects in Europe as well as in the United States, and transaction-related costs in the amount of CHF 79 million totaling CHF 93 million. In the previous year, restructuring, impairment and transactionrelated costs amounted to CHF 180 million. 7. Disposals Clariant sold 100 % of its shares in Infrapark Baselland AG to GETEC heat & power GmbH for a total consideration of CHF 40 million. The loss recorded on the transaction in 2018 amounted to CHF 43 million net of tax and CHF 54 million before taxes. 8. Distribution from reserves On 19 March 2018, the Annual General Meeting approved a distribution of CHF 0.50 per registered share from capital contribution reserves. On 26 March 2018, a distribution totaling CHF 165 million was made to Clariant shareholders. 9. Repayment of financial liabilities On 26 September 2018, a bond issued in 2012 in the amount of CHF 250 million reached maturity and was repaid. 10. Launch of new certificates of indebtedness On 25 September 2018, Clariant issued four certificates of indebtedness with a total amount of EUR 265 million (CHF 299 million). These certificates have the following terms: EUR 92 million for 5.5 years at % p.a. fixed, EUR 102 million for 7 years at % p.a. fixed, EUR 54 million for 7 years at 0.95 % p.a. variable interest rate and EUR 17 million for 10 years at % p.a. fixed. The variable interest rate is based on the 6- month EURIBOR plus spread.

14 Page 13 of Business Area figures Sales to 3rd parties EBITDA before exceptionals EBITDA CHF m % CHF % LC % CHF % CHF Care Chemicals Catalysis Natural Resources Plastics & Coatings Business Areas total Corporate Total Operating income before exceptionals Operating income Systematic depreciation of PPE CHF m % CHF % CHF Care Chemicals Catalysis Natural Resources Plastics & Coatings Business Areas total Corporate Total Business Area margins Sales to 3rd parties EBITDA before EBITDA (Share of Total) exceptionals in % Care Chemicals Catalysis Natural Resources Plastics & Coatings Total Operating income Operating income b. exceptionals in % Care Chemicals Catalysis Natural Resources Plastics & Coatings Total

15 Page 14 of Condensed earnings per share data Net income attributable to shareholders of Clariant Ltd (CHF m) Shares Number of registered shares at and respectively Weighted average number of shares outstanding Adjustment for granted Clariant shares Adjustment for dilutive share options Weighted average diluted number of shares outstanding Basic earnings per share attributable to shareholders of Clariant Ltd (CHF/share) Diluted earnings per share attributable to shareholders of Clariant Ltd (CHF/share) Finance income and costs Finance income in CHF m Interest income Other financial income 7 23 Total finance income Finance costs in CHF m Interest costs thereof effect of discounting of non-current provisions 3 5 thereof interest component of pension provisions Other financial expenses 12 7 Total finance costs before currency result Currency result, net 6 Total finance costs

16 Page 15 of Foreign exchange rates Rates used to translate the consolidated balance sheets (closing rates) Change % 1 USD EUR BRL CNY INR JPY Average sales-weighted rates used to translate the consolidated income Change % statements and consolidated statements of cash flows 1 USD EUR BRL CNY INR JPY

17 Page 16 of 16 CLARIANT WHAT IS PRECIOUS TO YOU? Clariant is a focused and innovative specialty chemical company, based in Muttenz near Basel/Switzerland. On 31 December 2018 the company employed a total workforce of In the financial year 2018, Clariant recorded sales of CHF billion for its continuing businesses. Clariant s corporate strategy is based on five pillars: focus on innovation and R&D, add value with sustainability, reposition portfolio, intensify growth, and increase profitability. The company reports in four Business Areas: Care Chemicals, Catalysis, Natural Resources, and Plastics & Coatings. Calendar of Corporate Events Your Clariant Contacts 01 April 2019 Annual General Meeting 30 April 2019 First Quarter 2019 Reporting 25 July 2019 First Half 2019 Reporting 30 October 2019 Nine Months 2019 Reporting Investor Relations Fax Anja Pomrehn Tel Maria Ivek Tel Media Relations Fax Jochen Dubiel Tel Thijs Bouwens Tel Disclaimer This document contains certain statements that are neither reported financial results nor other historical information. This document also includes forward-looking statements. Because these forward-looking statements are subject to risks and uncertainties, actual future results may differ materially from those expressed in or implied by the statements. Many of these risks and uncertainties relate to factors that are beyond Clariant s ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behavior of other market participants, the actions of governmental regulators and other risk factors such as: the timing and strength of new product offerings; pricing strategies of competitors; the Company s ability to continue to receive adequate products from its vendors on acceptable terms, or at all, and to continue to obtain sufficient financing to meet its liquidity needs; and changes in the political, social, and regulatory framework in which the Company operates or in economic or technological trends or conditions, including currency fluctuations, inflation, and consumer confidence, on a global, regional, or national basis. Readers are cautioned not to place undue reliance on these forwardlooking statements, which speak only as of the date of this document. Clariant does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of these materials.