Financial Summary Key Figures 2011 2010 CHF m CHF m Sales 7 370 7 120 EBITDA before exceptionals 975 901 EBITDA margin before exceptionals (%) 13.2 12.7 Net income 251 191 Basic earnings per share 0.86 0.81 Operating cash flow 206 642 Investment in property, plant and equipment 370 224 Research & development costs 176 135 Total assets 9 081 5 921 Total equity 3 026 1 806 Equity ratio (%) 33.3 30.5 Net financial debt 1 740 126 Gearing ratio (%) 1 58 7 Employees 22 149 16 176 1 et financial debt to equity N Sales by Business Unit Sales by Region CHF m CHF m Total 2011: 7 370 Total 2011: 7 370 Industrial & Consumer Specialties 1 473 20 % Europe 3 029 41 % Masterbatches 1 124 15 % Middle East & Africa 642 9 % North America 958 13 % Pigments 973 13 % Textile Chemicals 675 9 % Latin America 1 144 15 % Oil & Mining Services 620 8 % Leather Services 265 4 % Performance Chemicals1 1 293 18 % Asia/Pacific 1 597 22 % Functional Materials 2 456 6 % Catalysis & Energy2 491 7 % 1 erformance Chemicals includes the Business Units Additives, Detergents & Intermediates, P Emulsions, Paper Specialties. 2 ay – December 2011 M Cover photo The cover photo was taken at St. Jakob-Park in Basel, home of the 14-time Swiss football champions, FC Basel. Stadium seats can be made with products from three of Clariant´s Business Units: Additives, Masterbatches and Pigments. Proﬁtable Growth under Way Their products provide, amongst other things, vibrant color; block light with their UV stabilizers; repel dust withClariant Annual Report 2011 Annual Report 2011 CLA_GB11_Umschlag_E_jsc.indd 1 17.02.12 14:22 their antistatics; and fight fire with their flame retardants.
Business Units in 2011 Additives Emulsions Key Figures 2011 Key Figures 2011 See Performance Chemicals. See Performance Chemicals.The Additives Business Unit is an important supplier of products with func- The Emulsions Business Unit is one of the leading suppliers of latex/polymertional effects for plastics, coatings, and printing inks. The product range in- dispersions for paints, coatings, adhesives, sealants, and for the textile, leath-cludes flame retardants, waxes, and polymer additives for effects in plastics, er, and paper industries. These water-based and therefore environmentallyvarnishes, and other applications. compatible products give colors luminosity and durability.www.additives.clariant.com www.emulsions.clariant.com Catalysis & Energy Functional Materials Key Figures 20111 Key Figures 20111 Sales (CHF m) 491 Sales (CHF m) 456 EBITDA before exceptional items EBITDA before exceptional items (CHF m) 107 (CHF m) 59 Employees 2 659 Employees 2 829Catalysis & Energy has been part of the Clariant Group since the acquisition of Functional Materials has been part of the Clariant Group since the acquisi-Süd-Chemie in 2011. This Business Unit holds a leading position as a producer tion of Süd-Chemie in 2011. This Business Unit is among the market leadersof catalysts for the chemical, petrochemical, polymer, refinery, and auto otive m in specialty products and solutions for improving product and efficiency char-industries. It also supplies products into environmental markets and sells acteristics in various industries including adsorbents, solutions for protectiveenergy storage materials such as for lithium-ion batteries. packaging, and water treatment.www.catalysis-energy.clariant.com www.functionalmaterials.clariant.com Detergents & Intermediates Industrial & Consumer Specialties Key Figures 2011 Key Figures 2011 See Performance Chemicals. Sales (CHF m) 1 473 EBITDA before exceptional items (CHF m) 251 Employees 1 801Detergents & Intermediates is one of the most important producers of key raw The Industrial & Consumer Specialties Business Unit has the highest salesmaterials for detergents and household cleaners. It is also an important sup- volume in the Clariant Group and is one of the largest providers of specialtyplier of chemical intermediates used specifically for producing agrochemicals chemicals and application solutions for consumer care and industrial marketsand pharmaceuticals. such as the agricultural, metalworking, machine-building, and aircraft indus-www.detergents-intermediates.clariant.com tries. Its EcoTain® label exemplifies its uncompromising pursuit of the principle of environmental sustainability. www.ics.clariant.com ay – December 20111 M
Leather Services Paper Specialties Key Figures 2011 Key Figures 2011 Sales (CHF m) 265 See Performance Chemicals. EBITDA before exceptional items (CHF m) 26 Employees 595Leather Services is a leading producer of chemicals and services to the leather in- Paper Specialties is one of the largest manufacturers of products for optical bright-dustry. The Business Unit offers chemical and technical solutions for the complete ness, color, coating, and thickness of paper and thus helps improve the optical andleather production process, from beamhouse to finishing. functional properties of all types of papers and board with its focused product of-www.leather.clariant.com fering. www.paper.clariant.com Masterbatches Pigments Key Figures 2011 Key Figures 2011 Sales (CHF m) 1 124 Sales (CHF m) 973 EBITDA before exceptional items EBITDA before exceptional items (CHF m) 129 (CHF m) 210 Employees 3 091 Employees 1 928Clariant Masterbatches is a leading manufacturer of dye and additive concentrates The Pigments Business Unit is a leading global provider of organic pigments, pig-and technical composites for the plastics industry, and supplies the packaging, con- ment preparations, and dyes, which are used for coatings, printing, plastics, andsumer goods, medical, textile, and automotive industries. other special applications. These include high-performance pigments and dyes forwww.clariant.masterbatches.com ink jet and laser printers. www.pigments.clariant.com Oil & Mining Services Textile Chemicals Key Figures 2011 Key Figures 2011 Sales (CHF m) 620 Sales (CHF m) 675 EBITDA before exceptional items EBITDA before exceptional items (CHF m) 72 (CHF m) 34 Employees 1 000 Employees 2 096The Oil & Mining Services Business Unit is one of the most significant provid- Clariant’s Textile Chemicals Business Unit supplies specialty chemicals for the pre-ers of products and services to the oil, refinery, and mining industries. The treatment, dyeing, printing, and finishing of textiles and improves the properties ofbroad and diverse product range includes chemical solutions for deep wa- garments and other textiles such as high fashion fabrics, home textiles, and specialter exploration to refining which help to reduce costs and improve production technical fabrics.efficiency. www.textiles.clariant.comwww.oil.clariant.com or www.mining.clariant.comPerformance Chemicals Performance Chemicals includes the Business Units, Additives, Detergents & Inter-Key Figures 2011 mediates, Emulsions, and Paper Specialties.Sales (CHF m) 1 293EBITDA before exceptional items (CHF m) 177Employees 2 141
1IndexL etter to Shareholders Page 02Profitable growth under way Page 08Financial Review Page 14 15 Results of operations, financial position, and net assets 19 Segment analysis 26 Extract of cash flow statement 31 Outlook 33 The Executive CommitteeDrivers for profitable growth Page 36 36 Portfolio Management 42 Global Positioning 46 Innovation, Research & Development 52 Sustainability at Clariant 60 Clariant ExcellenceC orporate Governance Page 70Compensation Report Page 86Consolidated Financial Statements of the Clariant Group Page 99 99 Consolidated balance sheets Financial Statements of Clariant Ltd, Muttenz 100 Consolidated income statements 160 Clariant Ltd balance sheets 100 Consolidated statements 161 Clariant Ltd income statements of comprehensive income 162 Notes to the financial statements of Clariant Ltd 101 Consolidated statements of changes in equity 170 Appropriation of available earnings 102 Consolidated statements of cash flows 171 Report of the statutory auditor 103 Notes to the consolidated financial statements 172 Forward-looking statements 158 Report of the statutory auditor Review of Trends 159 Five-year Group overview
2 Clariant Annual Report 2011 Letter to Shareholders Dear Shareholders, 2011 was an important year for Clariant in terms of our transformation from restructuring to sustainable profitable growth. Following the sometimes painful but necessary cutbacks in 2009 and 2010, when we were forced to over- come additional obstacles created by the financial crisis, we posted a successful performance in 2010, aided by a strong economic tailwind. We have made further progress in 2011. Despite the fact that the global financial crisis cooled industrial demand significantly in the second half of the year, Clariant reported another excellent year with sales increases of 16 percent in local currencies or 4 percent in Swiss francs and the best profitability in ten years. The strong growth was driven by price increases and by Süd-Chemie sales, which were consolidated for the eight- month period following the acquisition of the company in April 2011. Overall group sales reached CHF 7.37 billion and EBITDA margin before exceptional items increased to 13.2 percent versus 12.7 percent in 2010. Profitable growth under way We will continue to gradually and systematically implement the efforts we began three years ago. We created the foundation for profitable growth in Phase 1 by executing the cash-generating, cost-cutting, and complexity-reducing measures as part of the Project Clariant program. At the end of 2009, Clariant entered Phase 2 with the launch of Clariant Excellence, the company-wide initiative that focuses on continuous improvement and value enhancement. We are now in the process of changing the philosophy that governs our day-to-day business activities and integrat- ing a culture of continuous improvement into all business units based on Operational Excellence, Commercial Excel- lence, Innovation Excellence, and People Excellence. After benefits at a total of CHF 63 million in 2009 and 2010, the company has been able to achieve further benefits of more than CHF 100 million in 2011 through a large number of projects at all levels. 2011 saw the focus shift for the first time to strengthening our Innovation Excellence and taking the first steps in People Excellence. We will continue these efforts in 2012 in order to achieve new savings of more than CHF 60 million each year through Clariant Excellence. Further cost reductions totaling CHF 60 million are expected by mid-2013 after comple- tion of the production network optimization under the Global Asset Network Optimization (GANO) program as part of Project Clariant. We entered Phase 3 of our strategy plan in 2011: Its goal being to sustainably increase value based on long-term profitable growth. The emphasis is on continually improving profitability in all business units, focusing on innova- tion, expanding our already strong competitive position in the growth markets of Asia and Latin America, and optimizing our company portfolio.
Letter to Shareholders 3 Acquisition of Süd-Chemie – a great opportunity for Clariant The takeover of Süd-Chemie in 2011 is of great significance in the transformation of the company. Through this transaction, we acquired two attractive high-margin businesses. Our newly acquired segments – Functional Materi- als and Catalysis & Energy – posted EBITDA returns of just under 13 and approximately 22 percent, respectively, in 2011. In view of the ongoing economically turbulent times, it is remarkable that Süd-Chemie was able to gener- ate a very stable margin even during the last global recession of 2008 – 2009. Süd-Chemie also has an excellent track record in future technologies and innovations. Overall, Clariant has increased Group sales and earnings by about one fifth through this acquisition. The integration of Süd-Chemie is progressing as planned. We project that integration-related synergies and Clariant Excellence initiatives from the integration will lead to an additional rise in EBITDA of CHF 90 to 115 million by 2013. Solid balance sheet structure Even after this major acquisition, Clariant has a solid balance sheet structure that will enable us, to effectively increase our own investments in the future of the company in the coming years. The willingness of the capital market to participate in the financing package that Clariant put together in the course of the takeover was cru- cial in this regard. This was not a foregone conclusion since the deal involved a total financing volume of about CHF 2.5 billion. We strengthened our equity base through a capital increase that raised the equity ratio to 33.3 per- cent, slightly above the previous year’s 30.5 percent level. We also refinanced all our commitments with long-term financing at attractive conditions. We will work hard in 2012 and in subsequent years to reduce our net financial debt rapidly and substantially. Our vision for 2015 Clariant has set ambitious goals for the years through to 2015 in expectation of a moderate upward trend in the global economy and stable exchange rates. By implementing the measures from the strategy initiatives Project Clariant and Clariant Excellence, we aim to improve the profitability of the company and all business units. We will also increase investments in the Group’s technology and innovation, as well as expand the innovation pipeline significantly by implementing Innovation Excellence. The focus will be on broader expansion into the fast-growing emerging market regions. The company will in particular increase its market share in China, India, and Brazil. The profitability of the current portfolio will be analyzed on a continuous basis. We will also make targeted acquisitions in the future to strengthen the product pipeline and the company’s regional presence, but we will also consider divestments. By implementing these basic strategic goals for 2015, Clariant aims to increase Group sales to more than CHF 10 billion. The EBITDA margin before exceptional items is projected to rise to above 17 percent, and Return On Invested Capital (ROIC) is expected to be higher than the industry average.
4 Clariant Annual Report 2011 A challenging 2012 The fiscal year 2012 will play a major role in these developments. An accurate forecast for this year is difficult to make, given the high level of economic uncertainty. We will monitor the conditions very closely and respond rapidly, where necessary. Should the expectations of most economic experts prove correct – namely, that the world economy, driven by impetus from the emerging markets, will return to solid growth in the course of the year – then Clariant is also confident that it will be able to increase sales and earnings for 2012. We are confident we will improve the performance of the company after a slow start in 2012, given the current economic slowdown. The integration of Süd-Chemie has increased the percentage of the Group’s less cyclical activities markedly to about 50 percent. This makes us stronger and more able to resist economic fluctuations. A bitter note in 2011 was the performance of the Clariant share price, which was disappointing for us. After a sharp rise in 2010, the stock market still categorizes us as a highly cyclical company. We must address this issue in prov- ing the sustainability of our performance. We will continue focussing our efforts to increase the value of the Clariant Group. We would like to thank our shareholders for their trust, especially in these difficult times. We would also like to express our gratitude to all employees of the Clariant Group around the world for their excellent work and high level of commitment. They have played a key role in getting our company back on track to success. 2012 will be another year full of challenges. We are well equipped and will step up our efforts to make Clariant a specialty chemicals company that is a global leader in innovation, productivity, and competitiveness. Yours sincerely, Jürg Witmer Hariolf Kottmann Chairman, Board of Directors Chief Executive Officer
Letter to Shareholders 5Jürg Witmer Hariolf KottmannChairman, Board of Directors Chief Executive Officer
6 Clariant Annual Report 2011
7Yolanda Garcia, R&D Department Special DyesUsing 92 percent less water and remarkably littleenergy to achieve a higher standard of quality in avast array of colors. Environmentally minded andfashion aware: Thanks to Advanced Denim’s Pad/Sizing-Ox dyeing process, an innovative solution ofthe Textile Chemicals Business Unit, dyeing jeanshas become far more environmentally compatible.
8 Clariant Annual Report 2011 Profitable growth under way Clariant was able to sustain the 2010 performance and to reap further rewards from the restructuring measures of recent years in 2011. However, increases in profitability and organic and external growth were slowed by a gloomy economic environment. 2011 objectives achieved despite difficult Operating margin development since 2000 environment Clariant has made significant progress in 2011 in consistently pursu- Disciplined and fast strategy execution is starting to be ing its strategic goal of sustainable profitable growth as it expanded reflected in margin progress1 % its EBITDA margin before exceptional items from 12.7 percent in 2010 to 13.2 percent in 2011. After adjustment for negative cur- 2011 9.7 rency effects, Group sales were up by 16 percent and EBITDA before 2010 9.8 exceptional items rose by 8 percent year on year. The significant 2009 4.1 cooling in industrial demand in the second half of the year due to the 2008 6.6 global financial crisis should, of course, be taken into account here. 2007 6.3 A crucial factor in this regard is that the company was able not only 2006 6.9 to safeguard the achievements of the tough restructuring process of 2005 6.3 2009 to 2010 but also to expand them at almost all levels and in all 2004 7.4 Business Units. The efforts of the past few years have increasingly 2003 7.2 started to pay off. Savings resulting from optimization of the produc- 2002 7.4 tion network through Global Asset Network Optimization (GANO), 2001 6.4 for example, totaled about CHF 60 million up to 2011. 2000 10.7 0 3 6 9 12 EBIT margin before exceptional items 1 This shows that none of the companies in the Clariant Group is rest- ing on its laurels; rather, all are working systematically to realize the long-term goal of sustainable profitable Group-wide growth. After all, the targets for the fiscal year 2015 are high: Group sales are ex- pected to increase to more than CHF 10 billion, assuming moderate economic growth and stable currencies, while the EBITDA margin (before exceptional items) is projected to climb to above 17 percent.
Profitable growth under way 9A positive factor in the year just ended was that Clariant was able Five-year comparison:to pass on significantly higher raw material costs in their entirety. Trend in ratio of net working capital to sales %Clariant also made good on its promise to strengthen its portfolioand future potential through external growth by acquiring Süd- 2011 19.6Chemie in April. The key operating data for the Süd-Chemie trans- 2010 15.9action demonstrate that this acquisition will have a very positive 2009 21.1effect on Clariant. The two newly acquired businesses, Functional 2008 23.8Materials and Catalysis & Energy, posted in 2011 EBITDA returns 2007 25.5 0 5 10 15 20 25 30of just under 13 and approximately 22 percent, respectively, whichis already a very good sign. Clariant will benefit fully from thisacquisition in 2012 since Süd-Chemie will then be consolidated for Efforts to establish stable cash generation also focus on the area ofthe first time on a full-year basis. Clariant also projects that inte- working capital management. The 19.6 percent ratio of net workinggration-related synergies and Functional Excellence initiatives from capital to sales as of 31 December 2011 met the Group’s target of 20integration will lead to additional growth in EBITDA of CHF 90 to 115 percent. Return on invested capital (ROIC), another important Groupmillion by 2013. The first significant effects are expected to emerge indicator, was affected in 2011 by the consequences of the major ac-as early as the new fiscal year. quisition of Süd-Chemie. The value at year-end of 13.1 percent was thus significantly below the previous record level of 18.1 percent from 2010, however still above long-term industry average.Focus on management of net working capitalClariant has also taken important steps in 2011 with regard to itsbalance sheet. It was possible to finance the Süd-Chemie takeover Strategic Reviewon the capital markets in a very short time, even given the totalinvestment volume of about CHF 2.5 billion. This involved raising On a clearly defined growth path as plannedequity through a capital increase as well as bringing in outside The transformation process launched in 2008 is progressing ascapital. In this case, the maturity pattern of the loans was markedly planned. This will take the Clariant Group from the restructuringimproved by utilizing various financing instruments, such as issuing initiatives of the past few years to a new level as a specialty chemi-bonds or certificates of indebtedness, which also resulted in favor- cals company that is a global leader in innovation, productivity andable conditions for Clariant in an extremely volatile environment. competitiveness with sustainable profitable growth. The company isThe investor confidence indicated by this underlines the fact that the following a clearly defined three-phase strategy to this end.capital markets have fully acknowledged the company’s successes.Nonetheless, there is still work to be done. Although the equity ratiowas solid at 33.3 percent at the end of 2011 and the gearing ratio of58 percent was also respectable, Clariant will work hard in the com-ing years to reduce net financial debt, which has risen to CHF 1.7billion as a result of the acquisition.
10 Clariant Annual Report 2011 Restructuring phase largely completed Cost cutting (excl. acquisition of Süd-Chemie): Phase 1 of the strategic realignment of the Clariant Group was car- › The total number of employees in the Clariant Group was reduced ried out primarily in 2009 and 2010 and involved implementing an by about 20 percent. extensive restructuring program. Under the Project Clariant heading, As part of Global Asset Network Optimization (GANO), the closure a large number of steps were taken, focusing on cash generation, of 20 sites worldwide was announced and is scheduled to be fully cost cutting and making Group structures leaner. implemented by mid-2012. Finalization of these measures will lead to further reductions in costs totaling CHF 60 million by mid-2013. Solid success has been achieved, as indicated by the trend in the key company indicators: Reduction of complexity: › The number of Business Units was streamlined, and the global ser- Cash generation: vice organization was consolidated at eight locations. › The ratio of net working capital to sales was reduced to 19.6 per- › A decision was made to realign Research and Development (R&D) cent by the end of 2011, down from 23.8 percent at the end of 2008. with new research headquarters in Frankfurt and branches in core The internal long-term group target for this value was set at below regions. This has already been implemented for the most part. 20 percent. Clariant on the road to sustaining profitable growth Restructuring › Cash generation › Cost cutting ete Implementation of restructuring Compl › Complexity reduction Result: Establish a solid base for profitable growth Continuous improvement Clariant Excellence program Continue program/ › Operational Excellence › Commercial Excellence Sustain achievements › People Excellence › Innovation Excellence Result: Sustainable productivity improvement Profitable growth › Improve profitability of existing portfolio › R&D and Innovation › Growth in emerging markets › Strengthen portfolio by selective acquisitions Result: Growth of profitable business portfolio 2009 2010 2011 2012 Cost focus Portfolio focus
Profitable growth under way 11The restructuring phase is largely complete, although some of the to improve the operating margin by an additional one to two percent-announced efficiency improvements will take until 2012 to imple- age points. Finally, Clariant also launched the Clariant Supply Chainment. System (CSS) initiative in early 2011 to enhance customer service, cash and working capital along the entire value chain.Clariant Excellence – a culture of continuous improvementAt the end of 2009, Clariant signaled the start of Phase 2 by launch- Clariant Excellenceing the company-wide Clariant Excellence initiative. With LeanSig- Innovation Excellence: Commercial Excellence:ma processes at its core, Clariant Excellence is designed to enhance Promoting new ideas and solutions Empowering sales and marketingcompetitiveness by improving efficiency and creating value. The for profitable growth to offer the best customer servicecompany is creating a culture of continuous improvement based on and valuefour pillars of Operational, Commercial, People, and Innovation Ex- LeanSigmacellence. Clariant has also put in place internal control mechanismsto maintain what has already been achieved. More than 3 000 em-ployees were designated as “belts”, i.e., project managers or project Operational Excellence: People Excellence:staff, trained specifically for tasks in connection with the Excellence Striving for optimum efficiency across Enabling our people to achieve all of our operating processes a culture of continuous improvementProgram, and entrusted with its implementation within the Group.Süd-Chemie employees will also be included in this process from2012. The sustainable value enhancement phase has begun We entered Phase 3 of our strategy plan in 2011: sustainably in-After saving a total of CHF 63 million in 2009 and 2010, the company creasing value based on long-term profitable growth. The focus is onhas been able to achieve further benefits of more than CHF 100 mil- four strategic pillars:lion in 2011 through a large number of projects at all levels. In 2011, › Ongoing improvement in the profitability in all Business Unitsthe focus was for the first time on strengthening our Innovation Ex- › Focus on innovationcellence and taking the first steps in People Excellence. The stated › Expansion and exploitation of Clariant’s strong competitive positiongoal is to make Clariant a global innovation leader and to be able to in the Asian and Latin American growth marketsrely on a well trained and coordinated team of employees. › Optimization of the company portfolio.In 2012 and the coming years, we will continue these efforts in or-der to achieve new savings of more than CHF 60 million each yearthrough Clariant Excellence. These figures are specifically supportedby a number of initiatives that have already been launched: For ex-ample, the Clariant Production System (CPS) was introduced in 2010to achieve optimum productivity and financial performance in theproduction units of all Business Units. The goal is to achieve pro-ductivity increases ranging between 8 and 10 percent. The ClariantCommercial System (CCS) was also established in 2010. This is aninitiative to optimize sales and marketing processes and is designed
12 Clariant Annual Report 2011Christian Steib, Technical Marketing ManagerSoccer is one of the most beautiful games in the world.And for most boys probably the universe. In its AdditivesBusiness Unit, Clariant has developed licocene®, a poly-mer that has revolutionized the manufacture of artificialturf. The turf is fully recyclable and extremely hardwearing. Clariant donated the first artificial pitch withthis technology in Germany to the Feuerbach children’scenter in Stuttgart in 2011.
