It is not known whether and, if so, when Conrad Keijzer will be going on vacation. The CEO of Clariant certainly deserves a breather. The second year at the helm of the specialty chemicals group has taken a lot out of the Dutchman so far. The company experienced a veritable "Black Monday" on February 14, when Clariant had to postpone the presentation of its financial statements for 2021. Internal whistleblowers had previously sounded the alarm and pointed out possible manipulations. The share, which is represented in the SMIM, plunged by 16% within one day after this news. In the following 3 weeks, Clariant plunged a further 17% to its lowest level since March 2020. Although the Baselbiet-based company was able to present audited financial statements in May, the stock has yet to close the gap. The direction is right: In the meantime, Clariant is trading just under a third above the outlined low.
The review of the books is not the only thing that has kept the management at the Group's headquarters in Muttenz on its toes. Operationally, the company is also going through a turbulent phase. On the one hand, the war in Ukraine is calling into question the business prospects of the cyclical chemicals sector, while at the same time rising costs for raw materials, energy and logistics are weighing on the profit and loss accounts. Clariant has so far coped surprisingly well with this environment. At the end of July, the company reported 2Q2022 sales growth of 29% in local currencies to CHF 1.301 billion. While volume growth contributed 9 percentage points to the rate of increase, price increases had a 20% impact. Currency effects, on the other hand, had a negative impact of 3%. Clariant was once again successful in passing on inflation to customers around the world. Since the end of 2021, the Group has managed to push through double-digit percentage price effects in every quarter (see chart).
In the division, "Care Chemicals" Clariant is growing particularly strongly. High demand for specialty chemicals for personal care products or crop protection products, as well as for coatings, gave the segment a 46% increase in sales in local currency terms in the 2nd quarter. While the catalysts business expanded by 8%, Clariant posted growth of almost a quarter in the "Natural Resources" division. The Group also made significant progress in profitability: at 16.6%, the operating margin (Ebitda level) reached a peak in the first half of 2022, exceeding the previous year's figure by 80 basis points. Clariant also aims to operate more profitably in the current 3rd quarter than a year ago. At the same time, management expects "continued strong year-on-year sales growth in local currencies." The target of significantly higher revenues and margin also applies to the full year. However, the company emphasizes the uncertainties associated with the outlook, such as the Ukraine war or COVID-19.
Regardless of business performance, Clariant's ownership structure is likely to remain an issue. After an agreement the company had with major Saudi shareholder Sabic expired in June, takeover rumors once again made the rounds. In a newspaper interview, Conrad Keijzer now stated that there were no indications that Sabic would increase its stake. The Saudis continue to hold 31.5% of Clariant shares. Whatever the case, the top manager is unlikely to be bored for the time being. Holders of the new softcallable barrier reverse convertibles can follow the performance of the specialty chemicals group with relative calm. Leonteq has launched two variants: In the case of the single BRC on Clariant, the guaranteed coupon is 10% p.a., while the barrier is a low 59% of the initial level. With an identical risk buffer, a multi-structure on Clariant, Covestro and Sika enters the term of a maximum of one year. The payout here is a high 17% p.a.. Both BRCs are denominated in Swiss francs and have a soft callable feature. This means that Leonteq can call and redeem the issues on a quarterly basis. The first time this step is possible is after six months. Please also note that there is no capital protection. As soon as an underlying reaches or falls below the barrier, the investment is exposed to the full price risk of Clariant or the weakest security in the Multi-BRC.
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