October 31, 2018 / 9:36 AM / 18 days ago

Clariant says softer China, Turkish downturn weigh on growth

ZURICH (Reuters) - Switzerland’s Clariant, in which Saudi Basic Industries (SABIC) owns a quarter of the shares, stuck to its full-year outlook despite soft Chinese demand and turbulence in Turkey and Africa that led to slower third-quarter growth.

FILE PHOTO: Chief Executive Hariolf Kottmann and Chief Financial Officer Patrick Jany (R) of Swiss specialty chemicals company Clariant attend a news conference to present the company's full-year results, in Zurich, Switzerland, February 14, 2018. REUTERS/Moritz Hager/File Photo

Third-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) hit 241 million Swiss francs ($239.78 million), the speciality chemicals group said on Wednesday, compared to a 247 million franc average in a Reuters poll.

Sales rose 5 percent in local currencies to 1.6 billion francs, compared to 1.627 billion in the poll, decelerating from the 7 percent second-quarter rate.

Clariant, which took on four new board members from SABIC this month amid the crisis over the killing of a journalist in the Saudi embassy in Istanbul, said its business in China grew only 9 percent, down from 20 percent rates recorded in recent quarters.

Though some customers in China’s electronics industry are braced for a trade war with the United States, Chief Financial Officer Patrick Jany said Clariant was more affected as contracts for its catalysts — chemicals that speed up the manufacturing of other products — that were spurring above-average growth came to an end.

“I understand the concern,” Jany said. “(But) the 9 percent we show now in the third quarter is not a reflection of a significant slowdown. It is probably more the normal days you would expect to have in China.”

Its catalyst sales fell 4 percent, which analysts at Zuercher Kantonalbank said were worse than expected but were offset by a better performance of care chemicals for soaps and by Clariant’s plastics and coatings business.

The shares were up 1.9 percent at 0830 GMT. Clariant shares year-to-date are down more than a fifth.

The Muttenz-based company confirmed its 2018 outlook of achieving sales growth in local currency, higher operating cash flow and an improvement in profit margins.

Still, operating profit as a percentage of sales stagnated at 15 percent in the quarter and at 15.3 percent in the first nine months, shy of the 20 percent it is aiming for by 2021 as it deepens its SABIC partnership.

The slowdown in the Middle East and Africa, where sales slipped 1 percent, was largely driven by Turkey, where a crumbling lira hit results, and South Africa’s recession.

Though Riyadh-controlled SABIC is Clariant’s biggest shareholder, Jany did not foresee much impact should the kingdom face global sanctions over Jamal Khashoggi’s death.

“It may have some repercussions on growth in some markets ... but on our business, no consequence at all,” Jany said. “I think that’s a separate evolution.”

($1 = 1.0051 Swiss francs)

Reporting by John Miller, editing by John Revill and David Evans

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