14 Clariant Annual Report 2011 Financial Review Given the challenging economic conditions the results achieved in 2011 are a good performance and reflect the sustainable profitability increase achieved by Clariant. Business performance review 2011 General conditions Summary statement for business year 2011 Global economic growth slows significantly at end of 2011 For Clariant 2011 was marked by the acquisition of Süd-Chemie According to data from the International Monetary Fund (IMF), AG, the slowdown in economic growth over the course of the year, the global economy grew 4 percent in 2011, but was unable and highly negative currency effects. Group sales totaled CHF 7 370 to sustain the dynamic growth of 2010. Moreover, economic growth million, slightly higher compared to 2010. After adjustment for weakened significantly in the second half of the year. The devel- acquisitions (particularly Süd-Chemie) and negative currency opment of the global economy was driven primarily by the emerg- effects, the company has achieved an organic growth of 2 percent. ing markets, while the industrial nations lost momentum. The Profitability as a percentage of the operating result (EBITDA) before gross domestic product of the emerging countries rose 6.4 percent exceptional items improved to 13.2 percent from 12.7 percent. These in 2011, whereas the IMF reported growth of only 1.6 percent for good results were achieved on the back of the success of the Project the industrialized world. In the wake of the euro crisis, Europe Clariant and Clariant Excellence initiatives that were launched in 2009. (+ percent) is wrestling with the unresolved problems of the 1.6 Clariant reached its goal of setting the company on a profitable debt-ridden southern European states. Impetus for growth was growth path. It will continue to pursue this strategy systematically also lacking in the US economy (+ 1.5 percent) due to a high govern- based on the sound operational and financial foundation already es- ment deficit. The emerging markets were exposed to much lower tablished in order to attain the ambitious objectives for 2015, which economic risks. Although experiencing inflationary tendencies the include increasing the EBITDA margin before exceptional items to emerging economies in Asia, in particular, continue to grow at about 17 percent, provided that there is a stable economic environ- a high rate. China’s economy experienced 9.5 percent growth in ment. Clariant will take further important steps in this direction in 2011, according to IMF figures, while India advanced by 7.8 percent. 2012, although there are still uncertainties regarding precise fore- The economies of the two other BRIC countries – Russia (+ 4.3 per- casts due to the effects of the global financial crisis on the world cent) and Brazil (+ 3.8 percent) – also posted robust expansion. economy. The massive revaluation of the Swiss francs against major curren- cies was stopped with the intervention of the Swiss National Bank, which set a floor of the value of the Swiss franc at an exchange rate of at least CHF 1.20 per Euro. On a year on year comparison how- ever the Swiss currency has appreciated significantly compared with most local currencies that are crucial for Clariant. Chemical industry in 2011: Positive year with weaker finish The chemical industry as a whole and specialty chemicals in particu- lar also exhibited positive growth trends, driven by a still positive economic environment. Global chemical production increased by
Financial Review 15“ lariant was able to further improve its result and has established C a sound financial foundation.” Patrick Jany, Chief Financial Officer about the same magnitude, proportionately, as the global economy. Since 1 May 2011, the sales and results of Süd-Chemie’s Catalyst Impetus for growth came primarily from the EMEA (Europe, Middle business and its Adsorbent & Additive unit have been included in the East & Africa) region, North America, and Asia. Growth was based Clariant Group’s consolidated financial statements. On 1 July 2011 in large part on the extremely dynamic development in some areas these businesses were renamed Catalysis & Energy (catalysts) and in the first six months of the year. In the second half of the year, Functional Materials (adsorbents and additives). Clariant therefore however, the slowdown in industrial production across all regions has twelve instead of ten Business Units, and Clariant’s external re- triggered by economic conditions manifested itself in declining de- porting structure now includes nine segments instead of the seven mand. Europe was affected and experienced stagnating growth as that existed in 2010. of the third quarter after a definite uptrend at the beginning of the year. Momentum in the emerging Asian markets also slowed. By the Results of operations, financial position, end of the year, Japan’s chemical industry reported definite signs of and net assets recovery after the sharp downturn caused in the aftermath of the tsunami in March. Analysis of sales, margins, and costs The price levels for both raw materials and finished products also Key figures rose significantly, but stabilized after a peak in the mid of 2011. In CHF m 2011 2010 Change in % the second half of 2011 a significant de-stocking could be observed Sales 7 370 7 120 4 in several industries (Leather, Plastics, Coatings). Because of the Gross profit on sales 1 968 1987 – slowdown in industrial production, which was more pronounced to- EBITDA before exceptional items 975 901 8 ward year-end, the last six months of the year were characterized by Margin (%) 13.2 12.7 – stagnation in annualized chemical production. EBIT before exceptional items 717 696 3 Margin (%) 9.7 9.8 – Changes in the reporting structure EBIT 507 366 39 On 16 February 2011 Clariant AG announced a series of transac- Financial result – 173 – 123 41 tions, pursuant to which it acquired the specialty chemical company Income before taxes 334 243 37 Süd-Chemie AG at an aggregate enterprise value of approximately Net income 251 191 31 CHF 2.5 billion. Süd-Chemie AG was acquired partially in exchange Basic earnings per share 0.86 0.81 6 for cash and partially in exchange for newly issued Clariant shares. The last step in the acquisition of Süd-Chemie AG was concluded Earnings situation shaped by organic and external growth, with the squeeze-out of the remaining Süd-Chemie AG minority efficiency increases, and currency translation charges shareholders, the successful completion of which was announced on After the dynamic growth of 2010, Clariant was still able to post 1 December 2011. Clariant now controls 100 percent of the shares a solid performance in 2011 despite differing demand in the indi- in Süd-Chemie AG. vidual Business Units. It is important to emphasize that the less cyclical Business Units – Catalysis & Energy, Functional Ma- terials, Oil & Mining Services, Industrial & Consumer Special- ties, and Additives – reported much stronger growth than Mas- terbatches, Pigments, Textile Chemicals, Leather Services and Paper Specialties, areas in which business is cyclical in nature. The last three segments were also negatively impacted by structural
16 Clariant Annual Report 2011 problems. Due to the positive economic environment, especially Group sales – Five-year overview in the first half of the year, the Clariant Group realized significant CHF m improvements in local currencies. In addition, the consolidation of 2011 7 370 the newly acquired businesses of Süd-Chemie translated into appre- 2010 7 120 ciable external growth. Thanks to their strong growth, the emerging 2009 6 614 markets generated additional momentum in the industrialized coun- 2008 8 071 tries, although the latter grew at a significantly lower rate. Profit- 2007 8 533 ability was further improved by the efficiency improvements initiated 0 2 000 4 000 6 000 8 000 10 000 in the previous periods. Sales by Reporting Segment Sales in local currencies increased by 16 percent – organic CHF m growth at 2 percent Industrial & Consumer 2011 1 473 Group sales totaled CHF 7 370 million in 2011, slightly above the fig- Specialties 2010 1 526 ure reported for 2010. This represents a 4 percent increase over the 2011 1 124 Masterbatches previous year. In local currencies, much stronger Group sales growth 2010 1 260 of 16 percent has been achieved. The lower rise in sales in Swiss 2011 973 Pigments francs is the result of the substantial appreciation of the Swiss 2010 1 168 franc against the major world currencies. While sales volumes 2011 675 Textile Chemicals decreased below the prior-year level by the end of the year after 2010 821 a sharp rise in the first half, increases in selling prices had a positive 2011 620 Oil & Mining Services effect on sales revenue. This made it possible to fully compensate 2010 604 the rise in raw material prices. External growth also played a very 2011 265 Leather Services important role. It was driven primarily by the recently acquired activi- 2010 326 ties of Süd-Chemie AG, which contributed CHF 948 million in sales Performance 2011 1 293 during the eight months of consolidation. Adjusted for this factor and Chemicals 2010 1 415 for negative currency effects, Clariant would have posted an organic 2011 456 Functional Materials1 sales increase of 2 percent in local currencies. 2010 – 2011 491 Catalysis & Energy1 The individual Business Units reported very different levels of de- 2010 – mand for their products in 2011. The less cyclical Business Units 1 ay – December 2011 M – Catalysis & Energy, Functional Materials, Oil & Mining Services, Industrial & Consumer Specialties, and Additives – posted dynamic growth in local currencies in the low double-digit range. The more cyclical Business Units – Masterbatches, Leather Services, Textile Chemicals, Paper Specialties, and Pigments – experienced weaker year on year demand, even in local currencies. In Swiss francs there was a downward trend in all Business Units except for Oil & Mining Services.
Financial Review 172011 Sales by Reporting Segment Sales by regionLocal Currencies, Growth in % CHF m 2011 2010 Change in CHF Change in LC2Industrial & Consumer Specialties 10 in % in %Masterbatches 2 EMEA1 3 671 3 529 4 16Pigments – 6 North America 958 860 11 27Textile Chemicals – 6 Latin America 1 144 1 199 – 5 9Oil & Mining Services 17 Asia/Pacific 1 597 1 532 4 16Leather Services – 6 urope, Middle East & Africa 1 E C = Local Currencies 2 LPerformance Chemicals 4Functional Materials1 7Catalysis & Energy1 17 2011 sales structure by currency % anuary – December 20111 J Euro 44Clariant was able to increase sales in local currencies in all keyregions in 2011. North America posted especially strong increases US dollar 32and reported 27 percent growth. The EMEA (Europe, Middle East& Africa) region also reported positive results, selling 16 percentmore than in the previous year. Sales revenues in the Asia/Pacific Japanese yen 4region climbed 16 percent, whereas the Clariant subsidiaries in Swiss franc 0Latin America – after significant growth the previous year – saw Emerging markets 20a comparatively moderate 9 percent rise in 2011. Overall, around 46percent of Group sales were generated in the emerging and develop- 2011 cost structure by currencying markets, which are expected to have the strongest growth rates %in the future. The regional sales distribution of businesses acquired Euro 49from Süd-Chemie also had a positive impact in this regard. US dollar 25 Japanese yen 2 Swiss franc 7 Emerging markets 17
18 Clariant Annual Report 2011 Gross margin below prior year due to volume 2010. The EBITDA margin before exceptional items increased to and currency effects 13.2 percent compared to the prior-year figure of 12.7 percent. Re- The high level of demand in most industries brought about a capacity structuring costs and impairments were substantially reduced and utilization of approximately 70 percent in 2011, as in 2010. Signifi- amounted to CHF 161 million in 2011, down from CHF 331 million the cant savings were realized as the result of the efficiency improve- year before. This reflects the sharply reduced costs for optimization ments successfully implemented in prior years – Project Clariant and of the global production network (Project GANO) and measures to Clariant Excellence. In the case of Clariant Excellence the savings integrate Süd-Chemie. totaled more than CHF 100 million compared with CHF 50 million in 2010. Nonetheless, these positive factors were not sufficient to EBITDA Margin before exceptional items – Five-year overview compensate for negative currency and volume effects. Gross margin % therefore declined overall from 27.9 percent in 2010 to 26.7 percent 2011 13.2 in 2011. Due to sluggish global economic growth, raw material pric- 2010 12.7 es stabilized in the course of the year but were still 13 percent higher 2009 7.5 than in 2010. The higher raw material costs were completely ab- 2008 9.7 sorbed, as planned, by an increase in sales prices. Price adjustments 2007 9.5 totaling 7.5 percent in local currencies were implemented in 2011. 0 2 4 6 8 10 12 14 EBITDA before exceptional items – Five-year overview The financial result was adversely affected by the higher level of CHF m indebtedness resulting from the Süd-Chemie acquisition. On bal- 2011 975 ance the result was a decrease in the net financial result to CHF 2010 901 – million from CHF – million. Operating income before 173 123 2009 495 exceptional items at CHF 717 million is above the previous year 2008 783 (CHF 696 million) but was reduced by currency effects totaling 2007 812 CHF 170 million. Clariant posted pretax profit of CHF 334 mil- 0 250 500 750 000 1 lion, compared with CHF 243 million in 2010. The tax rate rose to 24.9 percent from 21.4 percent the previous year. Profit after taxes Selling, general, and administrative expenses (SG&A costs) as accordingly increased to CHF 251 million from CHF 191 million. a percentage of sales were lowered slightly to 15.9 percent (from 16.5 percent in 2010) as the result of high cost efficiency, despite This results in earnings per share of CHF 0.86 based on 264 586 754 increased project costs. In absolute figures, this corresponds to shares, compared with CHF 0.81 in 2010. a change to CHF 1 million from CHF 1 million. This figure 176 177 includes significant one-time project costs for the integration of ac- Given the significant improvement of Clariant’s performance and quired Business Units. The focus on innovations in conjunction with the sustainability of its earnings, the Board of Directors proposes the Innovation Excellence initiative and the integration of Süd-Chemie to repay 0.30 CHF of the nominal value of each registered share, as led to a CHF 41 million increase in research and development a result of a reduction of the nominal value from 4.00 CHF to 3.70 costs to CHF 176 million. Given these changes and the impact of CHF per registered share. In 2010 there was no distribution due to highly negative currency trends totaling CHF 41 million, the operat- the high restructuring expenditures. The motion will be subject to ing result (EBITDA) before exceptional items increased slightly by approval by the 17th Annual General Meeting on 27 March 2012. 8.2 percent to CHF 975 million, compared with CHF 901 million in
Financial Review 19Segment analysis improved product mix, an optimized cost structure, and higher sell- ing prices, which fully compensated for the increased raw materialPerformance of the Business Units costs.Industrial & Consumer Specialties ICS will continue to focus on innovative solutions and businesses that create a high level of added value. Of special interest is theKey figures Industrial & Consumer Specialties Personal Care business, in which Clariant has introduced numerousCHF m 2011 2010 innovations. ICS will strengthen its position in this market throughSales 1 473 1 526 an exclusive long-term partnership with KitoZyme, a leading manu-EBITDA before exceptional items 251 243 facturer of bio-polymers, which are tailored to the global needs of Margin (%) 17.0 15.9 Personal Care customers requiring natural and sustainable skin andEBIT before exceptional items 215 206 hair care substances. The takeover of Octagon Process LLC in mid- Margin (%) 14.6 13.5 March 2011 significantly expanded ICS’ North American activitiesNo. of employees 1 801 1 790 in the area of de-icing chemicals and generated additional growth potential.› Sales increase in local currencies of 10 percent› EBITDA margin further increased to 17 percent MasterbatchesThe Industrial & Consumer Specialties (ICS) Business Unit reported Key figures Masterbatchesan increase of 10 percent in sales in local currencies in 2011, but CHF m 2011 2010a decrease of 3 percent in Swiss francs compared with the prior- Sales 1 124 1 260year period. Total sales in this segment reached CHF 1 473 million EBITDA before exceptional items 129 151(2010: CHF 1 million). There was particularly high demand for 526 Margin (%) 11.5 12.0chemicals for the construction industry and industrial lubricants. EBIT before exceptional items 102 120Significant growth again resulted from business in China, where ICS Margin (%) 9.1 9.5further solidified its market position by opening a new ethoxylation No. of employees 3 091 3 129plant in Daya Bay (south of Guangzhou, China). › Adversely affected by currencies and cost effectsIn the regional markets the Business Unit generated double-digit › EBITDA margin of 11.5 percent nevertheless highsales growth in Asia and North America as well as in Latin America, › Focus on growth opportunities in emerging marketsMiddle East & Africa (MEA) region. Growth was somewhat weakerin Europe. Although the Business Unit was still able to achieve a sales increase at the beginning of the year, demand then weakened from Q2 on-EBITDA before exceptional items increased by 3.3 percent to CHF wards. As a result, sales in local currencies only grew by 2 percent251 million. The Business Unit therefore increased the EBITDA mar- while sales in Swiss francs fell significantly, by 11 percent to CHFgin to 17 percent from the already high level of 15.9 percent a year 1 124 million. The decline in demand, which was not noticeable untilearlier, despite negative currency effects. This rise was due to an the second quarter, worsened steadily in the second half of the year as plastics processing companies responded to rising raw material costs and uncertain economic conditions by reducing or delaying orders.
20 Clariant Annual Report 2011 Sales growth was strongest in the Middle East region, especially in After a strong post-recession upsurge in demand was being felt in Saudi Arabia and Turkey. China and Indonesia also contributed posi- 2010, sales of the Pigments Business Unit declined 6 percent in local tively to growth in Asia. Sales only grew moderately in North Amer- currencies in 2011. In Swiss francs the decrease was 17 percent, to ica and Latin America, and in Europe they fell below the year-earlier CHF 973 million. There are three major reasons for this: Increased level, primarily due to weak economic growth in southern Europe. purchases in Q1 before price increases. De-stocking given the slow- down in the economy. Volumes were also reduced by the stronger The EBITDA margin in 2011 fell to 11.5 percent, down from 12 per- focus on areas with high added value. cent in 2010, since the increases in selling prices and productivity were not sufficient to absorb the negative currency effects and rising The lower demand was felt in most business sectors. The effects costs of underutilized capacities. The Business Unit’s raw material were especially pronounced in the printing industry, where the costs remained high but were fully compensated by higher selling Business Unit increasingly refocused efforts away from low-margin prices. EBITDA before exceptional items totaled CHF 129 million and products. In markets with high added value such as the non-impact was below the high CHF 151 million level of the previous year. printing market, customers reduced their inventories. Sales in mar- kets with high added value such as non-impact printing inks, paints, The Business Unit is focusing on growth opportunities in emerging and coatings fell from a high level in 2010 as the result of customers markets. It will benefit from expansion in the Middle East region re-adjusting their inventories. with new production facilities in Turkey, for example, as well as from expansion of existing sites in Saudi Arabia and Pakistan. Additional Despite the significant market headwinds, EBITDA margin reached capacities have also been created in China and Brazil in order to 21.6 percent, up from prior-year value of 20.2 percent thanks to the serve customers in the Asia/Pacific and Latin American regions. significantly improved cost structure resulting from the restructuring and efficiency improvement actions taken over the course of the pre- The Business Unit’s focus in Europe is on expansion in Eastern Eu- vious two years. EBITDA in absolute terms declined CHF 26 million rope and optimization of the existing production network in West- from previous year due to lower sales volumes and unfavorable rate ern Europe. In North America two plants were combined in order of exchange. It is expected that the benefits from the realized effi- to create a new state-of-the-art production facility in Chicago that ciency gains will continue in 2012 as the exits from the plants closed produces both liquid and granular masterbatches. in 2010 and 2011 are largely completed, supported by ongoing effi- ciency and competitiveness improvements derived by implementing Pigments measures under the Clariant Excellence initiative. Key figures Pigments The integration of the Italtinto business, specialized in supplying CHF m 2011 2010 integrated tinting systems to the paint industry, is progressing ac- Sales 973 1 168 cording to plan, enabling Business Unit Pigments to execute its strat- EBITDA before exceptional items 210 236 egy of capturing value further down the value chain. Initial market Margin (%) 21.6 20.2 responses and new orders were very promising, and customers are EBIT before exceptional items 184 202 showing considerable interest in our tinting system technology. Margin (%) 18.9 17.3 No. of employees 1 928 2 059 › Significant downturn in demand in second half of the year › EBITDA margin at 21.6 percent thanks to high cost efficiency
Financial Review 21Textile Chemicals The Textile Chemicals Business Unit will continue to focus on products that create added value for its customers. More than 25Key figures Textile Chemicals product, process, and effect innovations were recently presented atCHF m 2011 2010 the industry’s leading trade show, ITMA 2011, in Barcelona. TheseSales 675 821 included a new durable and more environmentally compatible flame-EBITDA before exceptional items 34 69 resistant finish for technical textiles and innovative acid dyes that Margin (%) 5.0 8.4 do not contain heavy metals and have high light resistance, even inEBIT before exceptional items 13 46 dark colors. Margin (%) 1.9 5.6No. of employees 2 096 2 163 Oil & Mining Services› Massive currency effects depress performance Key figures Oil & Mining Services› Accelerated relocation of production to Asia CHF m 2011 2010 Sales 620 604Performance in the Textile Chemicals Business Unit differed greatly EBITDA before exceptional items 72 76from one key region to the next in 2011. Sales growth in local cur- Margin (%) 11.6 12.6rencies reached a healthy level in North America and remained un- EBIT before exceptional items 67 72changed in Europe since there was still strong demand for technical Margin (%) 10.8 11.9textiles. In Latin America and China, on the other hand, sales expe- No. of employees 1 000 886rienced a double-digit drop as demand continued to be weakened bystrong fluctuations in cotton prices and flagging demand in the cloth- › Growing demand for oil servicesing sector. Overall, the Business Unit reported a decrease of sales › High level of investment to ensure future growthin local currencies in 2011 of – 6 percent. In Swiss francs, however,sales declined 18 percent. In the second half of the year the losses Buoyed by the rise in global oil production in line with general eco-turned to the double-digit range. nomic trends, sales in the Oil & Mining Services (OMS) Business Unit soared, increasing by 17 percent in local currencies and continu-Textile Chemicals, which still has an extensive production operation ing to grow throughout the entire year. In Swiss francs, OMS postedin Muttenz, Switzerland, was heavily impacted by the stronger Swiss 3 percent growth to CHF 620 million. Sales growth was strongestfranc. It therefore accelerated relocation of production to Asia. The in the Middle East and in North America, where the acquisition ofheadquarters of the Business Unit was moved to Singapore in Au- Prairie Petro-Chem had a positive impact. The rise in sales was alsogust 2011. Production will now be transferred to China and India in in the double-digit range in all other regions except Europe. The in-early 2012, much earlier than originally planned, and this change will crease was especially strong in Latin America, where Brazil recov-significantly increase the Business Unit’s competitiveness. ered from a weak phase in the second quarter.EBITDA before exceptional items dropped significantly by 51 percent Sales growth was driven by the Oil Services business, which ac-to CHF 34 million since it was not possible to fully compensate for counts for about two-thirds of total sales. It experienced strongthe massive currency effects and decline in volume through cost re- growth in most regions. In North America, Oil Services benefitedductions. Higher raw material costs, however, were balanced out by from continuing investments in non-conventional oil and gas devel-higher selling prices. Corresponding the EBITDA margin fell consid-erably from 8.4 percent to 5.0 percent.
