Financial Review FULL-YEAR. 16 February Rothausstrasse Muttenz Switzerland CLARIANT INTERNATIONAL LTD

Transcription

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

2 Page 1 of 16 Key Financial Group Figures Continuing operations: CHF m 2016 % of sales CHF m 2015 % of sales Sales Local currency growth (LC): 2% Organic growth 1 1% Acquisitions/divestitures 1% 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 Discontinued operations: Sales Net income from discontinued operations 12 Other key figures total Group: Net debt Equity (including non-controlling interests) Gearing 60% 53% Return on invested capital (ROIC)** 10.2% 9.7% 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. *** Includes restructuring, impairment and transaction-related costs and gain/loss from the disposal of activities not qualifying as discontinued operations. See details on page 4.

3 Page 2 of 16 FINANCIAL DISCUSSION FULL YEAR Sales and Net Results 2016 Sales increased 2 % in local currency, of which 1 % organic growth. In Swiss francs sales increased with 1 %, compared to the previous year. The gross margin for the full year of 2016 was 30.2 % compared to 30.7 % recorded in the prior-year period, the reduction comes from the impact of exceptional items, excluding this effect the margin was comparable to last year. * Selling, general and administrative costs accounted for 19.4 % of sales and were below the 20.0 % level of the previous year period.* Research and development costs of CHF 206 million in the full year 2016 were consistent with the level recorded in the previous year (CHF 206 million).* Income from associates and joint ventures of CHF 86 million in the full year of 2016 was above the level of the previous year (CHF 76 million). The net financial result was CHF -174 million for the full year of Before foreign currency impacts, the financial result increased to CHF -109 million in the year 2016 from CHF -100 million in 2015 mainly due to changes in the debt profile as well as a one-time currency effect on the Euro Bond interests in Tax expense of CHF 75 million was recorded in the full year of 2016 compared to CHF 73 million tax expense recorded in the prior-year period. The resulting tax rate (22 %) is slightly lower than in the previous year and this is due to several factors including opportunities for the utilization of tax losses, higher profit in low tax jurisdictions and positive one-time events. Net income** amounted to CHF 263 million in the full year of 2016, which was above the CHF 227 million net income reported in the same period of * Includes restructuring, impairment and transaction-related costs and gain/loss from the disposal of activities not qualifying as discontinued operations. See details on page 4. ** from continuing operations

