UPDATE 2-Clariant sees higher margins from slimmer business

Thu Feb 14, 2013 7:43am EST

* Aims to sell more lower-margin businesses this year

* Bolt-on buys possible in China, India, Indonesia

* Economic weakness in Europe squeezes margins

* Raises dividend by 10 percent to 0.33 Swiss francs (Adds CEO comment, analyst, shares)

ZURICH, Feb 14 (Reuters) - Swiss specialty chemicals firm Clariant said on Thursday it expected its slimmed-down business to deliver higher margins and net income next year, with emerging markets providing most of the growth.

The company, which sold three of its lower-margin cyclical units late last year, is looking to streamline further with the sale of leather, detergents and intermediates businesses.

"If we can close this second wave (of disposals) by the end of 2013 I think it will be an excellent result," Chief Executive Hariolf Kottmann told Reuters in a telephone interview.

He said the businesses for sale would be managed independently from the second quarter to obtain standalone financial data which should help better value them.

Clariant's 2015 EBITDA (earnings before interest, tax, depreciation and amortisation) margin target was above 17 percent, compared with 14.9 percent achieved in 2012 and group margins of 14.3 percent a year earlier. It gave no targets for 2013 or 2014.

A 10 percent dividend hike to 0.33 Swiss francs per share, compared with expectations for 0.28 francs in a Reuters poll, helped lift shares over 14 francs, their highest in 18 months.

By 1213 GMT the shares were up 2.2 percent to 13.7 francs, with the Stoxx 600 chemicals index down 0.7 percent.

"Despite the short-term uncertainty regarding economic prospects we believe that the transformational changes of the group will continue and help drive well above industry average earnings per share growth," said Vontobel analyst Patrick Rafaisz, confirming his "buy" rating on the company.

Net income fell 5 percent to 238 million francs, as declines in Europe's economies squeezed margins in cyclical businesses such as additives, hit by weakness in the electronics industry.

Total sales including discontinued businesses rose 5.5 percent from a year earlier, largely due to its $2 billion acquisition in 2011 of Germany's Sud-Chemie.

Kottmann said Clariant planned to cut net debt to 1.3 billion francs this year from 1.79 billion at the end of 2012. He said the company wants a gearing that allows it to get a sustainable BBB, investment grade, debt rating from BB- or junk.

BUY AND SELL

Kottmann said the company was considering bolt-on acquisitions, although nothing the size of Sued-Chemie.

"We are prepared to buy to close technological or regional gaps. An acquisition in China, Indonesia or India has a higher probability of approval than say in Italy, Spain or North America," he said.

He said the company planned no further job cuts this year after cutting staff numbers heavily throughout the financial crisis and trimming further after the Sued-Chemie buy, but said the company could cut project-related costs to 2010-2011 levels now it has integrated Sued-Chemie and met most divestment costs.

In December Clariant sold its textile chemicals, paper speciality chemicals and emulsions units to U.S. private equity firm SK Capital for 502 million francs as part of its effort to retreat from low-margin businesses.

At the end of January, Dow Chemical reported lower- than-expected profit on stumbling international demand for polyurethane and chlorine.

Larger German rivals Bayer and BASF will give more clues on the health of the industry when they report later in the month. ($1 = 0.9193 Swiss francs) (Reporting by Martin de Sa'Pinto; Editing by Louise Ireland)

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