22 Clariant Annual Report 2011 opment projects. In LATAM, for example, the Business Unit signed From a regional perspective, sales growth in local currencies was an extensive new agreement, which will help it to expand its excel- slightly negative in Europe, while growth in the Americas slackened lent market position in Brazil. slightly despite the strong growth in Brazil, the main market. Sales in Asia declined since they continued to be affected by high prices The Mining Services segment suffered from the weakening global for rawhide. In Japan, sales to tanneries that supply the automotive demand for minerals. The Business Unit counteracted this effect by industry recovered in the second half of the year to almost the same introducing new products and technologies in cooperation with min- level as before the earthquake. ing companies. Leather Services raised its selling prices and was thus able to com- The EBITDA margin before exceptional items was adversely affected pensate for higher raw material prices. However, the Business Unit by unfavorable currency effects and lies with 11.6 percent below also suffered from negative currency effects in addition to volume the prior-year level of 12.6 percent. This was due primarily to the decreases due to high prices for rawhide. The EBITDA margin there- higher sales and administrative costs associated with massive in- fore decreased to 9.8 percent from the prior-year level of 13.2 per- vestments in the oil and mining businesses in an effort to promote cent. In absolute figures, this is reflected in a 40 percent decline in future growth in these areas. The effects of higher raw material EBITDA before exceptional items to CHF 26 million. costs, on the other hand, were minimized by higher selling prices. EBITDA before exceptional items was accordingly CHF 72 million The Business Unit will continue to focus on segments with high add- (2010: CHF 76 million). ed value and on the introduction of new services and products that create added value such as the new chromium-free tanning technol- Leather Services ogy (EasyWhite Tan). It will place special emphasis on innovation activities and expand its future product portfolio, especially in its Key figures Leather Services line of more environmentally friendly products. CHF m 2011 2010 Sales 265 326 Performance Chemicals EBITDA before exceptional items 26 43 Margin (%) 9.8 13.2 Key figures Performance Chemicals EBIT before exceptional items 22 38 CHF m 2011 2010 Margin (%) 8.3 11.7 Sales 1 293 1 415 No. of employees 595 602 EBITDA before exceptional items 177 201 Margin (%) 13.7 14.2 › High leather prices lead to decline in sales EBIT before exceptional items 141 161 › tronger focus on innovative, more environmentally S friendly Margin (%) 10.9 11.4 products No. of employees 2 141 2 140 Despite continuing strong demand from the automotive and luxury › High growth momentum in Additives goods industries, sales in the Leather Services Business Unit de- › EBITDA margin almost maintained at high level of 13.7 percent creased by 6 percent in local currencies compared with 2010. Seg- ment sales in Swiss francs totaled CHF 265 million (– 19 percent). Performance Chemicals comprises four smaller Business Units in the The upholstery segment was largely responsible for the weak de- Clariant Group in terms of sales: Additives, Detergents & Intermedi- mand. The trend toward the use of alternative materials in place ates, Emulsions, and Paper Specialties. Driven by a significant boost of leather grew in that segment since prices for rawhide remained high in 2011.
Financial Review 23in demand in the Additives business, sales of Performance Chemi- Functional Materialscals in local currencies rose in 2011 by 4 percent. In Swiss francs,however, it posted a 9 percent decline to CHF 1 293 million. The local Key figures Functional Materials1currencies growth momentum in Additives, which was in a double- CHF m 2011digit percentage range, was based on the strong demand for non-ha- Sales 456logenated flame retardants and waxes. Detergents & Intermediates EBITDA before exceptional items 59and Emulsions saw single-digit sales growth, while sales in Paper Margin (%) 12.9Specialties were below the 2010 level. The Additives, Detergents EBIT before exceptional items 32& Intermediates, and Emulsions Business Units were able to raise Margin (%) 7.0their prices and fully compensate for higher raw material costs. The No. of employees 2 829strong appreciation of the Swiss franc had a negative impact on the May – December 1profitability of all four Business Units. › Reorganization completed by 1 July 2011Additives posted good operating performance in all key regions, › High level of sales growth and performancewith especially strong growth in the Asia/Pacific region and in NorthAmerica. Future demand will be met by a new plant that will go into Sales and results for the Functional Materials Business Unit haveoperation in mid-2012. The Detergents & Intermediates Business been included in the Clariant Group’s consolidated figures for eightUnit reported healthy demand for intermediates used in agrochemi- months of 2011. Functional Materials – formerly the Adsorbentscal and pharmaceutical products, which balanced out the slight & Additives division of Süd-Chemie – initially included the followingdecrease in demand for household and cleaning products. Demand business lines: Adsorbents & Additives, Foundry Products & Spe-in Paper Specialties began to decline in the second quarter after cial Resins, Protective Packaging, and Water Treatment. From 1 Julycustomers curbed their production output due to lower paper con- 2011 the Functional Materials Business Unit was reorganized sosumption. Profitability was also reduced by the strong Swiss franc that it now includes three business lines: Adsorbents, Performanceand the high cost basis in Switzerland. Relocation of production from Packaging, and Water Treatment. Comparison with 2010 figures isSwitzerland to Spain and the United States was therefore acceler- therefore only possible up to a point due to the reorganization ofated so that it could be completed by the end of 2011. The Emulsions activities.Business Unit was able to compensate for high commodity prices.Latin America posted significant sales growth due to recovery in The Functional Materials Business Unit succeeded in improvingdemand in Brazil, whereas demand in the Middle East weakened. sales in local currencies by 7.4 percent over the prior-year. In Swiss francs, sales amounted to CHF 456 million. The EBITDA margin be-The Performance Chemicals EBITDA margin was slightly below fore exceptional items was 12.9 percent, maintaining the high levelthe previous year at 13.7 percent due to negative currency effects. of the previous year. EBITDA before exceptional items grew to CHFEBITDA before exceptional items was relatively stable at CHF 177 59 million in 2011.million. Analysis of the individual businesses reveals differing growth trends. The Performance Packaging business line saw a rise in both sales and EBITDA, driven by the strong demand for packaging used
24 Clariant Annual Report 2011 for diagnostic and pharmaceutical products. The EBITDA margin in The Catalysis & Energy Business Unit has been able to maintain the the Adsorbents business declined since it was not possible to com- positive operating performance of 2010 without interruption. Sales pensate fully for the higher raw material prices and transport costs in local currencies terms in 2011 increased by 17 percent compared through higher selling prices. EBITDA also fell in the Water Treat- to 2010. After conversion to Swiss francs, sales totaled CHF 491 mil- ment line due to the unfavorable business mix and the increase in lion. As the result of stronger business activities, EBITDA in Swiss the cost of raw materials. The Functional Materials Business Unit francs amounted to CHF 107 million. The start-up losses in the new will focus to raise prices further, especially in the Adsorbents and Battery Materials business continued to have a negative effect on Water Treatment segments, in order to absorb price-increase trends performance. The EBITDA margin was high at 21.8 percent. in raw materials and transport costs, and improve margins. After a mixed start in early 2011, the business in catalysts for the Catalysis & Energy chemical and petrochemical industries picked up in the second quarter and improved continuously. The fourth quarter, as usual, Key figures Catalysis & Energy1 was the year’s strongest in this segment. The Catalyst business ben- CHF m 2011 efited from continuing strong momentum in the sales of catalysts Sales 491 for air purification and for hydrogen production. Battery Materials EBITDA before exceptional items 107 also contributed to this healthy business growth. Four sub-licensing Margin (%) 21.8 agreements for the highly innovative cathode material LFP (Lithium EBIT before exceptional items 67 iron phosphate) were signed in order to bring more rapid market Margin (%) 13.6 penetration. Preparations at the new LFP plant in Candiac, Canada, No. of employees 2 659 were already underway for the start of production, scheduled for May – December 1 1 January 2012. › Sales growth in all four operating areas › EBITDA margin significantly above 2010 margin Sales and results for the Catalysis & Energy Business Unit have been included in the Clariant Group’s consolidated figures for the last eight months of the year under review. Catalysis & Energy – the former Catalyst division of Süd-Chemie – initially comprised the Catalyst Technology and Energy & Environment business lines. From 1 July 2011, Catalysis & Energy was reorganized into a primarily functional organization that comprises the business line Battery Ma- terials and the three functional areas: Sales & Key Account Manage- ment; Operations, and Research & Development.
Financial Review 25Condensed consolidated balance sheetCHF m 31.12.2011 31.12.2010 Change in %AssetsNon-current assets 5 178 2 416 114 Intangible assets 1 762 269 555 Property, plant, and equipment 2 494 1 669 49 Financial assets 28 18 55 Other non-current assets 702 341 106 Deferred income tax assets 192 119 61Current assets 3 901 3 494 12 Inventories 1 151 800 44 Trade receivables 1 134 985 15 Other assets and receivables 417 993 – 58 Cash and cash equivalents 1 199 716 67Non-current assets held for sale 2 11 – 82 Total asset 9 081 5 921 53Equity and liabilitiesEquity Shareholders’ equity 2 933 1 759 67 Non-controlling interests 93 47 98 Total equity 3 026 1 806 68LiabilitiesNon-current liabilities 2 904 2 153 35 Financial debts 1 835 1 305 41 Retirement benefit obligations 538 443 21 Deferred income tax liabilities 289 85 240 Provision for non-current liabilities 242 320 – 24Current liabilities 3 151 1 962 61 Financial debts 1 139 240 374 Provision for current liabilities 364 310 17 Trade and other payables 1 325 1 170 13 Current income tax liabilities 323 242 33 Total equity and liabilities 9 081 5 921 53
26 Clariant Annual Report 2011 Balance sheet structure changed significantly The Süd-Chemie transaction was also responsible for most of the due to expansion increase in net financial debt from CHF 126 million at the end of As of 31 December 2011, the Clariant Group’s total assets of CHF 2010 to CHF 1 million as of 31 December 2011. This item in- 740 9.081 billion were significantly higher than the value a year earlier cludes current and non-current liabilities, cash and cash equivalents, of CHF 5.921 billion. The increase was based on first-time consolida- and near cash assets. The gearing ratio, which compares the level tion of the assets and goodwill of the companies acquired in 2011, of net financial debt to equity, therefore rose to 58 percent from namely Süd-Chemie, Prairie Petro-Chem, Octagon Process, and Ital- 7 percent as of 31 December 2010. tinto. Exchange rate effects also resulted in significant changes in various balance sheet items. Broadly based financing Clariant also had a very sound financial basis as of the end of 2011. Cash and cash equivalents totaled CHF 1.199 billion at the end of The company relies on different types of financing instruments. In 2011, compared with CHF 716 million twelve months earlier. The May the company issued two bonds in the Swiss franc domestic change within the reporting period is based on the issue of two bond market: one with a nominal value of CHF 150 million that was bonds totaling CHF 300 million in May and July 2011, the issue of increased by CHF 50 million in July, with a coupon of 2.75 percent two certificates of indebtedness totaling EUR 365 million and CHF and a four-and-a-half-year maturity (2015); and the other with a 400 million from an acquisition bridge facility, as well as outflows of nominal value of CHF 100 million, a coupon of 3.125 percent and a liquidity associated with the acquisitions mentioned above. By con- six-year maturity (2017). By issuing two certificates of indebtedness trast, the total cash position including near cash assets decreased in October 2011 totaling EUR 365 million with maturities ranging be- to CHF 1.234 billion year on year, from CHF 1.419 billion, due to ac- tween three and four-and-a-half years, Clariant continued to improve quisitions. the maturity profile of its borrowed funds. Clariant Groups total equity increased to CHF 3 026 million at the end of 2011 mainly due to the capital increase totaling CHF 1 111 million required for the Süd-Chemie acquisition. The equity ratio of 33.3 percent was above the prior-year level of 30.5 percent. Extract of cash flow statement CHF m 2011 2010 Net income 251 191 Reversals of non-cash items 551 362 Cash flow before changes in net working capital and provisions 419 251 Operating cash flow 206 642 Cash flow from investing activities – 741 – 961 Cash flow from financing activities 1 033 – 62 Net change in cash and cash equivalents 483 – 424 Cash and cash equivalents at the beginning of the period 716 1 140 Cash and cash equivalents at the end of the period 1 199 716
Financial Review 27Strong operating cash flow The acquisition of Süd-Chemie was a crucial factor in this substan-Despite the Group’s solid operational performance, cash flow from tial increase. Consolidation of the Süd-Chemie activities also result-operating activities decreased in 2011 to CHF 206 million from CHF ed in an increase in R&D expenditures in 2011 to CHF 176 million, up642 million because of the pronounced increase in net working capi- from CHF 135 million in 2010. The 2011 R&D expenditures representtal. The ratio of net working capital to sales therefore increased 2.4 percent of Group sales, compared with 1.9 percent in 2010.to 19.6 percent from 15.9 percent, significantly undercutting thekey target value of 20 percent. Investments in property, plant, and Innovation Excellence was launched in 2011 as part of the Clariantequipment rose markedly to CHF 370 million from CHF 224 million Excellence initiative. The first phase involves implementation of ef-as investments were increased and included the new Süd-Chemie ficient processes for quickly transforming ideas into innovative prod-Business Units. The cash flow from investments totaling CHF – 741 ucts. Strategic innovation management will help Clariant enhancemillion was influenced by CHF – 1 137 million spent on acquisitions its position as an innovative solution provider and an attractiveof Süd-Chemie, Prairie Petro-Chem, Octagon Process, and Italtinto, development partner. The company will benefit from the new struc-while the cash flow from financing activities of CHF 1 million 033 ture of R&D activities. Clariant’s global R&D network includes thereflects the financing occured during 2011. Given these effects, the following sites: Frankfurt (Germany), Gendorf (Germany), Lamottetotal cash balance (including near cash assets) of the Clariant Group (France), Reinach (Switzerland), and Suzano (Brazil). The importanceon 31 December 2011 stood at CHF 1 234 million (2010: CHF 1 419 of Frankfurt as a global R&D site is underscored by construction ofmillion). the Clariant Innovation Center, which is scheduled to be completed in 2013. The Business Units also maintain around 40 technical cen-Research & Development ters in Asia, Europe, Latin America, and North America so that the regions can be offered technical service and technical customer proj-A guarantor for profitable growth ects can be supported. Süd-Chemie conducts R&D activities at 26Clariant has defined global technology and innovation leadership sites around the world.as an important strategic goal in its core activities. Research anddevelopment (R&D) is therefore a high priority in the Group. The de- Innovation focus on megatrendsvelopment of a large number of new and advanced technologies puts Clariant’s ability to align its businesses to even more rapidly chang-Clariant in a position to find chemical solutions for many of their in- ing economic conditions and market requirements is crucial for itsdustrial customers’ problems quickly and efficiently and to increase success, and this includes recognizing social and industrial devel-added value for the business partners and for Clariant. Through the opments. By gearing development of new products to megatrends,realignment and concentration of R&D in 2010 and 2011, the com- Clariant focuses on the issues of sustainability and advanced ma-pany has created the foundation for sustainable, profitable growth terials, with an emphasis on energy and water efficiency, renew-and for consolidating its technology leadership in important areas. able raw materials, and nutrition. Newly launched products thatAround 1 100 employees were working in this area in 2011, twice as contribute to energy and resource conservation and brands such asmany as in the previous year. EcoTain® underline Clariant’s orientation to sustainable markets of the future.
28 Clariant Annual Report 2011 Employees Trend in FTEs1 (on 31 December) – Five-year overview 2011 22 149 Key success factor 2010 16 176 Motivated and well trained employees are a key success factor in 2009 17 536 the Clariant Group’s prosperity. The qualifications, commitment and 2008 20 102 motivation of its staff are essential to the company’s competitive- 2007 20 931 ness going forward. Human resources management plays a key role 0 4 000 8 000 12 000 16 000 20 000 24 000 1 TE = Full-time employee F in recruiting, promoting, and retaining the best employees for every position. To achieve these aims, Clariant pays performance-related compensation, provides ongoing training and pays due attention to Slight decrease in headcount after adjustment for expansion helping its employees achieve their personal career goals. The na- Although the total number of employees has declined significantly ture of demand has made it necessary for the Group to increase its in the last few years, it increased markedly by 5 from 16 973 176 global focus, with production sites on all continents. Clariant there- in 2010 to 22 149 in 2011. While the increase was mainly driven by fore has a broad, culturally diverse staff with a precise understand- acquisitions which added more than 6 000 employees, the remaining ing of the different customer needs in the various regions. These Business Units reduced personnel in their ongoing efforts for pro- needs are met consistently. ductivity increases. This was associated with the implementation of measures of the remaining restructuring initiatives and natural The biggest challenge for human resources management in 2011 fluctuation. The adjustments in headcount were made in close co- was to integrate Süd-Chemie employees. As a result of the acquisi- operation with local employee representatives and authorities. In tion, headcount of the Clariant Group increased by more than 6 000 contrast to past years, when situations such as these made it neces- or about 40 percent. Processes have to be aligned and adjusted, sites sary to institute shorter working hours, this option no longer had to integrated, and functions harmonized. As a result of integration- be used in 2011. based synergies and Clariant Excellence initiatives, Clariant plans to cut about 700 jobs at Süd-Chemie in the coming years, mainly Emerging markets in Asia are becoming increasingly administrative positions. important In regional terms, the European workforce continued to be the larg- Another focus for the Group in 2011 – as in prior years, although to est at 45 percent of Group headcount. The second largest region a lesser extent – was on further implementation of efficiency im- based on number of employees is Asia with 25 percent, followed by provements introduced as part of the Project Clariant strategy initia- Latin America with 14 percent, and North America with 9 percent. tive. The increasing importance of the East Asia region is indicated by China, where the number of employees rose to 1 966. Clariant had 15 production sites there as of the end of 2011.
Financial Review 29Employees by region 2011 in percentage of total employees more and more apparent, and led to discussions and speculation(including Süd-Chemie) about the potential insolvency of some countries, or even the col-% lapse of the European Monetary Union. This in turn led to massive Europe 45 unease in the financial markets due to the uncertainties about the future impact on the actual economy. By the end of June, this re- Asia/Pacific 25 sulted in profit-taking and the first price declines, which in August became a massive stock market crash with key indexes plummeting North America 9 more than 20 percent. Although the markets were somewhat calmer by the end of the year, the leading European markets lost value, e.g. Latin America 14 the Euro STOXX 50 lost 17 percent of its value over the entire year. Middle East & Africa 7 Clariant shares under pressure due to economicAmong the Business Units, Masterbatches had the highest head- uncertaintiescount with 14 percent of the Group’s total workforce. Other high- The recent performance of Clariant stock reflects this general mar-headcount Business Units included Pigments (9 percent), Textile ket trend. Clariant shares had also shown stable growth up to JuneChemicals (9 percent), and Industrial & Consumer Specialties based on positive operating figures. However, the acquisition of(8 percent). The two new Business Units that were added as a result Süd-Chemie and the associated financing requirements, includingof the Süd-Chemie acquisition – Functional Materials and Catalysis a capital increase, caused the price to drop in the interim from more& Energy – accounted for 13 and 12 percent, respectively. than CHF 18 at the beginning of the year to just over CHF 14. Follow- ing a rally, the price rose to its high for the year of nearly CHF 20 atIn 2011 the Clariant Group spent CHF 1 million on salaries, 623 the beginning of June. The subsequent slump on world markets alsosocial welfare contributions, and exceptional personnel costs for its resulted in a significant plunge in the price of Clariant stock. Since,own employees. When costs for external or temporary personnel however, cyclical share values in particular were impacted by sellingare included, personnel expenses in 2011 totaled CHF 1 679 million. pressure due to economic uncertainties, the price decline in the sec-The corresponding figure for 2010 was CHF 1 685 million (excluding ond half of the year was therefore much more pronounced than that ofSüd-Chemie). the SMI, the leading Swiss index, which is comprised predominately of non-cyclical stocks. Compared to its European peers Clariant’s fi-Clariant stock nancial figures were impacted by an unprecedented appreciation of the Swiss franc that impacted both sales and operational margin.Year shaped by global financial crisis As a consequence the company had to adjust its full year guidanceThe trend on the world’s stock markets in 2011 was shaped by theglobal financial crisis and the performance of the global economy.In view of positive economic data, the markets exhibited stable lat-eral movement into June, with relatively moderate fluctuations inthe major indexes. In March the tsunami in Japan caused sharperprice fluctuations for a brief period. By shortly before mid-year, themarkets had calmed again. Thereafter, the dimensions of financialdifficulties especially in the southern European EU countries became
30 Clariant Annual Report 2011 at the beginning of September which impacted the share price that Risk management hit its annual low of CHF 6.88 at this time. The general market re- For financial risks refer to page 109 and following pages of the covery and the solid operating figures caused the price to rise again Financial Report. after that. However, at the end of the year on 31 December 2011, Clariant shares were quoted at a price of CHF 9.27, which represents Enterprise Risk Management (ERM). a 51 percent year-on-year decline. In 2010 the securities had posted Identification, Assessment and Management. a clearly above-average performance by increasing 55 percent in For detailed information please refer to pages 82 to 83 of the Corpo- value. rate Governance section. Key figures for the Clariant share Events subsequent to the balance sheet date 2011 2010 On 17 January 2012, Clariant Finance (Luxembourg) S.A. issued Closing rate (31 December) (CHF) 9.27 18.94 an Eurobond in the amount of EUR 500 million, guaranteed by Peak price (CHF) 19.93 19.73 Clariant Ltd. The fixed rate notes with a minimum denomination of Lowest price (CHF) 6.88 10.85 EUR 100 and a final coupon of 5.625 percent per annum will 000 mature on 24 January 2017. The proceeds are to be used for general Number of shares on 31 December (million shares) 295.75 230.16 corporate purposes optimizing Clariant’s debt maturity profile. In free float (%) 89.52 100 Average trading volume per day (SIX) 2 497 598 1 883 336 With value date January 30, 2012, the last drawn part of the syn- Market capitalization on 31 December (CHF m) 2 742 4 359 dicated bridge loan facility to acquire Süd Chemie (CHF 400 million as of 31 December 2011) has been repaid in full. All commitments Earnings per share (CHF) 0.86 0.81 under the facility have been cancelled by then. The facility therefore Dividend per share (CHF) 1 0.30 0.00 ceases to exist. ayout by reduction of nominal value, subject to approval by the AGM. 1 P You find more detailed information about Clariant on the company website at www.clariant.com. Investor Relations Hardstrasse 61 CH-4133 Pratteln Switzerland Tel.: +41 61 469 6745 Fax: +41 61 469 67 67
Financial Review 31Outlook therefore predicting no significant potential for price rises in 2012. The industry will, however, benefit on the cost side from more stableEconomic environment raw material prices. The moderate growth in the industry will be largely driven by continuing rising demand in the growth regions ofGlobal growth in 2012 with increasing risks Asia, Latin America, and Eastern Europe.Since mid-2011, economic experts have become much more cau-tious in their forecasts for the global economy in 2012. According Outlook for 2012 involves major uncertaintiesto the Organisation for Economic Cooperation and Development After completion of restructuring in 2010, Clariant’s strategic focus(OECD), the uncertainties resulting from the global financial crisis in 2011 shifted to continuous improvement and profitable growth.have had a huge impact on the real economy. The OECD is therefore In 2012, Clariant will continue to systematically implement the nextonly forecasting growth of 1.6 percent for the more than 30 OECD steps in its transformational process with a focus on the integrationmember states. The developing and emerging markets are again the of Süd-Chemie, on completing measures from restructuring initiateddriving force behind this growth. The experts are forecasting growth in 2009/10 and on portfolio management. In this context, Clariant isof 8.5 percent for China. By contrast, the industrial nations are clear- considering several strategic options for the Business Units Textilely suffering the effects of the financial crisis. The eurozone economy Chemicals, Paper Specialties, Emulsions, and Detergents & Interme-is likely to post only marginal growth of 0.2 percent. A number of diates, with the goal to be realized in the mid- to long-term.member states are even expected to see a fall in Gross DomesticProduct. The United States is set to generate growth of 2.0 percent An accurate forecast for 2012 is difficult given the high level of eco-thanks to fiscal policy support in what is an election year. Following nomic uncertainty. Clariant will monitor the developments closelythe collapse in its economy triggered by the disaster in 2011, Japan and respond rapidly, where necessary. Raw material costs are ex-is also likely to post 2.0 percent growth in 2012. However, the OECD pected to rise in the low single-digit range while exchange rateswarns that the forecasts are subject to considerable uncertainty due should remain stable compared to the beginning of the year. In itsto the numerous open issues relating to the euro crisis; it therefore base case scenario, Clariant expects that after a weak start intodoes not rule out the possibility of a global recession if the economic 2012, the global economy will progressively strengthen in the courseenvironment worsens. of the year. Therefore, results for the first half-year are expected to be lower compared to the high base of the first half of 2011, with anCautious forecast for the chemical industry in 2012 improvement in the second half-year 2012. For the full-year 2012,The performance of the chemical industry in 2012 will be closely Clariant expects further sales growth in local currencies and a sus-tied to global economic growth. Economic experts are accordingly tained profitability.cautious in their forecasts. The upturn recorded in the chemical in-dustry in 2011 is expected to slow considerably in 2012. The GermanChemical Industry Association (VCI) has significantly lowered its es-timates and expects only a slight increase in chemical production.Entrepreneurs and consumers appear increasingly unsettled by theunresolved issues of the global debt crisis, and their ordering prac-tices have become correspondingly more conservative. Experts are
32 Clariant Annual Report 2011 Further cost reductions through completion Foundation for sustainable, long-term profitable growth of Project Clariant through 2015 Further progress in sustaining the improved returns already realized Clariant has set ambitious goals for the years through 2015 in ex- in the Group will be achieved by systematically continuing to imple- pectation of a moderate upward trend in the global economy and ment the measures launched as part of Project Clariant. For example, stable exchange rates. By continuing to systematically implement additional cost savings totaling CHF 60 million are expected by mid- the strategy initiatives Project Clariant and Clariant Excellence, we 2013 after implementation of improvements in the production net- intend to improve the profitability of the company and all Business work under the Global Asset Network Optimization program (GANO) Units. We will also increase investments in the Group’s research and is completed in mid-2012. The smaller businesses acquired in 2011 development, and expand the innovation pipeline significantly by im- have been successfully integrated and will continue to make a full plementing Innovation Excellence. The focus, furthermore, will be on contribution at operating level as of 2012. broader expansion into the fast-growing emerging market regions. The company will increase its market share particularly in China, Integration of Süd-Chemie is proceeding according to plan India, and Brazil. The profitability of the current portfolio will be ana- The integration of Süd-Chemie is progressing as planned, and all lyzed on a continuous basis. We will also make targeted acquisitions project teams are working hard to deliver to promise. Current know in the future to strengthen the product pipeline and the company’s ledge and experience confirms the forecast that integration by 2013 regional presence, but will also consider divestments, if necessary. will result in a rise in EBITDA of CHF 90 to 115 million. Because of integration-related synergies and Clariant Excellence initiatives, By implementing these basic strategic goals for 2015, Clariant around 700 jobs will probably be cut worldwide, especially admin- intends to increase Group sales to more than CHF 10 billion and istrative positions. Production improvement measures should also EBITDA before exceptional items to over CHF 1.7 billion, with an contribute to these savings. Those measures are planned to be EBITDA margin before exceptional items of more than 17 percent implemented from 2012 to 2014. a further target. ROIC should continue to be above the industry aver- age, based on these objectives.