4 Page 3 of 16 Balance Sheet Key Figures December 2016 Total assets increased to CHF billion as of 31 December 2016 from CHF billion at the end of This increase is mainly due to the acquisition on 1 October 2016 of the North American oilfield production chemicals businesses Kel-Tech Inc. and X-Chem LLC and to the cash remaining from the launch of new certificates of indebtedness in April and August Intangibles increased to CHF billion from CHF billion mainly due to the acquisitions made in the United States in the Oil and Mining Services business. CHF 17 million, by the combined effect of actuarial losses on retirement benefit obligations and a positive return on pension plan assets amounting to a negative CHF 89 million, net of deferred tax and by negative currency translation differences amounting to CHF 24 million associated with change in the euro/ Swiss franc exchange rate mainly. Net debt increased to CHF billion as of 31 December 2016, from CHF billion at the end of This figure includes current and non-current financial debts, cash and cash equivalents, near cash assets and financial instruments with positive fair values reported under other current assets. Investments in associates and joint ventures decreased to CHF 516 million from CHF 586 million mainly due to equity repayment and dividends received from Stahl Lux. Gearing, which reflects net financial debt in relation to equity including non-controlling interests, increased to 60 % as of 31 December 2016 from 53 % at the end of December Near cash assets increased to CHF 277 million from CHF 152 million. They include short-term deposits with an original maturity between 90 and 365 days. Current financial debts increased to CHF 957 million as of 31 December 2016 from CHF 394 million at the end of 2015 mainly due to the reclassification from non-current financial debts to current financial debts of the 500 million Eurobond maturing in January 2017 and of the CHF 100 million straight bond maturing in June Additionally, in April 2016, new certificates of indebtedness were launched for a total amount of EUR 300 million with a term of 4 years (EUR 212 million), 7 years (EUR 73 million) and 10 years (EUR 15 million) respectively and in August 2016, new certificates of indebtedness were launched totaling USD 277 million with a term of 5 years and EUR 95 million with terms of 5 years and 7 years. These new certificates of indebtedness offset the impact of the reclassification from non-current financial debts to current financial debts of the certificates maturing in Equity increased to CHF billion as of 31 December 2016 from CHF billion at the end of This was mainly due to the net profit for the period amounting to CHF 263 million, to transactions with non-controlling interests amounting to CHF 29 million and to treasury shares transactions amounting to CHF 24 million, partially offset by a distribution from capital contribution reserves to equity holders amounting to CHF 129 million and to non-controlling interests amounting to Cash Flow Cash flow from operating activities was a positive CHF 646 million for the full-year of 2016 compared to a positive CHF 502 million for the full-year of Working capital increased by CHF 18 million in 2016, compared with an increase of CHF 68 million for the full prior year. Investments in PPE and investments in intangible assets were CHF 297 million and CHF 39 million respectively, for the full-year of 2016 compared to CHF 374 and CHF 27 million respectively, for the full-year of Acquisition of companies, businesses and participations for the full-year of 2016 mainly relates to business acquisitions in the United States in the Oil and Mining business (CHF 354 million), to a business acquisition in India in Personal Care (CHF 53 million) and to the acquisition of the remaining 50 % shares in a consortium in Brazil in the oil and gas business (CHF 8 million). CHF 6 million were spent on smaller scale acquisitions in Italy and in Australia. Financing activities mainly include the sale and purchase of treasury shares, distributions to the shareholders of Clariant and to non-controlling interests, proceeds from transactions with non-controlling interests, proceeds from and repayments of financial debt, and the related interests paid and received.

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 property, plant and equipment Impairment 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) 8 14 Loss/(gain) from the disposal of activities not qualifying as discontinued operations** 3 15 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** 3 15 Operating income before exceptional items * Restructuring, impairment and transaction-related costs 2016: CHF 107 million (2015: CHF 115 million), of which: Costs of goods sold CHF 28 million (2015: CHF 2 million); Selling, general and administrative costs CHF 73 million (2015: CHF 110 million); Research and development CHF 7 million (2015: CHF 2 million); Income from associates and joint ventures CHF 1 million an income (2015: CHF 1 million an expense). **Gain/(loss) from the disposal of activities not qualifying as discontinued operations 2016: CHF 3 million loss (2015: CHF 15 million gain) reported under Selling, general and administrative costs.

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 (2015: 26 %). 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, near-cash assets and financial instruments with positive fair values. Net debt CHF m Non-current financial debt Current financial debt Cash and cash equivalents Near-cash assets Financial instruments with positive fair values 5 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 Near-cash assets 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) 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 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 from continuing operations Attributable to: Shareholders of Clariant Ltd Non-controlling interests Net income from discontinued operations 12 Attributable to: Shareholders of Clariant Ltd 12 Non-controlling interests Net income Attributable to: Shareholders of Clariant Ltd Non-controlling interests Basic earnings per share attributable to the shareholders of Clariant Ltd (CHF/share): Continuing operations Discontinued operations 0.04 Total Diluted earnings per share attributable to the shareholders of Clariant Ltd (CHF/share): Continuing operations Discontinued operations 0.04 Total * includes restructuring, impairment and transaction-related costs and gain/loss from the disposal of activities not qualifying as discontinued operations. See details on page 4.

