Clariant delivered strong sales growth and record H1 EBITDA margin

AD HOC ANNOUNCEMENT PURSUANT TO ART. 53 LR

• Q2 2022: Sales from continuing operations grew by 29 % in local currency to CHF 1.301 billion, underpinned by strong pricing and volume expansion
• Q2 2022: EBITDA margin increased to 16.6 % from 15.8 %, supported by operating leverage from strong sales growth, fully compensating raw material, energy, and logistics cost inflation
• H1 2022: Sales from continuing operations increased by 29 % in local currency
  to CHF 2.563 billion
• H1 2022: EBITDA margin increased to 17.0 % from 16.5 % – a record first half year EBITDA margin
• Full Year 2022 Outlook: Strong local currency growth for the Group to around CHF 5.0 billion with the aim to improve the year-on-year Group EBITDA margin
  level in a challenging geopolitical environment

"Throughout the first half year 2022, we continued to generate a significant sales and profitability increase driven by strong pricing and volume growth, fully compensating raw material, energy, and logistic cost inflation. Our new operating model brings a simplified organizational and leadership structure to support the further implementation of Clariant’s purpose-led growth strategy and cultural transformation. Despite significant short-term macroeconomic uncertainties, we confirm our full year 2022 guidance and expect to make progress in operating cash flow generation in the second half of 2022,” said Conrad Keijzer, Chief Executive Officer of Clariant.

Key Financial Data ⁽¹⁾

(1)   Q2 and Half Year 2021 restated. The figures were rounded, and hence, minor reporting deviations might occur
(2)   Total Group including discontinued operations
(3)   Pigments divested on 3 January 2022
(4)   As of 31 December 2021

Second Quarter 2022 – Strong sales growth and profitability improvement

MUTTENZ, JULY 28, 2022

Clariant, a focused, sustainable, and innovative specialty chemical company, today announced its second quarter and first half year 2022 results. In the second quarter of 2022, continuing operations sales were CHF 1.301 billion, compared to CHF 1.032 billion in the second quarter of 2021. This corresponds to an increase of 29 % in local currency, 25 % of which was organic, and 26 % higher sales in Swiss francs. For the fifth sequential quarter, both pricing and volume growth positively impacted the Group sales result by 20 % and 9 %, respectively, while the currency impact was -3 %. The particularly strong sales growth at Care Chemicals and Natural Resources outpaced the expansion at Catalysis.

In the second quarter of 2022, sales expansion was significant in all geographic regions. The 40 % sales growth in North America was followed closely by Latin America with a 39 % increase, underpinned by expansion in all three Business Areas. In Europe, the 29 % local currency growth was driven by strong expansion in Care Chemicals. The 22 % growth in Asia-Pacific was augmented by 25 % expansion in China, at Catalysis in particular. The Middle East & Africa also increased sales by 14 %.

In the second quarter of 2022, Care Chemicals increased sales by 46 % in local currency. This progress was driven by double-digit expansion in Consumer Care and Industrial Applications, especially Crop Solutions, Personal Care, Home Care, and Coatings. Catalysis sales rose by 8 % in local currency, primarily due to expansion in Specialty Catalysts and the emission-control businesses. Natural Resources sales increased by 24 % in local currency with growth attributable to all three Business Units, especially Additives.

The continuing operations EBITDA increased to CHF 216 million, and the corresponding 16.6 % margin clearly exceeded the 15.8 % reported in the second quarter of the previous year. This improvement was propelled by pricing measures that fully offset the increased raw material cost (approximately 36 %), supply chain constraints, and higher energy and logistics cost. Additionally, operating leverage from higher sales, and cost savings (CHF 4 million savings from performance programs) contributed positively to the margin expansion. The absolute EBITDA increased by 33 %, exceeding the underlying CHF 149 million (14.0 % margin) pre-pandemic level reported in the second quarter of 2019.

First Half Year 2022 – Further profitability improvement generated by specialty chemical portfolio, pricing, and cost discipline

In the first half year 2022, continuing operations sales were CHF 2.563 billion, compared to CHF 2.034 billion in the first half year 2021. This corresponds to an increase of 29 % in local currency, 25 % of which was organic, and 26 % in Swiss francs. Both pricing and volume growth had a positive impact on the Group of 18 % and 11 %, respectively, while the currency impact was -3 %.

In the first half year 2022, sales growth exceeded 20 % in local currency in all geographic regions. The particularly strong performance in North America is partly attributable to the weak comparison base of the first half year 2021, which was confronted with an especially challenging environment in Oil Services and weather-related disruptions in the first quarter of 2021.

Care Chemicals sales rose by 45 % in local currency in the first half year 2022 with double-digit sales growth in all key businesses. In Catalysis, the top line was up by 4 % in local currency, propelled by Specialty Catalysts and the emission-control businesses. Oil and Mining Services, Functional Minerals, and especially Additives all contributed to the 27 % local currency sales growth reported at Natural Resources.

The continuing operations EBITDA increased by 30 % to CHF 436 million as the Group improved profitability on the back of notable sales expansion. Continued, successful pricing measures offset raw material price increases of approximately 36 %, and the execution of the performance improvement programs resulted in additional cost savings of CHF 8 million in the first half year 2022. The EBITDA margin increased to a record high 17.0 % from 16.5 % in the previous year due to the continued cost discipline across the Group and the significant profitability improvement in Care Chemicals and Natural Resources, which more than offset the weakness at Catalysis.