Financial Review 33The Executive CommitteeChristian Kohlpaintner Hans-Joachim Müller Patrick Jany, CFO Hariolf Kottmann, CEO Mathias LütgendorfResponsibilities: Responsibilities: Responsibilities: Responsibilities: Responsibilities:Pigments, Masterbatches, Catalysis & Energy, Group Finance, Group IR Clariant Excellence, Industrial & ConsumerPaper Specialties, Functional Materials and Group IT . Group Legal & Compliance, Specialties, TextileDetergents & Intermediates, Business Units. Group HR, Group Chemicals, Oil & MiningAdditives and Emulsions Communications and Services and LeatherBusiness Units, Corporate Development. Services Business Units,Group Technology, Group Procurement, andand ESHA. Supply Chain Management.
34 Clariant Annual Report 2011
35Muriel Rakotomalala, Flame RetardantsWith the Exolit® product range Clariant is settingnew benchmarks for flame retardants. Exolit®is used in cases requiring environmentally com-patible and highly effective fire protection,such as smartphones, notebooks and otherhigh-tech devices, or textiles.
36 Clariant Annual Report 2011 Portfolio Management Clariant is a world leader in the field of specialty chemicals and supplies a broad Portfolio management until end range of products to many different industries. After undergoing major restructur- of 2010 characterized by ing through 2010, Clariant experienced an active phase of external growth in 2011. restructuring phases This is reflected both in the takeover of the Süd-Chemie operations and in the ac- The first important milestone related to quisitions of several smaller and medium-sized companies in order to strengthen changes in the company portfolio was the existing business operations. In this regard, active portfolio management also in- purchase of the specialty chemicals busi- volves strategic exploitation of opportunities for expanding into future-oriented ness of Hoechst AG in 1997. In 2000 Clariant technologies, products, and regions with strong growth potential. took over the activities of British company BTP, a specialist in life science chemicals. The brief history of Clariant, which first The current Executive Committee has re- At that time Clariant had around 31 000 em- went public under this name in 1995, has sponded to this situation and has taken a ployees – almost twice as many as it had been characterized by a number of restruc- number of measures since the end of 2008 prior to the acquisition of Süd-Chemie. The turing phases, which have had varying de- to advance the restructuring and reorgani- Group’s complexity quickly became problem- grees of success. They involved extensive zation of the Clariant Group at all levels. atic. High structural costs, Business Units reorganization and changes in the business By clearly focusing on the core themes of that were not very profitable, and changing portfolio. Despite all these portfolio adjust- cash generation, cost savings, and the re- global operating conditions led the company ment and restructuring initiatives, many duction of complexity, decisive steps have into a severe crisis in 2003. The strategic performance indicators lost ground against been taken to restore Clariant’s profitability focus during the period from 2001 to 2005 our competition for many years because of and position it on a course toward profitable was on separation from numerous business the strong squeeze on margins. These prob- growth. The positive results of these efforts sectors, as well as the creation of a com- lems were exacerbated, moreover, by the were already apparent in 2010 and were prehensive program aimed at cutting costs, recent financial crisis. also acknowledged by the capital market. increasing efficiency, and the associated
Drivers for profitable growth 37 Portfolio management“ ctive portfolio management is a key success factor in our A profitable growth strategy.” Hariolf Kottmann, Chief Executive Officer Clariant’s History to 2010 Divestment of Acquisition of Rite Systems Electronic Materials and Ricon Colors Acquisition of CIBA Master- batches Divestment of Divestment of Pharmaceutical Cellulose Ethers Fine Chemicals Divestment of European Emul- Clariant Acquisition of sion Business Divestment of Divestment of Sandoz spin-off Hoechst Specialty Acquisition and Hydrosulfite Acetyl Building Custom established and IPO Chemicals of BTP North America Blocks Manufacturing Restructuring 1886 … 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Overview of Business Units adhesives, sealants, and for the textile, Oil & Mining Services: This Business Unit at the end of 2011 leather, and paper industries. is a market leader in products and services for the oil, refinery, and mining industries. Additives: The Additives Business Unit is a Functional Materials: Functional Materi- leading provider of flame retardants, waxes, als is a leading manufacturer of specialty Paper Specialties: Paper Specialties is and polymer additives for effects in plastics, products and solutions for improving prod- among the largest providers of products for coatings, and other applications. uct and efficiency characteristics in various optical brightness, color, coating, and thick- industries. ness of paper. Catalysis & Energy: This segment is a market leader in catalysts for the chemical, Industrial & Consumer Specialties: Pigments: This Business Unit is a global petrochemical, polymer, refinery, and auto- Industrial & Consumer Specialties is one of leader in organic pigments, pigment prepa- motive industries. the most important providers of specialty rations, and dyes, which are used for coat- chemicals and application solutions for con- ings, printing, plastics, and other special Detergents & Intermediates: Detergents sumer care and industrial markets. applications. & Intermediates is one of the most impor- tant producers of key raw materials for de- Leather Services: Leather Services is a Textile Chemicals: Clariant’s Textile tergents and household cleaners as well as market leader in chemicals and services for Chemicals Business Unit is a market leader chemical intermediates. the leather industry. and supplies specialty chemicals for the pretreatment, dyeing, printing, and finishing Emulsions: The Emulsions Business Unit is Masterbatches: Clariant Masterbatches is of textiles. one of the most important suppliers of latex/ the world’s leading manufacturer of dye and polymer dispersions for paints, coatings, additive concentrates and technical com- posites for the plastics industry.
38 Clariant Annual Report 2011 > 20 % was the percentage of Clariant Group sales generated by activities newly acquired in 2011 (basis: 12-month consolidation) sharp reductions in headcount. The primary strategic expansion of its portfolio. The fol- Süd-Chemie satisfies all of purpose of these transactions was to create lowing criteria are paramount and must be Clariant’s success criteria more financial room to maneuver. However, met by any acquisition candidates: The acquisition of Süd-Chemie AG, Clariant costs could not be sufficiently reduced to 1. izeable future potential through expan- S Group’s biggest takeover transaction in compensate for the constant decline in sion of activities and/or the value chain its recent history, was also completed on profitability that the businesses were expe- of existing Business Units the basis of these criteria. With a total of riencing at the time. 2. Focus on innovative products with consid- around 6 employees, Süd-Chemie op- 500 erable potential in growth markets and erates two stable and profitably growing As a result of the recent financial crisis in industries, such as those with a strong Business Units that are among the global 2008, two initiatives were launched in 2008 orientation to future megatrends leaders in the areas of process catalysts and and 2009 – Project Clariant and Clariant 3. egional strengthening of the portfolio, R adsorbents. In addition, the company has a Excellence – that were designed to limit especially in fast-growing emerging mar- strong research and development pipeline the impact of the crisis and optimize cost kets for new business areas with significant structures. This has been very successful, 4. mprovement of profitability through al- I growth potential. These involve innovative as indicated by the significant improve- ready proven margin strength and addi- materials for key megatrends such as en- ment in profitability in 2010. By the end of tional potential through synergies based vironmental protection, energy efficiency, 2010 Clariant Group had a total of around on combination with existing activities energy storage, and renewable energies. 16 200 employees working in more than 100 and quickly realizable turnaround potential. Examples include lithium-ion batteries and companies worldwide, with Group head- biotechnologies used to produce second- quarters located in Muttenz, Switzerland. Each takeover target undergoes a very de- generation bioethanol. Clariant then comprised ten Business Units: tailed analysis process (due diligence) based Additives, Detergents & Intermediates, on these criteria, followed by a company The acquisition of Süd-Chemie will increase Emulsions, Industrial & Consumer Special- evaluation. The primary focus in the Clariant Group sales by about 20 percent. A com- ties, Leather Services, Masterbatches, Oil Group is on complementary acquisitions but parable improvement in earnings is also & Mining Services, Paper Specialties, Pig- can also lead to a major transformational expected based on Süd-Chemie’s high level ments, and Textile Chemicals. acquisition, as in the case of Süd-Chemie. of profitability. The operating EBITDA mar- Two additional Business Units were added in 2011 as the result of the acquisition of Süd-Chemie: acquisition criteria fully met Süd-Chemie: Functional Materials and Growth strong growth in sales in both business areas; Catalysis & Energy. potential little cyclical variation Strong external growth in 2011 ratio of R&D to sales > 5 percent; Innovation full innovation pipeline in megatrends Once the restructuring phase was virtually completed in late 2010 and the company Regional high proportion of sales in fast-growing emerging markets had a healthy balance sheet and solid fi- expansion nancing structure, Clariant again began in EBITDA margin before exceptional items of 13.2 percent Profitability 2011 to concentrate much more heavily on in 2011; improved return despite slowdown
Drivers for profitable growth 39 Portfolio management“The return is above-average.” Given the high level already achieved, how do you aim to add to this in the future? Hans-Joachim Müller: This is for sure a challenge, but we have always focused to a great degree on the future orientation of our products and applications. The high 5.4 percent ratio of R&D expen- diture to sales in 2011 is impressive proof of this approach. We have a large number of innovations for what are called the megatrends of the future: environmental protection, energy efficiency, renewable energies – to name just a few. What does that mean for your product portfolio in concrete terms? Interview with Hans-Joachim Müller, Member of the Hans-Joachim Müller: A look at our clean tech products shows Executive Committee, responsible for the Catalysis & Energy how well we are positioned. Our catalysts prevent emissions and and – till Dec. 2011 – Functional Materials Business Units are often the factors that make efficient utilization of alternative en- ergy and raw material sources possible at all. Our adsorbents and as a member of the Clariant Executive Committee, additives help improve production processes: They clean food, treat you are responsible for the activities acquired water, protect pharmaceutical products, replace heavy metals, and from Süd-Chemie. What are the strengths of these so forth. And by supporting the growing lithium-ion technology, we Business Units? are playing an important role in future energy storage. Hans-Joachim Müller: Functional Materials and Catalysis …and what does that mean with regard & Energy fit Clariant’s product portfolio perfectly. Both Business Units to your margins? have highly innovative products with great growth potential. The return is clearly above-average and will remain very stable, even in Hans-Joachim Müller: On this point we are confident that we the event of a new economic crisis. can both maintain high profitability and expand it. For one thing, we have a successful track record in this area. Süd-Chemie, for example, was able to increase the EBITDA return steadily, even during the last financial and economic crisis, from 13.9 percent in 2008 to over 16 percent in 2011. In addition, we see potential based on our inno- vative products and on integration into the Clariant Group. Integra- tion is proceeding very smoothly and we expect an additional rise in EBITDA of CHF 90 to 115 million by 2013 as the result of integration- related synergies and Clariant Excellence initiatives.
40 Clariant Annual Report 2011 “ he purchase of Italtinto strengthens our product portfolio T through forward integration in applications with high profitable growth potential.” Marco Cenisio, Head of the Pigments Business Unit gin of the Functional Materials segment, for expansion acquisitions in 2011 example, is just under 13 percent and that Acquisition of Prairie of Catalysis & Energy approximately 24 per- Petro-Chem (Canada) cent. It should also be emphasized that the Takeover of Süd-Chemie Acquisition Takeover of all Purchase of Süd-Chemie activities are much less cycli- of Octagon AG (Germany) minority shares Oberhausen cal than most of Clariant’s other activities. Process LLC Acquisition of in Colex Spolka Technology Center (USA) Italtinto S.r.l. (Italy) (Poland) (Germany) They increase Clariant’s percentage of less cyclical business to significantly above 50 percent. During the last major recession of March April May June July August September October 2008 and 2009, Süd-Chemie was even able to achieve returns of 13.9 and 14.7 percent, respectively, and to increase its margin fur- higher level of delivery reliability. This ac- Clariant also strengthened its Pigments ther to 16.8 percent by 2010, despite the quisition also generates additional growth Business Unit in April by acquiring the Ital- crisis. potential since the company brings to the ian company Italtinto. This takeover makes Group its innovative product range, particu- a lot of sense strategically for two reasons. You can find additional information on Süd- larly in the area of more environmentally It allows Clariant to extend its value chain Chemie at: www.sued-chemie.com friendly de-icing chemicals. in the attractive market for color mixing systems and is the ideal complement to the Several strategic expansion The Canadian company Prairie Petro-Chem Business Unit’s existing product range in acquisitions in 2011 was purchased in April as part of the Oil a very healthy market with above-average In addition to the major acquisition of Süd- & Mining Services Business Unit. The com- growth rates. The integration of Italtinto Chemie, which certainly outshone every- pany, which is active in the petrochemical also yields big synergy effects on the cost thing else in 2011, Clariant again also con- sector, is among the leading suppliers of and customer side. cluded several smaller but very attractive specialty chemicals for oil and gas produc- and future-oriented takeover transactions. tion in the Bakken Shale region of Canada, Lastly, Clariant took over Oberhausen Tech- which is viewed by industry experts as one nology Center GmbH (OTC) in October. This By acquiring the US company Octagon Pro- of the most promising regions in North again strengthens Industrial & Consumer cess LLC in mid-March, Clariant significantly America. Specialties, specifically the Consumer Care expanded its North American activities in area. OTC has unique formulation expertise the area of de-icing chemicals in the Indus- Additional information on the Oil & Min- that enables it to transform new sustain- trial & Consumer Specialties Business Unit. ing Services Business Unit is available at: able and innovative technologies into low- Clariant is already a world leader in this www.clariant.com under the “Businesses” cost consumer products. The transaction is sector, and Octagon strengthens its position heading. therefore a perfect fit for Clariant’s strategy further in the North American region. It can of establishing strong positions in new fast- now guarantee its customers there an even growing areas.
Drivers for profitable growth 41 Portfolio management“In Prairie Petro-Chem we have acquired a real asset.” what is special about Prairie Petro-Chem from Clariant’s perspective? Christopher Oversby: In Prairie Petro-Chem we have acquired a truly valuable asset. The company already supplies more than 7 oil and gas production sites and is established as a leader 000 in the fast developing Saskatchewan region of Canada. The region, which includes the Bakken Shale formation, has some of the biggest hydrocarbon reserves in North America – positioning Prairie Petro- Chem for continued success for many years to come. But with sales of about CAD 30 million, the company is quite small. Interview with Christopher Oversby, Christopher Oversby: It might look like that at first glance, how- Head of the Oil & Mining Services Business Unit ever the company has a strong record of significant growth and is highly profitable. In addition to the immediate potential of the region, which is very impressive, we will use this acquisition as a spring board to accelerate the development of our shale business in other regions, both within North America and globally. Portfolio optimization also peripheral activities that are no longer part Clariant’s continuous efforts to make the includes the sale of some of the Business Units’ core areas would be Group a world leader in the field of specialty operations in better hands in other companies. Clariant chemicals with above-average profitable At Clariant, portfolio management also therefore sold several smaller operations growth through strategic portfolio optimiza- means reviewing all existing activities with in the course of 2011 such as its polysila- tion. regard to profitability and future orientation zane coatings business and Licomer brand within the Group. The analysis shows that floor polishes. These transactions highlight
42 Clariant Annual Report 2011 Global positioning The ongoing process of globalization is forcing globally active companies to adapt Location strategy follows global their structures and strategies to ever more rapidly changing conditions. As a glob- requirements al leader in specialty chemicals, Clariant has done its homework over recent years The structural changes in global trade have and consistently aligned its production structures with global economic trends. also had a lasting effect on Clariant’s loca- The company has production facilities on all continents and 152 production sites in tion strategy. 13 and 3 percent respectively 44 countries. The focus for the future, which is also reflected in the Clariant Group’s of the company’s 152 production sites, are growth strategy, is on expanding market share in high-growth emerging countries currently located in the emerging countries in Asia and Latin America. of Asia and Latin America. The measures taken to optimize the production network The Clariant Group has seen a clear shift a relatively low 3.4 percent, but by 2011 as part of the Global Asset Network Op- in regional sales shares in recent years. it had risen to 6 percent. A corresponding timization (GANO) program also contrib- Dynamic economic growth in the emerging decline occurred in sales from the tradi- uted to this shift in the regional balance markets has driven a significant rise in the tional industrial nations of North America of power at Clariant. By the time the mea- sales shares of these regions when mea- and Europe. Having accounted for a total of sures are completed at the end of 2013, 20 sured against Group sales. This increase was 63.4 percent in 2005, they had fallen to 54.1 Clariant locations will have undergone especially pronounced in the sales shares of percent by 2011. It is important to note that restructuring. Fourteen are being or have Latin America and Asia/Pacific. Whereas some of these sales had been exported to already been closed completely, while Latin America generated only 13.0 percent the emerging nations mentioned above. a further six will see significant cost im- and Asia/Pacific 17.1 percent of sales in provements as a result of GANO. Clariant 2005, by 2011 these figures had risen to The integration of Süd-Chemie will provide expects these measures to generate some 15.5 percent and 21.7 percent respectively. a significant boost to Clariant’s growth. In CHF 60 million in cost savings by mid-2013. A particular highlight has been the dynamic 2011, Süd-Chemie generated more than growth in China’s sales share in proportion 30 percent of its sales in Asia and the Mid- to Group sales. Six years ago this stood at dle East (EUR 433 million).