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 Total items that will not be reclassified subsequently to the income statement, gross Deferred tax on remeasurements 26 6 Total items that will not be reclassified subsequently to the income statement, net 89 1 Net investment hedge 6 66 Cash flow hedge 5 Currency translation differences Share of other comprehensive income of associates and joint ventures 4 1 Effect of the reclassification of foreign exchange differences on previously held net investments in foreign entities 3 2 Total items that may be reclassified subsequently to profit and loss Deferred tax effect Total items that will be reclassified subsequently to the income statement, net Other comprehensive income for the period, net of tax Total comprehensive income for the period Attributable to: Shareholders of Clariant Ltd Non-controlling interests Total comprehensive income for the period Total comprehensive income attributable to shareholders of Clariant Ltd arising from: Continuing operations Discontinued operations Total comprehensive income attributable to shareholders of Clariant Ltd

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 on retirement benefit obligations Return on retirement benefit plan assets, excluding amount included in interest expense Deferred tax on remeasurements Currency translation differences Share in 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 Share buyback of non-controlling interests Clariant (India) Ltd Employee share & option scheme: Effect of employee services Treasury share transactions Balance 31 December Net income Cash flow hedge Net investment hedge Remeasurements: Actuarial 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 in 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 Transactions with non-controlling interests Employee share & option scheme: Effect of employee services Treasury share transactions Balance 31 December

11 Page 10 of 16 Consolidated statements of cash flows CHF m Net income Adjustment for: Depreciation and amortisation Impairment and reversal of impairment 8 14 Impairment of working capital 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 3 15 Loss on disposal of discontinued operations 2 Other non-cash items Total reversal of non-cash items Dividends received from associates and joint ventures Income taxes paid 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 12 7 Changes in provisions (excluding payments for restructuring) 53 7 Cash flow from operating activities Investments in property, plant and equipment Investments in intangible assets Investments in financial assets, associates and joint ventures 8 Sale of property, plant and equipment and intangible assets 43 7 Changes in near-cash assets Change in current financial assets Business acquisitions Proceeds from equity repayment of associates and financial assets 69 Proceeds/ payments associated to disposals of activities not qualifying as discontinued operations 3 74 Cash flow from investing activities Purchase of treasury shares Sale of treasury shares Distributions from the reserves to the shareholders of Clariant Ltd Dividends paid to non-controlling interest Proceeds/ payments associated to transactions with non-controlling interests Proceeds from financial debts Repayments of financial debts Interest paid Interest received Cash flow from financing activities Currency translation effect on cash and cash equivalents 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 4. Acquisition activities 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 None of the new standards, amendments or interpretations effective for the financial year starting 1 January 2016 has a material impact for the Clariant Group and the accounting policies applied are consistent with the ones applied at year-end These consolidated financial statements were approved on 14 February 2017 by the Board of Directors. The preparation of the 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 the 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. Seasonality of operations The Group operates in industries where significant seasonal or cyclical variations in total sales are not experienced during the financial year. 4.1 Acquisition of Vivimed personal care portfolio On 8 January 2016, Clariant acquired the specialty chemicals segment of Vivimed Labs Ltd, India. This acquisition complements Clariant global strategy to enhance its offering in personal care and to boost its presence in Asia. It will also strengthen the active ingredients portfolio of Clariant in India. The estimated consideration totals CHF 53 million. The assets acquired mainly consist of customer relationships, technical knowhow and intellectual properties. The preliminary goodwill generated amounts to CHF 21 million. 4.2 Acquisition of the remaining shares in the consortium with Carboflex. On 13 June 2016, Clariant acquired the Carboflex 50 % stake in the consortium that built and operates a plant in Rio de Janeiro in Brazil to produce chemicals used in oil and gas wells. The purchase price of the remaining 50 % shares totals CHF 11 million out of which CHF 8 million were paid in June 2016 and the remaining CHF 3 million are held back for potential indemnifications for obligations assumed by Clariant on behalf of Carboflex. The assets acquired mainly consist of customer relationship and property, plant and equipment. This transaction was treated as a two-step acquisition. Therefore the 50 % shares already held are re-measured to fair value as well as the acquisition of the remaining 50 % shares. This resulted in a positive income statement impact of CHF 7 million and the generated goodwill is immaterial. 4.3 Acquisition of Kel-Tech Inc. and X-Chem LLC in North America 3. Fair value measurement All derivative financial instruments held by the Group at the end of December 2016 are classified as Level 2 as defined by IFRS 13 Fair Value Measurement. On 1 October 2016, Clariant acquired from Arsenal Capital Partners 100 % of the shares of Kel-Tech Inc. for a total consideration estimated at CHF 224 million, out of which CHF 203 million were paid in The acquired company is based in Midland, Texas, USA and is a manufacturer and supplier of specialty chemicals for production, field stimulation and drilling applications in the oil service business throughout onshore United States.

