Clariant Finds Elusive Growth in Consumer-Care Chemicals Market
Oct. 10 (Bloomberg) — Clariant AG said it’s maintaining growth rates at a division supplying chemicals for washing powders, moisturizers and agrochemicals as competitors struggle to sustain orders from clients including Procter & Gamble Co.
Sales at the Industrial and Consumer Specialties unit have increased by 6 percent in local currencies so far this year, excluding Clariant’s aircraft and runway de-icers that are part of the division, said Michael Willome, who oversees the operation.
“Year to date, ICS businesses are doing well,” Willome said in an Oct. 7 interview at the Montreux World Conference on Fabric and Homecare. “We are very pleased with growth. Not booming, but stable.”
Leading consumer-care chemical providers, including BASF SE and Croda International Plc, are battling stagnant demand as cosmetic and household-detergent makers restrict the number of newly formulated products introduced into the market. Clariant is a newer entrant to the market, supplying a broad range of surfactants and emulsifiers that leave it less focused on the high-margin, niche active ingredients on which Croda has built its strategy upon.
Croda’s consumer-care division reported 0.3 percent sales growth at constant currencies in the first half.
European specialty chemical makers are also having to contend with Indian competitors that have become increasingly innovative and competitive, Willome said. Clariant’s care- chemicals business is mostly made up of Willome’s ICS.
Dirt Remover
In the drive to acquire new contracts, the Muttenz-based chemicals maker is pushing up against rivals such as Evonik Industries AG and Solvay SA. Clariant is currently “most excited” by a soil-release polymer used in washing powders, the executive said.
Growth in Care Chemical sales, excluding de-icing solutions, was in the high-single digit range in the first quarter in local currencies, and about 5 percent in the second quarter, according to the company. It’s now Clariant’s second- largest division — with sales last year of 1.6 billion francs ($1.65 billion) or 26 percent of the total — and also the most profitable with a 14 percent margin. Sales of de-icing chemicals have fallen this year amid warmer temperatures.
Care Chemicals are center stage in Chief Executive Officer Hariolf Kottmann’s transformation of the company, whose roots date back about 150 years. Kottmann has sold lower-margin commodity chemical units and moved into new markets such as catalysts.
M&A Target
Clariant’s refocus could result in the company attracting the interest of potential acquirers, according to JP Morgan analysts Ben Scarlett and Martin Evans. Mergers and acquisitions within the European chemical industry are poised to accelerate, and Clariant’s “robust” performance and valuation at 6.7 times enterprise value to earnings before interest, taxes, depreciation and amortization make it attractive, they said.
“Clariant could be viewed by the market as a potential target, given its strong positions in consolidated, niche markets, for example catalysts, specialty surfactants,” Scarlett and Evans said in the note today.
Clariant, which will report third-quarter earnings on Oct. 30, traded 2.2 percent lower today as of 12:28 p.m. in Zurich, amid a general decline in equity markets.
To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net Andrew Noel, Robert Valpuesta