Drivers for profitable growth 43 Global Positioning“ ompanies which are too slow to adapt their structures to the C challenges of globalization will stand very little chance in the future competitive business environment.” Mathias Lütgendorf, Member of the Executive Committee sales share by region – Comparison 2005 and 2011 % Europe North America 20051: 48.7 2011: 41.1 …whereof China 20051: 14.7 2011: 13.0 20051: 3.4 2011: 6.0 Asia/Pacific… Latin America 20051: 17.1 2011: 21.7 Middle East & Africa 20051: 13.0 2011: 15.5 20051: 6.5 2011: 8.7 1 without Süd-Chemie Total Sales by Regions Employees by region 2011 in percentage of total employees % (including Süd-Chemie) % North America 13 Europe 45 Latin America 15 Asia/Pacific 25 Europe 41 North America 9 Middle East & Africa 9 Latin America 14 Asia/Pacific 22 Middle East & Africa 7 whereof China 6
44 Clariant Annual Report 2011 39 % of the Clariant Group’s workforce is already employed in the emerging nations of Asia and Latin America. Clariant worldwide Countries where Clariant is represented Textile chemicals closer to the new headquarters will accommodate in this segment. The plant marks another markets the entire senior management of Textile important investment in the country by the Chemicals. The Business Unit has also set Industrial & Consumer Specialties (ICS) When it opened the new headquarters up a global textile application team and Business Unit. The new 80 000 square me- for the South East Asia & Pacific region, opened a state-of-the-art laboratory at the ter Dayabay plant situated in the South Clariant also relocated the headquarters of new location. East of Guangdong Province is the unit’s the Textile Chemicals Business Unit from largest plant in Asia/Pacific. The plant will Europe to Asia, thereby underlining the have an initial production capacity of some key role of the textiles sector in Asia. More Clariant expertise for the Chinese 50 000 tons of surfactants per year. It is also than 60 percent of global textiles produc- market equipped with an autoclave laboratory to al- tion is based in the Asia/Pacific region, and low fast product development and custom- Clariant already generates 43 percent of its In May 2011, Clariant commenced produc- ization in accordance with local demands. textile chemicals sales in Asia. With the tion at a new ethoxylation plant in China, relocation from Switzerland now complete, which means it now has a global presence
Drivers for profitable growth 45 Global Positioning“ lariant’s expansion in the fast-growing Asian region is a key C pillar of our profitable growth strategy. It is also evidence of our considerable commitment to our customers and markets.” Hariolf Kottmann, Chief Executive Officer Clariant’s sales in China by targeted expansion of production capaci- CHF m ties and a move into high-growth sectors in 2016 /17 ~ 1 000 the region such as pigments and coatings 2010 424 for China’s automobile industry. 2005 273 0 250 500 750 1000 Clariant forecasts similarly large potential for the Indian market. The Group has main- tained a presence in the country for some The integration of Süd-Chemie will bring This strengthening of Clariant’s presence 40 years and, with four production sites at with it a further 51 new production sites, shows that the company is systemati- present, has a well established and efficient of which around 16 percent are situated cally pursuing its expansion strategy in the organizational structure. Until now, around in China, India and Brazil. The growing region. 70 percent of sales have been generated by share of sales and locations accounted the Textile Chemicals, Pigments and Leather for by emerging nations also affects the Considerable growth potential Services segments. Improving living stan- staff members employed there. At the end in China and India dards and dynamic economic growth have of 2011, some 39 percent of full-time em- Clariant has invested over CHF 200 million benefited the company in India, too. As is ployees at Clariant worked in Asia/Pacific in China alone over the past five years, the case in China, Clariant is focusing on and Latin America. The comparable figures and had 15 production sites there at the supplying the Indian automotive sector as were on a similar scale at Süd-Chemie, with end of 2011. From a historical perspective, well as the biotechnology industry, which a third of the workforce being employed in production relocations to China primarily both are expanding rapidly in the region. the Asia/Pacific region. affected the mature Business Units Textile The aim is to triple Clariant’s 2010 sales in Chemicals, Leather Services and Pigments, India of approximately CHF 205 million by Clariant strengthens presence as the majority of global production in 2016/17. In addition to organic growth and in Asia in 2011 these areas stemmed from Asia owing to the introduction of new, innovative prod- Clariant continued to strengthen its pres- the low personnel costs there. In recent ucts, the company is also examining selec- ence in Asia in the year under review, among years, however, improving standards of liv- tive acquisitions in India. other things by opening new headquarters ing and the rising demand for industrial and for the South East Asia & Pacific region in consumer goods in the region have led to November. The new regional headquarters a marked increase in activity and dynamic in Singapore are the first that Clariant has growth in Clariant’s other Business Units, used together with Süd-Chemie. The Singa- in particular in the Industrial & Consumer pore location currently has 200 employees, Specialties, Masterbatches and Additives who are responsible for supporting custom- segments. The goal is to more than double ers in the South East Asia & Pacific region. the Clariant Group’s sales in China from CHF 424 million in 2010 to around CHF 1 billion by 2016/17. This will be achieved
46 Clariant Annual Report 2011 Innovation, Research & Development Innovation is a key driver of progress on the path to profitable growth at Clariant. In The acquisition of Süd-Chemie in the year the face of stiff international competition, it is impossible to achieve lasting sales under review led to another significant ex- growth and generate added value without new, attractive products. A high level of pansion of Clariant’s technology platforms, commitment to Research & Development (R&D) is essential for a specialty chemi- which now include chemical technologies, cals company to position itself successfully in the global market on a long-term biotechnology, catalysis, and process tech- basis. Only through creativity and a continuously high capacity for innovation can nology. By doing this, the company is gener- a company react quickly to customers’ changing requirements. Thanks to a large ating further potential for the future so that number of innovations, Clariant has continued to be able to rise to the demands it can continue pursuing its strategic goal of of the market and secure sustained development of both products and production sustainable profitable growth, even in diffi- processes. Innovations also ensure that the company establishes a presence at an cult economic conditions. early stage in attractive market sectors and lucrative niches. From idea to market: Increasing globalization and the ever more ergy efficiency, resource management, and Clariant’s innovation process rapidly changing conditions mean that com- alternative energies as well as renewable Innovation comprises the entire complex panies must have the ability to react quickly raw materials. process from the development of an idea to the requirements of the market and cus- through to the successful market launch of tomers. In addition to ensuring lean and Clariant publishes current examples of a new product. In order to implement this efficient structures and the optimum use these innovations on a quarterly basis in process effectively, Clariant has set up an in- of resources, Clariant also concentrates on a number of forms, including animations novation management system which is firm- recognizing future requirements within the about innovative products and their ap- ly established throughout the entire Group context of megatrends and developing its plications, on the company website under and aligned the organizational structure of products accordingly. For this reason, one the title “Innovation Spotlight.” R&D accordingly. On this basis, efficient and focus of the company’s R&D activities is on www.innovation.clariant.com targeted use is made of the available innovation in the future growth areas of en-
Drivers for profitable growth 47 Innovation, Research & DevelopmentGlobal Innovation Network of Clariant Australia China Bendorf Pogliano Russia Thailand Lara Jinshan Hilden Novara St. Petersburg Phan Tong Tianjin Moosburg Merate Bangpoo Belgium Saudi Arabia Shanghai Unterneunkirchen Louvain Japan Riyadh Turkey Taoyuan Frankfurt-Höchst Shizuoka Gebze Brazil Guangzhou Gendorf Singapore Toyama Jacarei Munich Singapore United Kingdom France Sao Paulo Heufeld Malaysia Aberdeen Cergy South Africa Resende Lahnstein Port Klang Choisy-le-Roi Chloorkop USA Suzano Shah Alam Lamotte India Johannesburg Little Ferry Canada Cochin Mexico Randburg Needham Germany St. Bruno Pune Puebla Palo Alto Ahrensburg South Korea Baroda St. Clara Belen Chile Knapsack Pohang Kolshet Alfred Station Maipú Oberhausen New Zealand Roha Spain Minneapolis Wiesbaden Albany El Prat Holden Leinfelden Indonesia Pakistan Castellbisbal Chicago Gersthofen Cileungsi Karachi St. Andreu Winchester Tangerang Korangi Yuncos HoustonCentral functions: Italy Charlotte R&D Center Chemistry and Process Technologies Peru Switzerland R&D Center Biotechnology Lomagna Louisville Lima Muttenz R&D Center Catalysis & Energy Palazzolo Mount Holly ReinachBusiness Unit functions: Technical Centers (Application Development)
48 Clariant Annual Report 2011 CHF 176 m was the amount spent by the Clariant Group in researching and developing innovative products in 2011. Excellence in Innovation: The Clariant innovation process – From idea to market SCOUT SCOPE EXECUTE Commercialize › Ideation › Evaluation › Development › Monitor › Scouting › Deep Dive › Pilot › Close › Proof of Concept › Launch resources for developing new products and The company’s research strengths – at Innovation Excellence launched applications with great potential for the Clariant mainly chemicals, and at the new in 2011 future. subsidiary Süd-Chemie Catalysis and Bio- To make R&D even more efficient and effec- technology – will generate significant tive, Clariant has launched a new idea-to- Realignment of the R&D synergy effects. The combination of Süd- market process within the Group in the form organization to increase Chemie’s experience in catalysis, enzyme of the Clariant Innovation Excellence (CIX) efficiency technologies, fermentation and materi- initiative. CIX is the fourth pillar of Clariant The R&D organization, which was already als separation with Clariant’s expertise in Excellence and was introduced in July 2011. restructured in 2010 and consists of the chemical modification of renewable raw The idea-to-market process is implemented Group Research & Development Centers for materials and in polymer technology opens consistently throughout the Group and is Colorants, Surfactants and Alkoxylates, Ef- the way for the development of, for exam- designed to scout, scope, develop, and fect Chemicals and Intermediates, Specialty ple, new surfactants, which have consider- commercialize innovation ideas within the Polymers, and Formulation Technology, has able growth potential. shortest possible time frame. Between the combined know-how and strengthened individual steps, the achievements are com- technology platforms. The work of the R&D In addition to Group R&D, the Group Tech- pared with the original goals and market Centers includes not only developing new nology Services function includes the orga- requirements (stage gate) before the green molecules and polymers but also optimiz- nizational units Group Process Development, light is given for the next stage. ing formulations. The Intellectual Property Group Engineering, New Business Develop- Management Department develops pat- ment, and Intellectual Property Manage- R&D workforce moved to 1 100 ent strategies together with the Business ment. Using innovative process technol- As a result of the consolidation of Süd-Che- Units and thus secures Clariant’s know-how. ogy, Group Process Development brings mie, Clariant’s R&D workforce increased to These new solutions are then tested in the chemical processes to production scale and 1 100 as of the end of 2011 – twice as many application development laboratories of increases the efficiency of existing chemi- as in the previous year. the Business Units in order to assess their cal processes. New Business Development viability in practice. Before an R&D proj- is responsible for developing new business This led to an increase in R&D expendi- ect is approved, the cost effectiveness of outside of existing business activities. ture from CHF 135 million in 2010 to CHF innovations is assessed by comparing the 176 million in the year under review. As expenditure on research, production, and a proportion of Group sales, this corre- marketing with the expected returns.
Drivers for profitable growth 49 Innovation, Research & Development“ nnovation is the basis of our business success.” I ries in Frankfurt. In addition, our Group Process Development team operates Clariant’s most versatile pilot plant there to speed up the development from lab to production. Many of our Business Units op- erate application development, testing and analytical laboratories in Frankfurt. Bundling of expertise under one roof in the new Innovation Center will foster collaboration and communication across organiza- tional boundaries and this will certainly be a source for innovation. We will even integrate our New Business Development team and our Patent Department in the new center. Secondly, there are several universities and research institutions in the Rhine-Main region of- fering collaboration opportunities for Clariant. And thirdly, Frankfurt as the global hub of Clariant’s R&D has an excellent infrastructure considering the proximity of the industry park to the international airport and the excellent train network. Interview with Martin Vollmer, Chief Technology Officer How do you see the importance of collaboration What is the importance of innovation for Clariant? with external partners such as universities and research institutions? Martin Vollmer: Innovation is the basis of our business success and enables us to achieve profitable growth. Innovation also means Martin Vollmer: This is of great importance for us. It can be con- delivering new products and services to the market which are of sidered as technology push and will be beneficial to fill the research value for our customers. Starting point is to understand the unmet pipeline. Open Innovation in particular is becoming more and more needs of our customers and to translate these needs into the right important. Combining knowledge and capabilities from various part- product or service offering. Moreover, innovation is directly linked to ners leads to new ideas and creative product concepts. The role of sustainability. Clariant responds with the development of safe, re- the industry partner is to build the bridge to the market. Clariant is source efficient and environmentally compatible chemical processes currently involved in more than 140 research projects with external providing the basis for innovative performance products. partners world-wide. For example, in Germany, we intensively work with the Technical University of Munich in the field of catalysis. In You are investing considerable amounts in Switzerland, we work with the ETH Zurich and sponsor a fellowship building a global Research & Development center. program for Ph.D. students. This gives us access to young talents Why in Frankfurt? who might join Clariant after finishing their education. Martin Vollmer: During a classical evaluation of various locations, Industry Park Höchst in Frankfurt emerged on top of the list. There are several reasons for this: Firstly, we already have a critical mass in Frankfurt. All of our Group R&D Centers run chemical laborato-
50 Clariant Annual Report 2011 Clariant Innovation Center in Frankfurt › Completion scheduled for 2013 › Investment: CHF 125 million › Workforce of 500 › Coordination of Clariant’s global R&D activities sponds to an increase from 1.9 percent The Business Units also maintain around 65 The Project Center for Renewable Raw Ma- in 2010 to 2.4 percent. The main driver of technical centers – in Asia, Europe, Latin terials coordinates all of Clariant’s interna- this increase was Süd-Chemie’s tradition- America, and North America – so that the tional research and development activities ally high R&D expenditure. In the two new regions can be offered technical service in this area as well as appropriate exter- Clariant businesses, Functional Materials and technical customer projects can be nal collaborations. Clariant is investing at and Catalysis & Energy, which were supported. The development of new and least CHF 10 million in this interdisciplinary added as part of the acquisition, R&D ex- the optimization of existing production pro- research program initially scheduled to last penditure was well over 5 percent (in terms cesses mainly takes place in three process three years. Key objective is the replace- of sales). development centers in Frankfurt/Höchst, ment of petrochemical raw materials with Gendorf, and Lamotte. Süd-Chemie’s major renewable ones. At the Advanced Materials The R&D activities at the five R&D Centers R&D sites are in Germany (Munich, Heufeld, Project Center, new materials such as ce- mentioned above are located in Frankfurt/ and Moosburg), USA (Louisville, Palo Alto), ramic fibers and composites are developed. Höchst and Gendorf (Germany), Reinach and Japan (Toyama). (Switzerland), Lamotte (France), and Su- zano (Brazil). Another Research & Devel- Together with Süd-Chemie, Clariant holds opment Center is planned in Asia in the over 9 500 patents and is involved in more foreseeable future. After the completion than 140 scientific projects with external of the Clariant Innovation Center in 2013, research partners. The Group’s research Clariant will have one of the most cutting- and development activities are thus com- edge research centers in the world in Frank- plemented by an international network of furt/Höchst. All global R&D activities will be universities, public research institutions, coordinated from this center. and partner companies, which strengthens its own R&D. Clariant sponsors young sci- entists by awarding scholarships to world- renowned universities, such as ETH Zurich.
Drivers for profitable growth 51 Innovation, Research & DevelopmentExamples of recent R&D projects and product innovations Sunliquid® is an integrated process being developed by Clariant for manufacturing bioethanol from cellulose obtained from the leftover straw waste from food production. With this second generation bio fuel pro- cess applying enzyme technologies, Clariant is avoiding the conflict between food and fuel. Süd-Chemie’s selective hydrogenation ex- p ertise was highlighted when the latest addition to the OleMax® series was short- listed for the ICIS Innovation Award in 2011. OleMax 207 offers a 35 percent selectiv- ity improvement in converting acetylene to ethylene in petrochemical operations of customers. The high conversion catalyst runs at lower temperatures and for longer cycles than competing materials, translating to EUR 1 million in annual savings for a mid- sized ethylene unit, and correspondinglyVitipureTM, ZenvivoTM, Velsan® – a Under the name Synergen®, Clariant is less impact on the environment.unique range of chitosan-based biopoly- developing new crop protection productsmers developed in collaboration with the based on renewable raw materials. The Süd-Chemie began commercial productioncompany KitoZyme. It is used to make hair special feature of the Synergen® concept is of its new battery material Life Power® P2and skin cleansing products more moistur- that the raw material is taken from the plant in December 2011. The new unit in Candiac,izing, gentle and protective. species for which the crop protection prod- Canada, uses a proprietary wet process to uct has been formulated. This enables an in- make a high-performance cathode materialClariant is already a global leader in non- crease in crop yields without damaging the based on lithium iron phosphate. Life Powerhalogenated flame retardants thanks to plants with artificial substances. As a con- P2 delivers high power, superior safety, andExolit®. Exolit® is used in particular in the sequence, this bio-based surfactant product long cycle life to applications such as elec-electrical and electronics industries as well meets the market demand for “green” crop tric and hybrid vehicles and home energyas in construction. A new concept has also protection. storage systems.been developed to improve fire protectionof printed circuit boards in the electronicsindustry.
52 Clariant Annual Report 2011 Sustainability at Clariant In addition to further strengthening its operational and technological basis for prof- ing working environment, guaranteeing itable growth in business year 2011, Clariant also focused this base rigorously on mutual respect, and – where appropriate sustainability aspects, thereby taking into account both its corporate and social – participating in campaigns to improve the responsibility. From the business point of view, this is critically important in two social climate. ways. First, particularly in challenging times, companies that are sustainably man- aged and act responsibly are proven to be more successful in the long term. In Clariant has set itself the specific objectives addition, the wide range of innovations developed on the basis of sustainability of steadily reducing its relative consumption generates added sales and earnings potential. of water and energy, and generating less waste and pollutant emissions. In addition, Global population growth, increasing stan- Sustainability-based management signifi- plant safety is to be increased still further dards of living, and globalization have cantly increases the Group’s competitive- and products improved through ongoing re- opened up many possibilities but at the ness, generating value, which also address- search. By implementing its sustainability same time, have brought many challenges: es the capital markets’ requirements. This is objectives, Clariant is assuming responsibil- Ever scarcer raw materials and energy a further reason why sustainability is firmly ity for the environment, its employees, its sources have to be spread over more and anchored in Clariant’s corporate strategy. customers, and society, particularly through more people. Responsible and efficient use intensive and transparent communication of the available resources is imperative Long-term planning, with the relevant stakeholders. for us, and all the more so for future gen not short-term thinking erations. Clariant believes it has a duty to use re- Clariant’s focus on innovation also strength- sources sparingly and respect the environ- ens the company’s future economic viability. ment, from a pure business point of view The company’s main opportunities here lie apart from anything else. This also includes in the development of innovative prod- ensuring a sound and performance-enhanc-
Drivers for profitable growth 53 Sustainability at ClariantClariant Sustainability PolicyCommitment & Clariant grams. The system complies with ISO 9001, Risk and EmergencyExcellence ISO 14001, OHSAS 18001, and Responsible ManagementClariant commits itself to ethical and sus- Care®. Achieving and maintaining a high Comprehensive assessment of risks relatedtainable operation and development in all level of quality across all aspects of our to our operations and products are prereq-business activities according to Responsible businesses, our ESH related activities, So- uisite to our business processes. Local andCare® and Clariant’s own Code of Conduct. cial Responsibility and Responsible Care®, global emergency organization is in place toClariant strives for a business culture of is our understanding of Corporate Sustain- ensure comprehensive emergency manage-continuous improvement as well as for ability. ment and response.sustainable competitiveness and top perfor-mance in consideration of Clariant’s ethical Compliance Innovation and Productstandards. Compliance with laws, international stan- Stewardship dards, internal regulations, and Clariant‘s We are convinced that it will be essentialResponsibility Code of Conduct is a basic requirement for to understand our customers’ needs. Inno-Clariant bears an ethical responsibility for all our activities. Clariant appreciates volun- vation and customer focus is the key to oursustainable, economic and ecological, as tary initiatives and provides adequate sup- business. We permanently develop betterwell as fair, business practices. Corporate port to develop effective and efficient safe- and new products and services to add valueSocial Responsibility is therefore an inte- ty, health and environmental regulations. to our customers and to our environment.gral component of our companys philoso- Concurrently we secure that our productsphy. All Clariant employees are educated Safety and Environment can be used over their entire life cycle inand trained to assume responsibility in line One of Clariant’s most important objectives a safe manner for employees, customers,with their function, level of authority, and is the safety of its worldwide activities and the public and the environment.qualification. the protection of people and environment. We set protection goals which are valid Sustainable Operation andClariant’s Management System throughout the entire group and monitor and ProcessesClariant’s certified Management System ad- evaluate all aspects of our activities. We take initiatives to reduce environmental,heres to all internal and external standards safety and health risks in production, stor-to which Clariant subscribes and forms the age, distribution and usage of our productscompany’s documented structural frame- and the disposal of waste. This includes thework as the basis for objectives and pro- efficient use of energy and resources and the continuous improvement of our process- es to minimize the impact of our activities on the environment. continued on page 54
54 Clariant Annual Report 2011 continued from page 53 Third Party Management Communication Monitoring and Review Our aim is to establish mutually beneficial Clariant fosters a culture of proactive and We monitor and review all business aspects relationships with our third party suppli- transparent communication as key to trust- and processes including Responsible Care® ers and contractors in order to support our ing and reliable relationships. All stakehold- issues at regular intervals. Observing our services on the basis of our internal ESHQ ers are regularly informed about our activi- quality and performance is an integral com- standards, which include Corporate Social ties, our targets and our ESHQ performance. ponent of our business processes, our top Responsibility and Responsible Care®. We We identify the concerns and expectations priorities and our strategic planning. encourage our suppliers and service pro- of our stakeholders systematically. viders to adopt standards comparable to Clariant’s policies. Life Cycle Thinking on Product Level Sustainable Design – already reflects the idea for Responsible Production – focuses on sustain more sustainability during the development phase of ability initiatives during the manufacturing. a new product. Goal is to invent safer products that Goal is to make chemical reactions happen more are inspired by bio-based raw materials and designed efficiently, thus conserving energy and water and to replace critical materials. reducing greenhouse gases, effluents, and waste. 1 2 4 3 Ecological Integration – refers to the environ Safe & Efficient Use – highlights the product mental fate of a product after its use. It concentrates benefits during handling, formulation, and application. on the product’s environmental compatibility and It takes into account favorable product properties and ecological friendliness. performance benefits while assuring peoples’ safety.
Drivers for profitable growth 55 Sustainability at Clariant“ focus on sustainable management is firmly anchored A in Clariant’s business strategy.” Christian Kohlpaintner, member of the Executive Committee The six megatrends: Challenge and opportunity Sustainability made systematic, with detailed rules › Urbanization and social change Over the past years, Clariant has made con- Society › New mobility concepts siderable efforts to structure operational › Convergence of technologies processes even more rigorously in line Technology with sustainable management, align them › Increasing importance of bionics with ambitious goals, and continuously › New consumer behavior optimize them. This is also reflected in the Consumption › Thriving health sector ESHA management system (Environmental, Safety, and Health Affairs), which forms › Growth of trade flows part of our Group-wide process and strategy Globalization › Change in economic structures planning. Competitive › Knowledge-based economy The management system includes a pe- situation › New needs in the modern world of employment riodic compliance test of actual business › New thinking in use of energy and resources performance and ongoing goal reviews. Environment › Climate change Clariant has a global and local emergency › Environmental impacts management system and can react to inci- dents immediately and with a high degree of effectiveness. ucts, including those based on renewable and commitment to sustainability, Clariant raw materials. Innovative products should, is also making a contribution to mastering The Sustainability Council was imple- furthermore, minimize risks and waste in the global challenges of our time in process mented in business year 2011. It consists production. The optimization of internal pro- management. These challenges include suf- of representatives of the Business Units, cesses is also in the interest of our custom- ficient food, water, and energy; effective Group functions, and business regions. The ers, who benefit from tailored solutions. climate protection; and securing quality of Council develops mid- to long-term goals life for an ever increasing global population. and standards and evaluates the global Sustainability is very important at Clariant. Newly launched products which help to challenges of sustainable development, in This is demonstrated by the publication of save energy and resources, such as brands accordance with Clariant’s activities and the company’s detailed Sustainability Re- like EcoTain®, or the products made under product portfolio. This ensures that sustain- port, which received the GRI Level “A” for the CleanTech® label by Süd-Chemie, high- ability at Clariant is assessed and managed standards of reporting on sustainability light Clariant’s orientation toward sustain- holistically. from the Global Reporting Initiative (GRI) able markets of the future. in 2010. Through its product innovations You can find more detailed information on www.sustainability.clariant.com.
56 Clariant Annual Report 2011 “ ustainability@Clariant underpins our constant efforts S to ensure sustainable chemicals production.” What areas does Sustainability@clariant cover? Joachim Krüger: All the relevant ones. That means we are not only dealing with environmental issues, but also with safety in the pro- duction, transportation, and use of the products. We are also over- seeing aspects of health protection in both the production process and the handling by our customers. So sustainability@clariant also covers the area of product responsibility? Joachim Krüger: I would go so far as to say it is a specific focus. We want to handle chemicals and our products responsibly, on all levels: together with our suppliers, in our own production facilities, Interview with Joachim Krüger, and with our customers. An intensive exchange of ideas and opin- Vice President Corporate ESHA ions takes place here regarding applications and possible risks; we will keep on reducing the latter. Clariant pursues a strategy called Sustainability@clariant. What goals are you Does every department or production facility aiming for with this strategy? implement this program itself? Joachim Krüger: Sustainability@Clariant underpins our constant Joachim Krüger: Naturally, our employees on site have to imple- efforts to ensure sustainable chemicals production. Our aim is to ment Sustainability@Clariant under their own authority. However, produce chemicals by minimizing undesirable effects on the environ- the guidelines and requirements, as well as the application rules, ment. And we want to use as few materials and as little energy as are standardized and trained throughout the Group. Our Sustain- possible in their production. Our main priority in doing so is finding ability Council sets rigorous specifications here and strictly monitors the optimum balance in the triple-bottom-line approach for people, compliance. The Council works in this process with coordinators in planet, and profitability, and to satisfy the customer needs. the regions and countries, in the Business Units, and the various corporate functions. After all, Sustainability@Clariant is part of the global Clariant management system and the way we work.