In the first half year 2022, the total Group net result was CHF 386 million versus CHF 157 million in the previous year. The net result was lifted by the gain on the Pigments disposal, strong business performance of the continuing operations, and the corresponding margin improvement.

Operating cash flow for the total Group, which is typically lower in the first half of the year, declined to CHF -17 million from CHF 15 million in the first half of 2021. This development was mainly attributable to the inventory buildup needed to meet higher demand levels and to reflect the raw material price impact as well as the uncertainties connected to the unstable logistics chain situation and availability of raw materials. In addition to the typical seasonality, Clariant expects active working capital management to support a positive development in the second half of the year.

Net debt for the total Group decreased to CHF 931 million versus CHF 1.535 billion recorded at the end of 2021. This development is largely attributable to a significant reduction in current and non-current financial debts due to proceeds received from the Pigments divestment in the first quarter of 2022.

Discontinued Operations

On 3 January 2022, Clariant’s Pigments business was divested to a consortium comprising Heubach Group and SK Capital Partners.

As the Pigments business was sold on 3 January 2022, no sales were recorded in the first half year 2022 compared to CHF 449 million in the previous year. The 2022 net result from discontinued operations was a gain in the amount of CHF 197 million, which mainly resulted from the Pigments divestment proceeds, compared to CHF 52 million in the previous year.

ESG Update – Leading in sustainability

Clariant strives to be safe and sustainable in all of its activities. The Group’s efforts center on fighting climate change, creating safe and sustainable chemistry, increasing circularity, fostering a sustainable bioeconomy, minimizing waste, eliminating pollution, and creating social value. This includes fostering the development of employees as well as sustainability in the local communities in which Clariant operates.

Fighting climate change has a particular urgency for Clariant as well as for many of the stakeholders. Therefore, reducing proprietary greenhouse gas (GHG) emissions as well as providing solutions that enable customers to lower their emissions is a particular focus. Clariant continues to implement its 2030 roadmap to achieve its science-based climate targets. Between 2019 and 2030, Clariant targets a 40 % absolute reduction in scope 1 and 2 greenhouse gas emissions and a 14 % absolute reduction in scope 3 greenhouse gas emissions from purchased goods and services. Clariant’s science-based targets are accompanied by intensity reduction targets for the key environmental parameters in its operations. The Group is making good progress on its journey to becoming more resilient and continues to improve its operational footprint and energy sources (i.e. through the investment in renewable energy at our sites – most recently at Tarragona in Spain, Heufeld in Germany, and Bonthapally in India). Clariant’s 2030 target achievement will rely on energy transition and energy efficiency measures.

For Clariant’s customers, determining how much GHG emission is associated with a product along its life cycle is becoming increasingly important. In June, Clariant announced the launch of its product carbon footprint (PCF) calculation tool, ‘CliMate,’ enabling the Group to offer selected product carbon footprint calculations, in line with the ISO 14067 standard.

Another highlight in June was the successful production start of second-generation bioethanol at Clariant’s sunliquid^® production plant in Podari, Romania. The entire offtake is contracted with a multi-year agreement to Shell, a leading global energy company. Clariant’s plant in Podari is creating new jobs as well as business opportunities that will bring economic growth potential to this rural area. The cellulosic Ethanol produced at this plant can be applied as a drop-in solution for fuel blending but also offers further downstream application opportunities for sustainable aviation fuel and bio-based chemicals.

Outlook – Full Year 2022

Clariant aims to grow above the market to achieve higher profitability through sustainability and innovation. The Group concluded its significant portfolio transformation program by divesting Healthcare Packaging in 2019, Masterbatches in 2020, and Pigments in January of 2022. Clariant has become a true specialty chemical company and confirms its 2025 ambition to deliver profitable growth (4 – 6 % CAGR), a Group EBITDA margin between 19 – 21 %, and a free cash flow conversion of around 40 %.

In the third quarter of 2022, Clariant expects to generate continued strong sales growth in local currency versus the prior year, underpinned by expansion in all Business Areas despite a sequential normalization in Care Chemicals and Natural Resources. Clariant is aiming to slightly improve its restated year-on-year margin levels in the third quarter of 2022 via volume growth, continued pricing actions, and cost discipline to counter the continued high raw material, logistics, and in particular energy cost levels.

For the full year 2022, Clariant expects strong growth in local currency for the Group to around CHF 5.0 billion, based on a strong first half year 2022. The current high level of uncertainty resulting from the geopolitical conflicts, suspension of business with Russia, and the resurgence of
COVID-19 are expected to continue to impact global economic growth and consumer demand in the second half of 2022. Clariant expects the high inflationary environment with regard to raw material, energy, and logistics cost as well as supply chain challenges to persist. However, Clariant aims to improve its year-on-year Group EBITDA margin levels via solid revenue growth driven by pricing and continued cost discipline, despite the increasingly challenging economic environment.

Q2 2022 Media Release EN

H1 2022 Financial Review EN

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This media release 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 forward-looking 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.

www.clariant.com

Clariant is a focused, sustainable, and innovative specialty chemical company based in Muttenz, near Basel/Switzerland. On 31 December 2021, Clariant totaled a staff number of 11 537 and recorded sales of CHF 4.372 billion in the fiscal year for its continuing businesses. The company reports in three Business Areas: Care Chemicals, Catalysis, and Natural Resources. Clariant’s corporate strategy is led by the overarching purpose of ‘Greater chemistry – between people and planet,’ and reflects the importance of connecting customer focus, innovation, sustainability, and people.