13 Page 12 of 16 The assets acquired mainly consist of customer relationships, technical know-how, property, plant and equipment and working capital. The preliminary goodwill amounts to CHF 133 million. This is subject to change until the external valuation and the purchase price allocation are finalized in Additionally, on 1 October 2016, Clariant acquired from NCH Corporation the activities of X-Chem LLC in a combined asset and share deal for a total consideration of CHF 140 million. The acquired company is based in Irving, Texas, USA and is a provider of specialty oilfield chemicals for the production, completion and stimulation of oil wells, gas wells and pipelines focused on land and offshore United States. The assets acquired mainly consist of customer relationships, technical know-how, property, plant and equipment and working capital. The preliminary goodwill amounts to CHF 14 million. This is subject to change until the external valuation and the purchase price allocation are finalized in Launch of new certificates of indebtedness On 26 April 2016, Clariant issued four certificates of indebtedness with a total amount of EUR 300 million. These certificates have a term of 4 years (EUR 212 million), 7 years (EUR 73 million) and 10 years (EUR 15 million) respectively. The interest varies between % and %. On 5 August 2016, Clariant issued five certificates of indebtedness with a total amount of EUR 95 million and USD 277 million. These certificates have terms of 5 years (EUR 55 million and USD 277 million) and 7 years (EUR 40 million). The interest varies between % and %, while a tranche of EUR 13 million has a variable interest of 6 months EURIBOR plus 1.1 % and a tranche of USD 166 million has a variable interest of 3 months LIBOR plus 1.5 %. These acquisitions should accelerate Clariant s growth as a leading provider of oilfield production chemicals in North America. 5. Restructuring, impairment and transactionrelated costs During 2016, Clariant recorded restructuring expenses in the amount of CHF 53 million, mainly pertaining to projects in Europe, impairment in the amount of CHF 8 million and transaction-related costs in the amount of CHF 46 million. In the previous year, restructuring, impairment and transactionrelated costs totaled CHF 115 million. 6. Distribution from reserves On 21 April 2016, the Annual General Meeting of Clariant Ltd approved a distribution of CHF 0.40 per registered share from capital contribution reserves. On 28 April 2016, a distribution totaling CHF 129 million was made to Clariant shareholders.

14 Page 13 of Business Area figures Sales to 3rd parties EBITDA before exceptionals EBITDA CHF m % CHF % LC % CHF % LC % CHF % LC 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 % LC % CHF % LC Care Chemicals Catalysis Natural Resources Plastics & Coatings Business Areas total Corporate Total Business Area margins Sales to 3rd parties EBITDA before EBITDA 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) Continuing operations Discontinued operations 12 Total 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) Continuing operations Discontinued operations 0.04 Total Diluted earnings per share attributable to shareholders of Clariant Ltd (CHF/share) Continuing operations Discontinued operations 0.04 Total

16 Page 15 of Finance income and costs Finance income in CHF m Interest income 9 11 Other financial income 3 3 Total finance income Finance costs in CHF m Interest costs thereof effect of discounting of non-current provisions 4 4 thereof interest component of pension provisions Other financial expenses Currency result, net Total finance costs Foreign exchange rates Rates used to translate the consolidated balance sheets (closing rate) 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 globally leading specialty chemicals company, based in Muttenz near Basel/Switzerland. On 31 December 2016, the company employed a total workforce of In the financial year 2016, Clariant recorded sales of CHF billion for its businesses. Clariant s corporate strategy is based on five pillars: focus on innovation through R&D, add value with sustainability, reposition the 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 20 March 2017 Annual General Meeting 27 April 2017 First Quarter 2017 Sales and EBITDA 27 July 2017 Half Year 2017 Results 31 October 2017 Nine Months 2017 Sales and EBITDA Investor Relations Fax Anja Pomrehn Tel Steven Massheder 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 presentation 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 pertain 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.