Drivers for profitable growth 57 Sustainability at Clariant 50 % 1was the reduction of relativecarbon dioxide emissions withinthe Clariant Group over the last sixyears.Increased sustainability through CARBON DIOXIDE EMISSIONS IN RELATION TO PRODUCTION VOLUMEinternational standards kg/ tAs a leader in the specialty chemical in- 250 236 227 202 197dustry, Clariant goes beyond legal require- 200 184 154ments and participates in several voluntary 150 < 120sustainability programs, including voluntary 100commitments as part of Responsible Care® 50under the Global Responsible Care Charter 0and Global Product Strategy. 2005 2006 2007 2008 2009 2010 2011 1 1 PreliminaryThe guiding principle of these programs iscontinuous improvement of health, safety,and environmental protection as well as criteria for eco-efficiency. This aims to make are systematically ascertained and analyzedproduct quality from the point of view of the manufacture and application of products in order to determine and realize potentialsustainability. Accordingly, Clariant is cer- safer from the point of view of health and for improvement.tified to ISO 9001, ISO 14001, and OHSAS the environment – particularly by replacing18001 all over the world. All production scarce resources with bio-based, renewable Clariant works very closely with its custom-facilities have to adhere rigorously to the raw materials. ers to ensure safe and efficient product han-applicable rules on environmentally friendly dling. Optimum applications and processesand safe operations. Clariant also pursues a clearly defined are discussed. Possible interactions with philosophy in resource management. In other chemicals used must be taken into ac-Life cycle thinking delivers a subsequent stage, the energy required for count since life cycle thinking also includesfar-reaching sustainability production is determined by means of a de- dealing with the environmental impact ofTo ensure sustainability from the initial tailed input-output analysis. In accordance a product manufactured by Clariant after itproduct idea through production to the prod- with that analysis, operational excellence is used. To this end, environmental compat-uct’s application by the customer, Clariant criteria, and optimization potential in the ibility and recyclability of residual materialshas extended the life cycle concept to the process or product itself, are established. are investigated; the aim is to eliminateentire process chain. At Clariant, environ- negative effects or at least reduce them tomental protection begins in product design The same procedure is applied to air emis- the greatest extent possible.and development. Taking both ecological sions and water contamination. Productionand economic aspects into account, we does not start until the optimum balance of Respectable performanceexamine raw materials and the manufac- requirements feasible according to the state on environmental issuesture, distribution, usage, and disposal of of the art is found. This approach has helped Clariant has made improvements accordingproducts, and take into account potential Clariant make measurable improvements in to key environmental indicators in the last virtually all environmental areas in past few years, with the absolute consumption years. Risks inherent in production facilities
58 Clariant Annual Report 2011 of energy, resources and emissions falling terms in the relevant environmental indica- Additional sales and earnings considerably in some areas. This can be at- tors. However, relative consumption and potential from sustainability tributed to Clariant’s deploying increasingly relative pollution continued to fall. For ex- focus efficient production processes, but also to ample, carbon dioxide emissions per tonne The strong commitment of everyone in the the fact that sales and therefore production of volume produced have fallen substan- Clariant Group to manage sustainability fell sharply in 2008 and 2009. tially – by approximately 50 percent – since and at the same time respond to customer 2005, to less than 120 kilograms in 2011. needs generates a high level of additional The recovery of the global economy in 2010 sales and earnings potential. Many of the and the first half of 2011 has seen Clariant’s All these efforts are aimed at enabling innovations the Group develops on the basis manufacturing output rise substantially Clariant to pay shareholders a reasonable of sustainability address future megatrends again, a fact inevitably reflected in absolute return on their invested capital over the long such as environmental protection, energy term. The Sustainability Report 2011 con- efficiency, resource management and re- tains a detailed overview with many facts, newable energy sources. figures, and product examples. Exolit® Exolit® OP is an innovative, patented organo-phosphorus (OP) flame Global market for flame retardants (FR) by value retardant. It was developed by Clariant specifically for technical Latest market trends indicate a change of thinking in favor plastics in the electrical and electronics sector. It contains no halo- of non-halogenated products gen compounds, which have come under attack because of poten- Halogenated FR Non-halogenated FR tial damage to the environment and health. In the event of a fire, High-performance FR 0.1 0.2 Exolit® OP suppresses the chemical reactions in the flame and forms > 8 USD/kg a stable protective coating of carbonized material which keeps out oxygen and insulates against heat. All products in the Exolit® OP line Technical FR 0.9 0.6 4 – 8 USD/kg have an excellent environmental and health profile. Standard FR 1.6 0.8 > 4 USD/kg The triangle area represents the market share value. All values are in USD billion.
Drivers for profitable growth 59 Sustainability at ClariantAdvanced DenimTraditionally, denim is dyed with indigo in huge production lines that Environmental Benefitsnot only require vast quantities of water for the rinsing and purifica-tion processes but also consume large amounts of electricity. Apartfrom this, many conventional processes generate massive volumes ofcotton waste and involve the use of chemicals such as hydrosulfitesduring dyeing and hypochlorite in the post-treatment and wash-downstages. Now the new Diresul Indicolor dyes from Clariant set a newbenchmark in denim production that unites technological and ecologicaladvantages. › 92 % less water › 30 % less energy › Up to 87 % less waste cottonEasyWhite Tan processwith Granofin® Easy F-90Apart from Granofin® Easy F-90, no other tanning agents are needed. Environmental and production BenefitsOne third fewer chemicals are therefore used, and the environmentalimpact caused by the production and transportation of these chemicals Environment Productionis reduced accordingly. The volume of effluents is halved – even more › – 100 % chrome › Process simplificationwater can be saved by optimization measures, and the remaining ef- › – 80 % salt pollution › Cost reductionfluents are less polluted because chrome is completely eliminated. Salt › – 50 % effluents › User friendliness › Less susceptiblepollution drops by 80 percent, which also benefits the environment. to faults
60 Clariant Annual Report 2011 Clariant Excellence Continuous improvement coupled with cultural change characterizes the Clariant a total of more than 1 CLNX projects 900 Excellence (CLNX) initiative launched in 2009. Based on the well-known Lean have been launched, including around 500 Sigma approach, this holistic method involves all Business Units and is primar- in 2011. Improvements worth more than ily designed to improve competitiveness by increasing efficiency and generating CHF 160 million have been realized through added value for Clariant customers. After just three years, Clariant Excellence has these projects. The goal is to bring about already become a successful model, and its implementation across all depart- further improvements totaling CHF 60 mil- ments and functions has produced significant results. For example, by the end of lion per year in 2012 and subsequent years 2011, more than CHF 140 million in financial benefits had been achieved through through the Clariant Excellence initiative. more than 1 900 CLNX projects. The objective is to continue to expand this success After all four pillars have been introduced story in the years to come. in the form of individual improvement ini- tiatives, the defined objective is to achieve As a holistic initiative, Clariant Excellence as a method for increasing efficiency and even more efficient value creation for the changes and improves the business culture managing quality based on the core ele- Clariant Group and its customers by net- and internal procedures for the long term in ments of description, measurement, analy- working the four areas of excellence with an ever-changing complex world and thus sis, improvement, and monitoring of busi- one another. brings about regular annual benefits. CLNX ness processes using statistical methods. is a combination of basic system approach- Lean Management helps develop principles, More than 3 000 employees es tailored to specific areas and LeanSigma, methods, and procedures for efficiently are already directly involved a method for improving individual business structuring the entire industrial product in Clariant Excellence processes. The LeanSigma approach was value chain. Clariant Excellence is being implemented by conceived at the beginning of the 21st specially trained staff. The concept is based century and combines Six Sigma and Lean Clariant Excellence is based on four pillars: on defined roles modeled on rank designa- Management. Six Sigma was developed in Operational Excellence, Commercial Excel- tions in the form of “belt colors” – as used the late 1980s and is established worldwide lence, People Excellence, and Innovation in Asian martial arts. Within three years, Excellence. Since the beginning of 2009,
Drivers for profitable growth 61 Clariant Excellence“The initiative Clariant Excellence brings about a cultural change at Clariant.” What has actually changed at Clariant since 2009? Michael Riedel: We have successfully established the Clariant Excellence approach in the minds and conduct of our employees through more than 1 projects to date. More than 3 staff 900 000 members have been trained as “belts”, who then manage or help implement the projects. And what has this produced in concrete terms? Michael Riedel: The improvements are quite impressive. In just three years, the financial benefits attributed directly and indirectly to Clariant Excellence projects totaled more than CHF 160 million. And this is by no means the end of our initiative. Interview with Bernd Högemann and Michael Riedel. Michael Riedel was appointed Head of Integration Süd- What are your plans for the next few years? Chemie, effective 1 January 2012. He successfully led and developed the Clariant Excellence Initiative since its Bernd Högemann: In the future we want to achieve additional start in 2009 till the end of 2011. Bernd Högemann took average improvements of CHF 60 million per year through projects over responsibility for Clariant Excellence in January 2012. already introduced and projects still to be launched. And this does not even include the additional potential that we want to achieve why does Clariant need an excellence initiative? by consequently implementing Clariant Excellence at Süd-Chemie as of 2012. Michael Riedel: Clariant Excellence is a key building block for im- plementing our Group-wide strategy concept for generating sustain- able profitable growth. The initiative brings about a cultural change at Clariant. It puts us in a position to be able to respond flexibly to the dynamic changes in the globalized world. This helps us improve our competitiveness and generate added value for our customers.
62 Clariant Annual Report 2011 > 160 million Swiss francs is the value of financial improvements attributable to Clariant Excellence projects. The four Pillars of LeanSigma liveries to significantly above 90 percent, reduction in the ratio of net working capital LeanSigma to sales to less than 20 percent, and a 10 to Innovation Commercial Operational People Excel- 15 percent reduction in supply chain-related Excellence: Excellence: Excellence: lence: costs. As part of Operational Excellence, Enabling new Empowering Striving for opti- Enabling our ideas and solu- sales and mum efficiency people to Clariant will use CSS to develop a “best in tions marketing across all of achieve class” supply chain. for profitable to offer the our operating a culture of growth best customer processes continuous service improvement Commercial Excellence – and value focus on sales and marketing The kick-off for Clariant Commercial Excel- lence took place in 2010. Implementation of more than 3 of all Clariant employees 000 the foundation had been laid in 2010 by in- the Clariant Commercial System (CCS) laid have been specifically trained as “belts”, i.e. troducing CPS at pilot locations, the focus important foundations within the Group for project managers or project staff, for tasks in 2011 was on company-wide implementa- optimizing sales and marketing processes. in connection with the Excellence Program, tion. This will also be the main objective in This will allow Clariant to offer its custom- and entrusted with its implementation with- 2012. The goal is to increase productivity by ers the best service and the most attractive in the Group. Süd-Chemie employees will 3 – 5 percent per year by standardizing and price-performance ratio in the future. In also be included in this process from 2012. continually improving processes. this context, Clariant launched initial basic Regular surveys are carried out in order to modules in the Business Units focusing on monitor the successes and to identify poten- Clariant also launched the Clariant Supply improving margins and operational effi- tial improvements while introducing CLNX. Chain System (CSS) initiative in early 2011. ciency, among other aims. In 2011 the CCS Under the initiative, the entire value chain team concentrated primarily on the area The four pillars of Clariant from suppliers to customers is analyzed of transactional pricing. By 2013 the focus Excellence and scrutinized for optimization potential. will switch to customer and sales manage- This will result in further improvements in ment, and value-oriented pricing and sales Operational Excellence focus net working capital, cash management, and volume. These efforts will be closely net- on efficiency and productivity service quality. CSS plays a crucial role in worked with the other Clariant Excellence In 2009 and 2010 the emphasis of Clariant meeting Group-wide targets. For Clariant pillars – for example, through intensified Excellence was on Operational Excellence Supply Chain Systems, the specific targets innovation management via Innovation and Commercial Excellence, and in 2011 at- are: improvement in the punctuality of de- Excellence. The three modules will place tention was turned to Innovation Excellence and People Excellence. In 2010 the Clariant Production System (CPS) initiative was in- Benefits already realized through Clariant Excellence troduced as part of Operational Excellence, CHF m which focuses on efficiency improvements 2012 in all operating processes. The goal of the 2011 > 100 CPS program is to achieve optimum pro- 2010 ductivity and financial performance in the 2009 production units of all Business Units. Once 0 25 50 75 100
Drivers for profitable growth 63 Clariant ExcellenceMaster Black Belt for the MBB’s is to identify and drive the implementation of Best Practices across theIn addition to the yellow, green, and black world. It is important to utilize Asia’s poten-belts, there are currently also 10 individuals tial for Clariant as efficiently as possible andcalled “master black belts” who are driving to have the right products available locallythe execution of LeanSigma projects in their at the right time and in the highest qualityrespective regions. Sunil Joshi, Master for our customers’ benefit. All employeesBlack Belt in the Asia/Pacific region, de- in my region must be made aware of thisscribes his job as follows: “As master black projects which is quite a challenge consid- objective and be trained accordingly tobelts, we primarily support our black and ering the size of the territory as well as the achieve sustainable improvements.”green belts in executing their improvement wide variety of different cultures. A key taskPercentages of employees trained for Clariant Excellence (excluding Süd-Chemie)1 NOA EUR GCN JAP 1 200 FTEs 7 853 FTEs 1 203 FTEs 165 FTEs 5 BBs 48 BBs 6 BBs 1 BBs 88 (7.3 %) GBs 243 (2.9 %) GBs 37 (1.8 %) GBs 15 (4.4 %) GBs 436 (36.3 %) YBs 693 (7.1 %) YBs 46 (2.2 %) YBs 49 (14.5 %) YBs World LAT MEA IND SEA 16 194 FTEs 2 777 FTEs 920 FTEs 869 FTEs 1 207 FTEs 78 BBs 11 BBs 1 BBs 4 BBs 2 BBs 563 (3.5 %) GBs 99 (3.6 %) GBs 17 (1.8 %) GBs 29 (4.5 %) GBs 35 (2.0 %) GBs 2 435 (15.0%) YBs 932 (33.6 %) YBs 26 (2.8 %) YBs 106 (12.1 %) YBs 147 (8.3 %) YBs Full-time Employees (FTE) Black Belt (BB): full-time lead project manager Green Belt (GB): project team member or head of smaller projects Yellow Belt (YB): member of team headed by Green Belt; no project management duties 1 Süd-Chemie has started to implement this initiative.
64 Clariant Annual Report 2011 Example of Operational step in implementation of CPS is a detailed Brazilian site in Suzano, for example, this Excellence: analysis. Bernd Hirschberg, Head of CPS for means standardizing processes. In concrete The first successes at Latin chemical sites, describes this process as terms, this is manifested in a significant re- American plants after just a short follows: “The roll-out of CPS at every site duction in maintenance costs and increases time follows a standardized process. First we in productivity. “The decisive success factor analyze all areas and identify together with is that people experience the improvements The Clariant Production System (CPS) was the employees the opportunities for produc- and that they take ownership for the con- introduced in Latin America in June 2010 tivity improvements. These ideas are then tinuous improvement of any implemented at the Masterbatches plant in Cota, Colom- worked out in detail and implemented un- solution,” says Chris Hansen, Head of CPS bia. This was followed in January 2011 at der the direction of local management and for Masterbatches. the Business Unit’s Brazilian sites. The first with the support of the CPS team.” For the Example of Commercial cifically this means that internal price and include deadlines are then developed Excellence: guidelines must be defined for each group on this basis. They are supported by key What does transactional pricing of similar customers and previous prices performance targets as part of a separate involve? adjusted accordingly. A second objective performance management process, and is to pass on raw material price changes these targets are also reviewed regularly. Transactional pricing is simply the basic to the customers. This requires raw mate- The process of transactional pricing is module for Clariant Commercial Excellence. rial price planning that in turn defines future rounded out by regular training sessions for It involves, first of all, definition of customer sales prices. And finally, other cost outflows sales personnel where negotiating strategy groups, price-performance management, must be reviewed and analyzed from a cost is practiced, thus fixing the Clariant Com- and a link-up with the pricing mechanisms avoidance perspective. Price adjustment mercial Excellence philosophy firmly in the already used in the operating areas. Spe- processes and tools that are clearly defined minds of the staff.
Drivers for profitable growth 65 Clariant Excellence 10 %was the amount by whichproductivity in individual plants wasincreased through systematic use ofthe Clariant Production System.Clariant in a position to structure an inte- 2. stablishment of innovation processes: E Further information on this topic can also begrated price adjustment process, improve with a focus on process management found in the separate section of this Annualthe sales team’s effectiveness and focus and guaranteeing efficient development Report entitled “Innovation and Researchmore strongly on customer needs. of advancements that fit the innovation & Development.” strategy.Innovation Excellence – focus on 3. reation of an innovation culture: raising C People Excellence –growth through innovations awareness among all employees about focus on continuing developmentA further strategic focus for 2011 was In- the need to look beyond the current prod- of all employeesnovation Excellence, with the objective of uct portfolio and to focus on continuous The introduction of People Excellence willestablishing Clariant as a global innovation development of sales potential through increasingly become the new focus ofleader in the area of specialty chemicals in development and promotion of new prod- Clariant Excellence after 2011. A basicthe coming years. The focus is on develop- uct ideas and technologies. requirement for making Clariant a globaling new products and services, finding and 4. Training of relevant staff: systematic leader in specialty chemicals is to be able toestablishing new applications for existing training and empowering of employees to rely on a well trained and motivated team ofproducts. Clariant will concentrate its re- recognize the needs of rapidly changing employees. Clariant is therefore building onsearch and development activities on future market environments, and to implement a strong organization that is oriented to theglobal megatrends such as environmental the necessary processes of improvement core elements of strategy, structures andprotection, raw material and energy ef- through innovation. processes, as well as values and conduct.ficiency or alternative energies as well as The company dedicated itself to the first twofood availability. Sustainability is an impor- The implementation process across all Busi- elements primarily in 2009 and 2010. Onetant part of Group strategy, with the focus ness Units is slated to begin in 2012. Once of the first implementation steps of Peopleon technologies for instance for the devel- the four stages have been successfully im- Excellence was to define new corporate val-opment of products based on renewable plemented, Clariant will be able to advance ues consisting of six basic principles:raw materials. At the same time, Clariant the process of profitable growth by 1 2 – › Drive for Excellencewill work intensively on resource-conserv- percentage points per year – solely through › Disciplined Performance Managementing processes. Innovation Excellence. Clariant has also › Deliver to Promise introduced the new “idea to market” con- › Courageous and decisive leadershipInnovation Excellence, which was officially cept throughout the Group; it is designed to › Lived appreciationlaunched in July 2011, will be introduced in discover, develop, implement, and commer- › Corporate Responsibilitya multi-stage process: cialize innovation ideas within the shortest1. efinition of an innovation strategy: the D possible time frame. Sustainable value creation within the entire entire organization will be informed as Clariant Group is not possible unless these to the strategic goals and the core areas In organizational terms, the realignment values are implemented in everyday opera- that will be emphasized. of R&D and the innovation chain in 2010 tions. has already laid important foundations for leveraging considerable additional synergy potential while also increasing efficiency.
66 Clariant Annual Report 2011 “All team leaders will complete the leadership training.” What are the next steps in introducing People Excellence? Klementina Pejic: We laid the foundations by defining, communi- cating and training all employees on Clariant’s new corporate values. We explained and trained the application of corporate values in our leadership trainings. To ensure that our people live our corporate val- ues in their daily work and interaction with their colleagues we have introduced the 360 degrees feedback for our senior executives. All managers at the top four management levels will get general feed- back from their superiors, their colleagues and their teams on how they live corporate values. In addition, the evaluation of corporate values will be part of our annual performance dialogues throughout the organization. Interview with Klementina Pejic, Head of Senior Management Development What is the 360 degree feedback about? Who will go through leadership training? Klementina Pejic: A 360 degree feedback provides each Manage- ment Level 1 – 4 position holder the opportunity to receive feedback Klementina Pejic: All team leaders will complete the leadership from his or her supervisor, peers and subordinates. The focus-person training to increase proficiency in daily people management and to does also a self-assessment. The 360 degree feedback allows each coach the organization for high performance. The regional and local individual to understand how they are perceived living up to the leadership trainings will deepen the reflection of what Clariant’s Clariant Corporate Values and in particular to understand their new corporate values will require of Clariant leaders. This initiative strengths as well as potential development areas. We aim to en- is the key milestone to achieve People Excellence in Clariant. courage our people to openly and constructively share their observa- tions and to support each other in personal development and growth How was the roll-out organized? through sincere feedback as well as recommendations for improve- ment. After all, living our values will help us to create and sustain Klementina Pejic: BU and Functional senior managers from all a high performing organization. regions have participated with much passion and enthusiasm in different pilot training programs and have supported the core team to elaborate the final training content. We started the roll-out on regional level in May 2011 and on Country level in October 2011. We aim to implement the trainings throughout the entire Clariant organization in 2012. The leadership trainings will be an ongoing curriculum on Clariant’s training landscape.
Drivers for profitable growth 67 Clariant Excellence“nnovation Excellence plays a key role in ensuring that our I R&D expenditures of CHF 176 million are invested in the right projects and that these projects are implemented as quickly as possible.” Christian Kohlpaintner, Member of the Executive Committee Clariant’s corporate values Summary and Outlook The results of Clariant Excellence after three years are as follows: SUSTAINABLE › We have succeeded in improving Clariant’s VALUE CREATION performance sustainably; this is reflected in the improvements already achieved, CORPORATE RESPONSIBILITY which represent financial benefits of more than CHF 160 million. › Clariant has created a solid platform for LIVED additional significant improvements by APPRECE DRIVE FOR EXCELLENCE implementing a large number of projects ATION and launching further initiatives. › Clariant has redefined its corporate phi- COURAGEOUS DISCIPLINED losophy and reestablished employee focus AND DECISIVE PERFORMANCE LEADERSHIP MANAGEMENT on sustainable value creation. DELIVER TO › By doing so, Clariant has changed the way PROMISE and culture of working in the Group. All Business Units and Services are whole- heartedly committed to establish and Everyone must uphold atic performance and talent management expand the four pillars of Clariant Excel- corporate values and application of a 360 degree feedback lence and LeanSigma in their local and The corporate values have been supported process leading to qualification and perma- regional organizations. Based on the pro- in all Business Units of the Clariant Group nent development monitoring of all regional cesses already launched and the upcoming since mid-2011 through regional workshops and local managers. The pilot phase for the initiatives, Clariant firmly believes that it and executive training programs. The back- new Local Leadership Training program was can achieve additional sustainable improve- ground and consequences for daily opera- launched in October in Frankfurt; between ments totaling more than CHF 60 million per tions and the specific distinguishing charac- November and the end of 2012, it will be year. This number is backed up by the fol- teristics of certain regions and activities are expanded to cover the entire Group. lowing targets: productivity in the Clariant integrated into the process and developed Group as well as the operationg margin rel- further. A People Performance Cycle will be ative to EBIT will be increased significantly introduced in 2012. It will consist of system- through the disciplined implementation of Clariant Production System as well as through the Clariant Commercial System. In addition, net working capital, service quality and supply chain costs will be significantly improved by implementing and applying the Clariant Supply Chain System.
68 Clariant Annual Report 2011
69Helmut Müller, Project ManagerClariant Innovation CenterThe new Clariant Innovation Center at Frankfurt-Höchstwill be completed by 2013. From here, all of the Group’sResearch & Development activities will be managed infuture. In 2011 Clariant invested CHF 176 million in devel-oping innovations, the driving force for future growth.
70 Clariant Annual Report 2011 Corporate Governance Clariant is committed to international compliance standards, in order to ensure checks and balances between the Board and Management as well as a sustainable approach to value creation. Principles of Corporate Governance Leather Services, Masterbatches, Oil & Mining Services, Paper Spe- In defining the management structure, organization, and processes cialties, Pigments, and Textile Chemicals. Clariant owns 63.4 per- of the Clariant Group, the corporate governance principles aim to cent of the publicly traded company Clariant Chemicals (India) Ltd, provide stakeholder value and transparency to promote sustainable based in Thane, India, and listed on the Bombay Stock Exchange long-term success. The Group is committed to Swiss and interna- (ISIN INE492A01029, symbol: CLARICHEM) and the National Stock tional standards of corporate governance and follows the rules set Exchange of India (symbol: CLNINDIA). The company also owns 75 out in the Swiss Code of Best Practice for Corporate Governance percent of Clariant (Pakistan) Ltd, based in Karachi, Pakistan, and and by the SIX Swiss Exchange. The principles and regulations on listed on the Karachi Stock Exchange (ISIN PK007670101). In addi- corporate governance are described in the Swiss Code of Obliga- tion, since the entry made on 1 December 2011 of the squeeze out tions, the Articles of Association of Clariant Ltd, the Organizational accepted at the extraordinary general meeting of Süd-Chemie AG Group Regulations of the Clariant Group, and the Clariant Code of held on 22 November 2011, Clariant Ltd owns 100 percent of Süd- Conduct. The Board of Directors adapts these documents regularly. Chemie AG, which was acquired on 21 April 2011 and is based in The Articles of Association, Organizational Group Regulations of the Munich, Germany. Board of Directors, and Clariant Code of Conduct can be viewed on the Internet at www.governance.clariant.com. Significant shareholdings of 3 percent or more of total share capital At 31 December 2011 former shareholders of Süd-Chemie AG, who Group structure and shareholders had swapped their shares against Clariant shares, were holding in total 15.127 percent of the share capital of Clariant. These sharehold- Group structure ers are affiliated with each other because of family or other reasons The registered address of Clariant Ltd is Rothausstrasse 61, CH- (especially the Wamsler, Winterstein, Schweighart, and Stockhausen 4132 Muttenz, Switzerland. The company’s business operations are families). In addition, the following shareholders held a participation conducted through Clariant Group companies. Clariant Ltd, a holding of 3 percent or more of the total share capital: Fidelity Management company organized under Swiss law, directly or indirectly owns all & Research, Boston (United States), 5.23 percent (2010: 5.23 per- Clariant Group companies worldwide. Except as described below, cent); Teachers Insurance and Annuity Association of America – Col- these companies’ shares are not publicly traded. The important sub- lege Retirement Equity Fund (TIAA-CREF), New York (United States), sidiaries of Clariant Ltd are listed in Note 34 of the “Notes to the 3.097 percent (2010: < 3 percent); CS Asset Management Funds AG, consolidated financial statements of the Clariant Group” (pages 154 Zürich (Switzerland), 3.0184 percent (2010: 3.04 percent). No other to 157). The Group conducts its business through twelve Business shareholder was registered as holding 3 percent or more of the total Units: Additives, Catalysis & Energy, Detergents & Intermediates, share capital. At 31 December 2010 the following shareholders held Emulsions, Functional Materials, Industrial & Consumer Specialties, a participation of 3 percent or more of the total share capital: AXA, Paris (France), 5.09 percent; Amundi, Paris (France), 3.07 percent. No other shareholder was registered as holding 3 percent or more of the total share capital.
Corporate Governance 71These percentage figures are based on information received from Changes in capitalthe respective shareholders. In calendar year 2011 the share capital was increased by CHF 262 364 340 through a capital increase approved on 31 March 2011.Transactions notified to the Stock Exchange Disclosure Office pursu- A total of 65 591 085 new registered shares with a par value of CHFant to Art. 20 of the Stock Exchange Act can be seen on the SIX 4.00 each were issued, and a further 1 169 shares were created bySwiss Exchange reporting platform: http://www.six-exchange-regu- a single exercise of the conversion right of the CHF 300 million con-lation.com/obligations/disclosure/major_shareholders_en.html vertible bond. A table with additional information on changes to the share capital can be found on page 126 (Note 15) of this AnnualCross-shareholdings Report.There are no cross-shareholdings. Transferability of shares Transfer of registered shares requires the approval of the Board ofCapital structure Directors, which may delegate this function. Approval is granted if the acquirer discloses his/her identity and confirms that the sharesCapital have been acquired in his/her own name and for his/her own ac-As of 31 December 2011, the fully paid nominal share capital of count.Clariant Ltd totaled CHF 1 009 and was divided into 183 016295 752 254 registered shares, each with a par value of CHF 4.00. Nominee registration and voting rightsClariant shares have been listed on the SIX Swiss Exchange since Each registered share entitles the holder to one vote at Annual Gen-1995 (symbol CLN, ISIN no. CH0012142631). Clariant Ltd does not eral Meetings. Voting rights at Clariant are limited to 10 percent ofissue non-voting equity securities (Genussscheine). Based on the the share capital in accordance with Article 12, paragraph 1 of theclosing price of the Clariant share of CHF 9.27 on 31 December 2011, Articles of Association. Special rules apply to nominees who fail tothe company’s market capitalization at year end amounted to CHF disclose the identity of the persons they represent and whose share-2 742 million. holding exceeds 2 percent.Conditional capital Convertible bonds and optionsThe company’s share capital may be increased by a maximum of CHF In 2009, Clariant issued a convertible bond with a principal amount159 995 324 by issue of a corresponding maximum of 39 998 831 reg- of CHF 300 million. After the Clariant option program for employeesistered shares with a par value of CHF 4.00 each. These shares must was discontinued for financial reasons in 2009, options were oncebe paid up in cash, by the exercise of conversion or warrant rights again issued in 2010 and 2011. Details of the option program can begranted to their holders in connection with bonds of the company or found on page 149 (Note 29, “Employee Participation Plans”).one of its subsidiaries. The details are set out in Article 5b of the Ar-ticles of Association. You can find the Articles of Association on our Further information on the Clariant share can be found on page 29website at www.governance.clariant.com. On 31 December 2011, of of this Annual Report.these 39 998 831 shares, 35 086 549 are allocated to a CHF 300 millionsenior unsecured convertible bond issued on 2 July 2009, of which The Board of Directors1 169 shares were issued during 2011 upon a single exercise of the The Board of Directors of Clariant Ltd comprises at least six andconversion right. The convertible bond maturing on 7 July 2014 has no more than twelve members. At the 16th Annual General Meet-a conversion price of CHF 8.55 and a coupon of 3 percent per annum ing held in Basel on 27 March 2011, the following individuals werepayable semi-annually in arrears.
72 Clariant Annual Report 2011 Members of the Board of Directors: Jürg Witmer (Chairman) Hariolf Kottmann (CEO) reelected to the Board of Directors: Peter Isler, Rudolf Wehrli, Jürg Executive Committee of the Silent Gliss Group. Five years later he Witmer, Hariolf Kottmann, Dominik Koechlin, and Carlo G. Soave. took over the management of the Group’s German subsidiary. In 1995 Dolf Stockhausen, Konstantin Winterstein, and Günter von Au were he transferred to the Gurit-Heberlein Group as a member of the Ex- elected as new members of the Board of Directors. The term of office ecutive Committee and was promoted to Chief Operating Officer in of each member elected is three years. 1998 and Chief Executive Officer in 2000. He remained in this posi- tion until the company split up in 2006. He has been Vice Chairman Members of the Board of Directors of Clariant Ltd since 2008. Jürg Witmer, Swiss citizen Other activities: Board of Directors/Supervisory Board mandates: Function at Clariant: Chairman, non-executive member of the Board Berner Kantonalbank, Precious Woods AG; Kambly AG; Rheinische of Directors. Kunststoff-Werke SE; Chairman of the Board of Directors of Sefar Holding AG. Professional career: Jürg Witmer currently serves as Chairman of the Activities on behalf of companies and representative functions: Board of Directors of Givaudan S.A. and Vice Chairman of the Board Member of the Executive Committee of economic umbrella organi- of Directors of Syngenta AG. From 1999 to 2005 he was CEO of the zation economiesuisse; member of the Board of Trustees of Avenir Givaudan Group. Prior to that, he held various senior management Suisse. positions at Roche from 1978 to 1999, including General Manager of Roche Austria, Head of Corporate Communications and Public Af- Hariolf Kottmann, German citizen fairs at Roche headquarters in Basel, Regional General Manager of Function at Clariant: Chief Executive Officer (CEO) and executive Roche Far East in Hong Kong, and Assistant to the Chairman of the member of the Board of Directors. Board of Directors and CEO of the Roche Group. He has been Chair- man of Clariant Ltd since 2008. Professional career: Hariolf Kottmann earned his PhD in organic chemistry at the University of Stuttgart in 1984. In 1985 he launched Jürg Witmer has a doctorate in law from the University of Zurich his career at the former Hoechst AG in Frankfurt, where he held and a degree in international studies from the University of Geneva. several key management positions across the company’s chemical divisions and functions. In 1996 he was appointed Deputy Head of Other activities: Board of Directors/Supervisory Board mandates: the Basic Chemicals Division at Hoechst AG and took over respon- Givaudan S.A., Vernier/Geneva (Chairman); Syngenta AG, Basel sibility for the Inorganic Chemicals BU. In 1998 he joined Celanese (Vice Chairman). Ltd in New Jersey (United States) as a member of the Executive Activities on behalf of companies and representative functions: Committee and Head of the Organic Chemicals BU. In April 2001 None. he was appointed as a member of the Executive Committee of SGL Carbon AG, where he was responsible for the Advanced Materials Rudolf Wehrli, Swiss citizen Division and the Eastern Europe and Asia regions until 30 September Function at Clariant: Vice Chairman, non-executive member of the 2008. He was also in charge of the SGL Excellence and Technol- Board of Directors. ogy & Innovation corporate functions. He became CEO of Clariant on 1 October 2008. Professional career: Following studies at the Universities of Zurich and Basel, where he earned doctorates in theology, philosophy, and Other activities: Board of Directors/Supervisory Board mandates: German literature, Rudolf Wehrli began his career at McKinsey Plansee AG. & Co in 1979. In 1984 he joined the Schweizerische Kreditanstalt Activities on behalf of companies and representative functions: (now Credit Suisse) as a member of the company’s Senior Manage- Member of the Executive Committee of scienceindustries. Since 30 ment. In 1986 he became Marketing Manager and member of the September 2011, member of the Board of CEFIC (European Chemical Industry Council).
Corporate Governance 73Rudolf Wehrli (Vice Chairman) Peter Chen Peter R. Isler Klaus JennyProf. Peter Chen, US citizen Klaus Jenny, Swiss citizenFunction at Clariant: Non-executive member of the Board of Direc- Function at Clariant: Non-executive member of the Board of Direc-tors. tors.Professional career: Peter Chen studied chemistry at the University Professional career: Klaus Jenny studied economics at the Univer-of Chicago and in 1987 received a doctorate from Yale University sity of St. Gallen, where he earned a doctorate. He went on to studyin New Haven, Connecticut. He then served as an assistant profes- law at the University of Zurich and later attended the Massachu-sor (1988 to 1991) and as an associate professor (1991 to 1994) at setts Institute of Technology (MIT). In 1972 Klaus Jenny joined theHarvard University in Cambridge, Massachusetts. Since September Schweizerische Kreditanstalt (now Credit Suisse), where he held1994 he has been a full Professor of Physical-Organic Chemistry at various management positions. He was appointed a member of itsETH Zurich. From 2007 to 2009 he was Vice President of Research Executive Board in 1987, and later a member of the Executive Com-at ETH Zurich. mittee, CEO of Credit Suisse Private Banking, and finally a member of the Executive Board of the Credit Suisse Group. Since 1999 KlausOther activities: Board of Directors/Supervisory Board mandates: Jenny has been an independent financial consultant for companiesNone. and private individuals.Activities on behalf of companies and representative functions: Con-sultant at Givaudan; Gesellschaft zur Förderung von For chung und s Other activities: Board of Directors/Supervisory Board mandates:Ausbildung im Bereich der Chemie (Zurich); Member of the National Bâloise Holding; Edmond de Rothschild Holding S.A.; Banque PrivéeResearch Council of the Swiss National Science Foundation; Direc- Edmond de Rothschild S.A.; Maus Frères S.A.; Téléverbier S.A.; andtor of The Branco Weiss Fellowship. various foundations and smaller companies. Activities on behalf of companies and representative functions:Peter R. Isler, Swiss citizen None.Function at Clariant: Non-executive member of the Board of Direc-tors. Dominik Koechlin, Swiss citizen Function at Clariant: Non-executive member of the Board of Direc-Professional career: Peter R. Isler studied law at the University of tors.Zurich, completing his studies with a doctorate. He then attendeda masters program at Harvard Law School. From 1974 onward he Professional career: Dominik Koechlin earned his doctorate in lawworked for two Swiss law firms and in 1981 became a partner at the from the University of Berne and holds an MBA from INSEAD inZurich law firm Niederer Kraft & Frey AG. He has been a lecturer in Fontainebleau, France. He started his career in 1986 as a financialcorporate and commercial law at the University of Zurich since 1978 analyst at Bank Sarasin. In 1990 he founded Ellipson, a manage-and a member of the Anwaltsprüfungskommission (bar examination ment consultancy firm. From 1996 to 2000 he was a member of thecommission) of the Canton of Zurich since 1984. Executive Committee of Telecom PTT, which later became Swiss- com, where he was responsible for corporate strategy and inter-Other activities: Board of Directors mandates: Clariden Leu AG, national operations. Since 2001 he has served as a board memberZurich; Clariden Leu Holding AG, Zurich; Schulthess Group AG, of the listed companies EGL AG, Swissmetal AG, and Plant HealthBubikon; and other smaller companies. Care. He is Chairman of the Board of Sunrise AG as well as memberActivities on behalf of companies and representative functions: of the boards of several privately held companies. In addition, he isAnwaltsprüfungskommission (bar examination commission) of the a member of the University Council of the University of Basel.Canton of Zurich.
74 Clariant Annual Report 2011 Dominik Koechlin Carlo G. Soave Dolf Stockhausen Günter von Au Other activities: Board of Directors/Supervisory Board mandates: in Krefeld, Germany, where he was ultimately Managing Director Member of the Board of Trustees of LGT; member of the Board of and CEO. From 1996 to 2011 he was member of the Supervisory Directors of EGL AG and Plant Health Care; Chairman of the Board Board of Süd-Chemie and most recently Vice Chairman of the Su- of Sunrise AG; member of the boards of several privately held com- pervisory Board. He is also Chairman of the Management Commit- panies. tee of EAT GmbH and until mid-February 2012 he was CEO of Dr. Activities on behalf of companies and representative functions: Dolf Stockhausen Beteiligungsgesellschaft mbH (as of 22 December Member of the University Council of the University of Basel. 2011 “Dr. Dolf Stockhausen Beteiligungs s.à.r.l.“). Carlo G. Soave, British citizen Other activities: Board of Directors/Supervisory Board mandates: Function at Clariant: Non-executive member of the Board of Direc- None. tors. Günter von Au1, German citizen Professional career: Carlo G. Soave studied languages and econom- Function at Clariant: Non-executive member of the Board of Direc- ics at Heriot-Watt University in Edinburgh, Scotland. He launched his tors. career in 1982 at Oerlikon-Bührle in Switzerland, moving to Procter & Gamble in 1984. There he held various senior management posi- After studying textile and polymer chemistry at Reutlingen Univer- tions, including Vice President of Global Purchasing for the Fabric sity and chemistry at the University of Tübingen, where he obtained and Home Care Division. In 2004 he founded Soave & Associates, a doctorate, Günter von Au began his career in 1980 in Burghausen a consulting company based in Brussels, Belgium. He is a board at Wacker-Chemie AG. He held a number of different management member of MonoSol LLC, a company incorporated in Delaware positions at the company through 2001 in Germany, Brazil, and the (United States) and operating in the state of Indiana (United States). United States – most recently as Head of Wacker’s division for poly- mers, specialty chemistry, and basic chemistry in Munich. He was Other activities: Board of Directors/Supervisory Board mandates: also CEO of Wacker Polymer Systems GmbH & Co. KG in Burghau- MonoSol LLC, United States. sen, Germany. He joined Süd-Chemie in 2001 as President and CEO Activities on behalf of companies and representative functions: of Süd-Chemie Inc. In early 2004 Günter von Au was appointed mem- None. ber of the Management Board of Süd-Chemie AG in Munich, and in 2004 he became CEO, a position he will be holding until 31 March Dolf Stockhausen, Austrian citizen 2012. Function at Clariant: Non-executive member of the Board of Direc- tors. Other activities: member of the Supervisory Board of E.ON Bayern AG; member of the Advisory Committee of Gebr. Röchling KG; Chair- Professional career: Dolf Stockhausen studied business, economics, man of the Board of Directors of the local Bavarian section of the and law at the Universities of Freiburg and Münster, before gaining German Chemical Industry Association, Munich; member of the his doctorate in economics from the University of Münster. He began Senate of the Fraunhofer Society, Munich; member of the Board of his career at Bayer AG and a number of its foreign subsidiaries. He Directors and Vice-President of the Cologne Institute of Economic then held various positions at Chemische Fabrik Stockhausen GmbH Research. Günter von Au was elected to the Board of Directors at the 16th Annual General Meeting of Clariant Ltd. 1 Assumption of his position as Director was subject to the condition that he resign as CEO of Süd-Chemie AG. Mr. von Au will resign from his position at Süd-Chemie AG on 31 March 2012 and take his seat on the Board of Directors of Clariant Ltd on 1 April 2012.
Corporate Governance 75Konstantin WintersteinKonstantin Winterstein, German citizen Internal organizational structureFunction at Clariant: Non-executive member of the Board of Direc-tors. The Board of Directors and its committees The Board of Directors consists of the Chairman, one or more ViceProfessional career: Konstantin Winterstein studied at the Technical Chairmen, and the other members. No non-executive member of theUniversities in Darmstadt and Berlin, where he completed a degree Board of Directors held a senior management position at Clariantin production engineering. Since 1997 he has held various positions Ltd or any Clariant Group company between 2008 and 2011 or haswith the BMW Group, where he is currently Project Manager in the any significant business relationship with Clariant Ltd or any otherSupply Chain Division. In 2004 he received his MBA from INSEAD in Clariant Group company. In accordance with the Articles of Asso-Fontainebleau and Singapore. From 2006 to 2011 he served on the ciation, the number of members must be at least six and no moreSupervisory Board of Süd-Chemie AG. than twelve. The members of the Board of Directors constitute the following committees:Other activities: Board of Directors/Supervisory Board mandates: › Chairman’s CommitteeNone. › Compensation Committee › Audit CommitteeCross-involvement › Technology and Innovation CommitteeThere are no cross-involvements. BOARD OF DIRECTORS – COMMITTEE RESPONSIBILITIEsElections and terms of office Director Chairman’s Audit Compen TechnologyThe members of the Board of Directors are elected for terms of three Committee Committee sation and Committee Innovationyears maximum. There are no Board members standing for reelec- Committeetion at the Annual General Meeting on 27 March 2012. Jürg WitmerBoard of Directors Year of birth First elected Elected until Rudolf WehrliPeter R. Isler 1946 2004 2014 Peter ChenKlaus Jenny 1942 2005 2012 Peter R. IslerPeter Chen 1960 2006 2013 Klaus JennyRudolf Wehrli 1949 2007 2014 Dominik KoechlinJürg Witmer 1948 2007 2014 Hariolf KottmannHariolf Kottmann 1955 2008 2014 Carlo G. SoaveDominik Koechlin 1959 2008 2014 Dolf StockhausenCarlo G. Soave 1960 2008 2014 Konstantin WintersteinDolf Stockhausen 1945 2011 2014 ChairmanKonstantin Winterstein 1969 2011 2014 MemberGünter von Au1 1951 2011 2014 Günter von Au was elected to the Board of Directors at the 16th Annual General Meeting of Clariant Ltd.1 Assumption of his position as Director was subject to the condition that he resign as CEO of Süd-Chemie AG. Mr. von Au will resign from his position at Süd-Chemie AG on 31 March 2012 and take his seat on the Board of Directors of Clariant Ltd on 1 April 2012.
76 Clariant Annual Report 2011 BOARD OF DIRECTORS – COMMITTEES Number of meetings Duration/h CEO/CFO Other attendees Board of Directors 11 6–8 yes Executive Committee Chairman’s Committee 4 4–8 yes Audit Committee 7 3–4 CFO Auditors, Risk Management, and General Counsel Compensation Committee 3 2–3 no Head of Group Human Resources Technology and Innovation Committee 2 3 CEO Head of Technology The Board of Directors appoints the Chairman, Vice Chairman/ The Compensation Committee (CoC) comprises three members of Chairmen, and members of the committees. The Board of Directors the Board of Directors. Its Chairman must be an independent, non- meets at least once a quarter. At the invitation of the Chairman, the executive member of the Board of Directors. The CoC meets at least CEO, CFO, and other members of the Executive Committee and/or twice a year. It draws up the principles for compensation of members other employees and third parties regularly attend the meetings of the Board of Directors and submits them to the Board of Directors of the Board of Directors for the purpose of reporting or imparting for approval. It also approves the employment contracts for the CEO information. Each committee has a written charter outlining its du- and members of the Executive Committee. The CoC reviews bonus ties and responsibilities. The committees’ charters are published on and share plans. Furthermore, the Committee reviews fringe benefit Clariant’s website (www.clariant.com/committees). The committees regulations, dismissal regulations, and contractual severance com- report on their activities and results to the Board of Directors. They pensation packages with the CEO, members of the Executive Com- prepare the business of the Board of Directors in their respective mittee, Heads of Global Functions, and Regional Presidents. areas. www.clariant.com/committees The Chairman’s Committee (CC) comprises the Chairman, the The Audit Committee (AC) comprises four members of the Board Vice Chairman, and a third member of the Board of Directors. The of Directors. The Chairman must be an independent, non-executive Committee prepares the meetings of the Board of Directors. The CC member of the Board of Directors. A majority of the members of the meets as needed and generally before each meeting of the Board of AC must have financial and accounting experience. The AC reviews Directors. It makes decisions on financial and other matters delegat- the activities of the external auditors, their collaboration with the ed by the Board of Directors in accordance with the Bylaws of the internal auditors, and their organizational adequacy. It also reviews Board of Directors. In addition, the CC passes resolutions for which the performance, compensation, and independence of the external the Board of Directors is responsible when matters cannot be post- auditors as well as the performance of the internal auditors and re- poned. The CC draws up principles for the selection of candidates for ports back to the Board of Directors. Furthermore, the AC reviews election and reelection to the Board of Directors and for the office the company’s internal control and risk management systems and of CEO, and prepares the corresponding recommendations. Further, reviews compliance with the law and internal regulations – in par- the CC considers and submits to the Board of Directors the CEO’s ticular, with the Code of Conduct. In collaboration with the Group’s proposals concerning candidates for Executive Committee positions. external and internal auditors and financial and accounting man- www.clariant.com/committees agement, the AC reviews the appropriateness, effectiveness, and the compliance of accounting policies and financial controls with applicable accounting standards. The AC meets at least six times a year. The Committee reviews and recommends the Group’s financial statements for the first three quarters of each year and the release of the annual financial results to the Board of Directors for approval. www.clariant.com/committees
Corporate Governance 77The Technology and Innovation Committee (TIC) comprises four capital market transactions and other financing transactions (e.g.members of the Board of Directors with experience in research, inno- large loans) as well as changes in conditions associated therewith;vation management, and technology. The TIC usually meets at least › nsuring a management and corporate culture that is appropriate Etwice a year. The tasks of the TIC include assessing the company’s for the company’s objectives;innovative activities on behalf of the Board of Directors. The TIC also › Ensuring an internal control system and adequate risk and compli-reviews measures to stimulate research and development and op- ance management, in particular on financial, corporate governancetimize innovative potential, and submits appropriate recommenda- and citizenship, personnel, and environmental protection matters;tions to the Board of Directors. › Ensuring succession planning and management development;www.clariant.com/committees › onvening the Annual General Meeting (AGM), determining the C items on the agenda and the proposals to be made to the AGM, andDefinition of areas of responsibility approving the Annual Report including the annual financial state-In accordance with the law and the Articles of Association, the ments of Clariant Ltd and the consolidated financial statements ofBoard of Directors is the ultimate decision-making authority for the Group.Clariant Ltd in all matters except those decisions reserved by law orthe Articles of Association for the shareholders. The Board of Direc- Working methodstors has sole authority, in particular for the following, in accordance In 2011 the Board of Directors held seven meetings in person at thewith and supplementary to Article 716a of the Swiss Code of Obliga- Corporate Center in Pratteln or at other locations, mainly in Switzer-tions (non-transferable and inalienable duties of the Board of Direc- land. It also held four meetings by phone. The company’s strategy istors) and Article 23 of the Articles of Association (www.governance. reviewed and further developed once a year during a two-day meet-clariant.com): ing. Members of the Executive Committee are invited to attend the› Providing the strategic direction of the Group; meetings of the Board of Directors. For the October meeting, the› Approving the basic outline of the Group’s organization and its cor- Board of Directors visited the Gebze site in Istanbul, Turkey. On this porate governance; occasion the Board also met with the local management team. The› Supervising the overall business operations; views of external and internal consultants are heard, if necessary, in› Evaluating the performance of the CEO and members of the Execu- the case of projects of considerable scope. tive Committee;› Appointing and dismissing the CEO and members of the Executive Management of the Group Committee, the Head of Internal Audit, and other key executives; The Board of Directors has delegated the executive management of› Approving the basic accounting system and financial planning and the Clariant Group to the CEO and the other members of the Execu- control; tive Committee. The Executive Committee is mainly responsible for› Approving the Group’s annual budget; implementing and monitoring Group strategy, for the financial and› eviewing and approving the quarterly financial statements and R operational management of the Group, and for the efficiency of the results release for Clariant Ltd and the Group; Group’s structure and organization. The members of the Executive› pproving the Group’s consolidated financial statements for issue A Committee are appointed by the Board of Directors on the recom- at the end of the fiscal year; mendation of the Chairman’s Committee. Subject to the responsibil-› pproving major M&A transactions and financial transactions of A ity of the Board of Directors and the Annual General Meeting, the considerable scope or those involving special risks, in particular CEO and, under his supervision, the Executive Committee is respon- sible for:
78 Clariant Annual Report 2011 › rawing up strategic plans and policies for approval by the Board D Information and control instruments of Directors; vis-à-vis the Executive Committee › mplementing Group strategies and policies as well as strategies I The Board of Directors ensures that it receives sufficient informa- and action programs for individual Business Units and subsidiaries; tion from the Executive Committee to perform its supervisory duties › Managing the Business Units and functions to ensure efficient op- and make decisions that are reserved for the Board of Directors. The erations including regularly assessing the achievement of goals; Board of Directors obtains the information required to perform its › egularly informing the Board of Directors and its committees of R duties in various ways: all matters of fundamental significance to the Group and its busi- › he CEO and the CFO inform all directors regularly about current T nesses; developments, including via the regular submission of written › nsuring compliance with legal requirements and internal regula- E reports such as key performance indicators for each business; tions; › he minutes of committee meetings are made available to the T › stablishing a management and corporate culture in line with the E directors; company’s objectives; › Informal meetings and teleconferences are held as required › Promoting an active internal and external communications policy; between the CEO and the members of the Chairman’s Committee; › Appointing and dismissing senior management, including appropri- › he members of the Executive Committee are invited to attend T ate succession planning. meetings of the Board of Directors to report on areas of business under their responsibility; The Executive Committee is supported by a Corporate Center that › Directors are entitled to request information from members of the defines Group-wide policies and guidelines. The twelve Business Executive Committee or any other Clariant senior manager. Units are the highest-level operating units within the Group. They have global responsibility for the activities assigned to them, in Board committees particular, sales, marketing, product management, and production. The Chairman’s Committee meets regularly with members of the The Business Units also have global responsibility for short- and Executive Committee and other members of senior management to long-term revenue and earnings generated from the operations and review the business, better understand applicable laws and policies assets assigned to them. This includes fully exploiting existing busi- affecting the Group, and support the Executive Committee in meet- ness potential, identifying new business opportunities, and pursuing ing the requirements and expectations of stakeholders. The Tech- the active management of their products and services portfolio. The nology and Innovation Committee invites members of the Executive Business Units’ activities are complemented and supported by global Committee and members of senior management as necessary to Group functions (e.g., Procurement, Finance, Information Technology, discuss selected aspects of innovative activities. The CFO and rep- Legal, Human Resources, and Group Technology Services), which are resentatives of the external auditor are invited to Audit Committee organized as service centers. meetings. Furthermore, the Heads of Internal Audit and Risk Man- agement and Clariant’s General Counsel report on a regular basis to the Audit Committee. The Audit Committee reviews the financial reporting processes on behalf of the Board of Directors. For each quarterly and annual release of financial information, an internal team reviews the release for accuracy and completeness of disclo- sures and reports to the Audit Committee before publication. The Compensation Committee generally meets three times per year to adjust the development of the compensation structures to changing
Corporate Governance 79conditions, as necessary. In this context, the long-term incentive pro- Members of the Executive Committeegram for the Executive Committee and the senior management team At the end of 2011 the Executive Committee comprised the followingis also aligned with current market and business developments and members:corresponding adjustments made, as required. Hariolf Kottmann, German citizenInternal audit Chief Executive Officer (CEO)Internal Audit carries out operational and system audits in accor- Hariolf Kottmann earned his PhD in organic chemistry at the Univer-dance with an audit plan adopted by the Audit Committee and as- sity of Stuttgart in 1984. In 1985 he launched his career at the formersists organizational units in the accomplishment of objectives by Hoechst AG in Frankfurt, where he held several key managementproviding an independent approach to the evaluation, improvement, positions across the company’s chemical divisions and functions. Inand effectiveness of the internal control framework. Internal Audit 1996 he was appointed Deputy Head of the Basic Chemicals Divisionalso prepares reports on the audits it has performed and reports at Hoechst AG and took responsibility for the Inorganic Chemicalsactual or suspected irregularities to the Audit Committee and the BU. In 1998 he joined Celanese Ltd in New Jersey (United States)Chairman of the Board of Directors. The Audit Committee regularly as a member of the Executive Committee and Head of the Organicreviews the scope, plans, and results of Internal Audit. The Group Chemicals BU. In April 2001 he was appointed as a member of thepursues a risk-oriented approach to auditing and coordinates inter- Executive Committee of SGL Carbon AG, where he was responsiblenal audit activities with the external auditors on a regular basis. for the Advanced Materials Division and the Eastern Europe andDetailed information on Clariant’s risk management system can be Asia regions until 30 September 2008. He was also in charge of thefound on page 82 of this report. SGL Excellence and Technology & Innovation corporate functions. He became CEO of Clariant on 1 October 2008.The Executive Committee Patrick Jany, German citizenThe Executive Committee consists of the CEO, the CFO, and three Chief Financial Officer (CFO)members. The Executive Committee regularly holds meetings at the Patrick Jany is an economist and has been Chief Financial OfficerCorporate Center in Pratteln or at other Clariant sites worldwide. It at Clariant since 1 January 2006. In 1990 he joined Sandoz, one ofuses such external meetings to discuss business performance with Clariant’s predecessor companies. He held various positions inthe management of the local companies in person. financial and controlling at Sandoz and Clariant, including Chief Financial Officer for the ASEAN region and Head of Controlling for the Pigments & Additives Division. From 2003 to 2004 he was Head of Country Organization for Clariant in Mexico. Prior to his appoint- ment as CFO, he was Clariant’s Head of Corporate Development with responsibility for Group strategy and mergers and acquisitions. Christian Kohlpaintner, German citizen Christian Kohlpaintner studied chemistry at the Technical University of Munich and completed his PhD in 1992. Between 1993 and 1997 he worked in various research departments of Hoechst AG in Ger- many and the United States. In 1997 he joined Celanese Ltd and
80 Clariant Annual Report 2011 held a number of leadership roles at Celanese Chemicals Corpora- talysis & Energy BU) and was thus in charge of all operations of the tion. In 2002 he became Vice President Innovation of Celanese Ltd Süd-Chemie Group. He has been a member of Clariant’s Executive and Executive Director of Celanese Ventures Corporation. From 2003 Committee since 1 July 2011. he was a member of the Executive Committee of Chemische Fabrik Budenheim. In 2005 he became CEO. On 1 October 2009, he was ap- Other activities and functions pointed a member of the Executive Committee of Clariant. The members of the Executive Committee neither undertake other activities nor hold consultancy functions or other offices. Mathias Lütgendorf, German citizen Mathias Lütgendorf studied chemistry at RWTH in Aachen, Ger- Management contracts with third parties many, and earned his doctorate in 1984. In the same year, he joined There are no management contracts with third parties. the Research and Development department of the Fine Chemicals and Dyes Division of Hoechst AG. From 1990 he was responsible for Contractual arrangements for members various, mainly operational fields at Hoechst AG. From 1995 until of the Executive Committee 2008 he worked at DyStar, the textile dyes joint venture of Bayer and All members of the Executive Committee hold employment contracts Hoechst. BASF also integrated its textile dyes business into Dystar in with Clariant International Ltd, the Clariant Group’s management 2000, becoming the third equal partner in the venture. Mathias Lüt- company. The contractual provisions are governed exclusively by gendorf led the global operations of the Disperse Dyes Business Unit Swiss law. Contracts of the members of the Executive Committee and later also the Special Dyes Business Unit. From 2000 he was are subject to a standard notice period of 12 months. This notice responsible for purchasing, production, and supply chain manage- period is part of a detailed and exhaustive list of requirements as- ment at the company as Head of Global Operations. In 2004 he was sociated with severance. Specific change of control agreements are appointed member of the management board. On 1 April 2009, he in place with the CEO and with members of the Executive Commit- was appointed a member of the Executive Committee of Clariant. tee. If Clariant were to serve notice on the CEO or a member of the Executive Committee under a change of ownership, the contractually Hans-Joachim Müller, German citizen extended notice period would be 18 months. After studying chemistry and obtaining his doctorate from the Ludwig-Maximilians-University, Munich, and holding a research Compensation, shareholdings, and loans fellowship at the University of California in Los Angeles (UCLA), Please refer to the Compensation Report and Note 11 to the Finan- Hans-Joachim Müller began his professional career at BASF AG cial Statements of Clariant Ltd. in Ludwigshafen, Germany, as team leader research in product and catalyst development. After development of the hydrogenation tech- nologies area, he transferred in 1996 to Hong Kong, where he took Shareholders’ participation rights over responsibility for the catalyst business for the Asia/Pacific re- Each registered share entitles the holder to one vote at the Annual gion. In 2001 he joined Süd-Chemie AG in Munich, where he headed General Meeting. Shareholders have the right to receive dividends up the Global Business Unit Catalytic Technologies, and in 2007 he and such other rights as are granted by the Swiss Code of Obliga- was appointed to that company’s management board. In mid-2011 tions. However, only shareholders entered in the Clariant share reg- he also took over the international adsorbents business (Functional ister may exercise their voting rights. Materials BU) in addition to the catalytic technologies business (Ca-
Corporate Governance 81Voting rights and representation 21 March 2013. Shareholders who have been entered in the shareA registered shareholder may be represented at the Annual General register by Wednesday, 20 March 2013, may exercise their right toMeeting by another shareholder with the right to vote, a legal rep- vote at the Annual General Meeting on Tuesday, 26 March 2013.resentative, a representative of one of Clariant’s governing bodies There are no voting rights restrictions except those mentioned(Organvertreter), an independent proxy (unabhängiger Stimmrechts- above.vertreter), or a custodian (Depotvertreter). The shares held by anyone shareholder may be represented by only one representative.Voting rights at Clariant are limited to 10 percent of the share capital Change of control and defense measuresin accordance with Article 12, paragraph 1 of the Articles of Asso- The limit, beyond which the duty to make an offer applies, is theciation (www.governance.clariant.com). There are no special rules same as the statutory minimum, 33 percent. There are no clauses onfor waiving any voting rights restrictions laid down in the Articles changes of control (except for the specific agreements for the CEOof Association. The Articles of Association do not contain any rules and the members of the Executive Committee, see page 80).on participation in the Annual General Meeting that differ from thestandard terms proposed by law. Information policyStatutory quorums Notice are published in accordance with Article 29 of the ArticlesThe quorums laid down in the Articles of Association correspond to of Association, in the Swiss Official Gazette of Commerce, and inArticle 704 of the Swiss Code of Obligations. daily newspapers specified by the Board of Directors (Basler Zei- tung, Neue Zürcher Zeitung). Clariant releases its annual financialConvocation of the Annual General Meeting results in the form of an annual report. In addition, detailed busi-The Articles of Association do not contain any rules that differ from ness figures for the first, second, and third quarters are publishedthe standard terms proposed by law. in April/May, July/August, and October/November, respectively. The Annual Report and quarterly results are published in printed andProposal of agenda items for the 2013 Annual electronic form and announced in a media conference. Current pub-General Meeting lication dates can be found online in English on our website (www.The Articles of Association do not contain any rules that differ from clariant.com/media). All information and documents pertaining tothe standard terms proposed by law. Shareholders representing media conferences, investor updates, and presentations at analystshares with a total par value of CHF 1 million have the right to submit and investor conferences can be obtained online (www.clariant.com)requests that an item be included on the agenda, in writing, at least or from the following contact address:45 days prior to the Annual General Meeting. With regard to thebusiness year 2012, items to be included on the agenda for the 18th Clariant International Ltd, Investor Relations, Hardstrasse 61,Annual General Meeting on 26 March 2013 must be submitted not CH-4133 Pratteln, firstname.lastname@example.org, tel. +41 61 469later than 9 February 2013. Such requests must specify the item(s) to 67 66, fax +41 61 469 67 67.be included on the agenda and must contain a proposal on which theshareholder requests a vote. Weblinks:Entries in the share register Clariant website:There are no statutory rules concerning deadlines for entry in the www.clariant.comshare register. However, for practical reasons, the share registerwill be closed to entries several days before a shareholder meeting. E-mail distribution list (push system):With regard to the business year 2012, this applies as of Thursday, www.clariant.com/investors/services/subscription
82 Clariant Annual Report 2011 Ad-hoc messages (pull system): assessment of PwC include technical and operational competence, www.clariant.com/investors/publications/mediareleases independent and objective view, employment of sufficient resources, focus on areas of significant risk to Clariant, ability to provide effec- Financial reports: tive and practical recommendations, and open and effective com- www.clariant.com/investors/publications munication and coordination with the Audit Committee, Corporate Auditing, and management. In 2011 seven joint meetings were held Corporate calendar: with the external auditor’s representatives. These meetings lasted www.clariant.com/investors/calendar three to four hours on average and were in general attended by all members of the Audit Committee, the partner and senior manager of the audit firm, Clariant’s CFO and one additional member of the Exec- Auditors utive Committee, the Group Accountant, the Head of Internal Audit, and the General Counsel. Depending on the topics to be discussed, Duration of the mandate and term of office of the the meetings were also attended by the Group Risk Manager. The lead auditor auditors communicate audit plans and findings to the Audit Commit- PricewaterhouseCoopers (PwC) has held the mandate since Clariant tee and issue reports to the Board of Directors in accordance with Ltd was established in 1995. The principle of rotation applies to the Article 728b of the Swiss Code of Obligations. The Audit Commit- lead auditor, Dr. Daniel Suter, who was appointed in March 2011. tee’s approval is required for all services provided by PwC exceeding The Audit Committee ensures that the position of lead auditor is a fee volume of CHF 0.2 million. These services may include audit changed at least every seven years. and audit-related services as well as tax and other services. PwC and the Executive Committee report to the Audit Committee on Auditing fees a regular basis regarding the extent of services provided in conjunc- PwC received a fee of CHF 5.1 million for auditing the 2011 financial tion with this approval. statements (2010: CHF 5.9 million). Additional fees Enterprise Risk Management (ERM). PwC received a total fee of CHF 4.2 million for additional services Identification, assessment and management. (2010: CHF 3.7 million). These services comprise audit-related ser- Under the Group Risk Management Policy, based on the risk man- vices mainly with respect to accounting advice in the amount of CHF agement standard of the Institute of Risk Managers, a tool is used to 0.6 million, tax services of CHF 2.9 million, and other services of CHF prepare risk assessments every year with quarterly updates by Busi- 0.7 million. ness Units, Business Services and Regions by assessing threats and opportunities that will impact the objectives set for Clariant overall. Supervisory and control instruments These objectives are a result of the overall strategy of the compa- vis-à-vis the auditors ny as set by the Board of Directors (BoD) and implemented by the The Audit Committee of the Board of Directors is responsible for Executive Committee (EC). overseeing and evaluating the performance of the external auditors on behalf of the Board of Directors and recommends to the Board The Investment Sub-Committee of the Executive Committee is re- of Directors whether PwC should be proposed to the Annual Gen- sponsible for monitoring the risk management assessments for rel- eral Meeting for reelection. Criteria applied for the performance evance and consistency.
Corporate Governance 83Objective setting is finalized during the last quarter of the year. The consolidated risk assessment is benchmarked against publishedThese objectives together with the threats and opportunities to surveys dealing with risk management. Surveys that are industrythese objectives are subject to scrutiny by the Executive Committee specific, business wide, and with broad economic coverage are also(EC) during meetings with each Business Unit (BU). Also reviewed included in the benchmarking process.and discussed are the measures proposed to maximize opportunitiesand reduce or contain threats. Examples of identified risks included in the Risk Register:The Group and the regions are also required to make risk assess- Regulation & Compliance: Clariant is subject to many rules andments on the same criteria. All BU’s, functions, and business ser- regulations as well as compliance standards. These include chemi-vices are required to report significant changes to existing identified cal industry, country, government, and customer requirements asrisks and new threats and opportunities as they arise. well as the European Community’s (EU) Regulations on Registration, Evaluation, Authorisation and Restriction of Chemical substancesRisk Registers are maintained using financial, operational, reputa- (REACH) being a significant component. Group Responsible Care istional, and likelihood assessments to score and rank all identified responsible for this risk and certain specific tasks are delegated torisks. The assessment also addresses the measures in place to man- HR, Legal, ESHA and Logistics functions.age the risk identified with dates for completion of the measures.Effectiveness of the measures is also assessed. Sites & Locations: This includes sites, plants, and equipment that are important for the production of Clariant products for sale to cus-Threats and opportunities have been identified, quantified, and del- tomers. Also addressed are country and culture issues that couldegated to responsible named individuals being required to deliver create threats and opportunities to business objectives. The objec-effective risk management. The nature of the risk classification re- tive is to maintain high quality production facilities in key locations.quires different skills to be applied to risk management. The assess- Risk management is delegated to ESHA and Regional Services.ments are shared between the different BU’s, services, and individu-als and subject to reassessment on a quarterly basis. Competitor Activity: A number of identified risks including evaluat- ing the merger and acquisition activity that could affect the natureConsolidated risk assessment is presented to the Audit Committee and extent of competition. Clariant is a leading participant in its in-and Board of Directors. There is a process for accelerated reporting dustrial sectors and each sector is monitored to identify changes andof new or changed risks. consider and plan to deal the consequences of changes to customers and competitors.Summaries of Business Units, regions and services risk assessmentsare shared within Clariant to deliver the group summary to all keysenior managers.To support functional responsibility, certain functions have accessto risk assessments to support them in their roles. Examples areEnvironmental Safety & Health Affairs (ESHA) to identify key sitesfor their property risk survey programme, Internal Audit and GroupProcurement.
84 Clariant Annual Report 2011 Anaïs Bialy, Technical Marketing Decorative Coatings Innovative, easily dispersible pigments developed by the Pigments Business Unit make it possible to produce colors of greater intensity and brilliance than ever before – like the ones here in the stairwell of the Museum of Modern Art in Frankfurt.
86 Clariant Annual Report 2011 Compensation Report The compensation philosophy of Clariant aims at promoting and reinforcing the quality and commitment of the employees. Compensation framework Functions, Global Business Units and Regional Presidents, including The purpose of this Compensation Report is to provide a holistic the corresponding compensations. All appointments and dismissals overview of Clariant’s Compensation Concept and Programs in gen- that fall within the remit of the Board of Directors are submitted eral. In addition it includes the compensation levels of the Board of in advance to the CoC which makes, with regard to compensation Directors and the Executive Committee, therefore some information aspects, a recommendation to the Board of Directors. from the Note 11, pages 165 to 168 of the Financial Statements of Clariant Ltd is repeated here. The CoC reviews the global bonus, option and share plans, and makes recommendations to the Board of Directors. Furthermore, the 1. Members and responsibilities of the Committee reviews fringe benefit regulations, dismissal regulations, Compensation Committee of the Board of Directors and contractual severance compensation with the CEO, members of The Compensation Committee (CoC) is currently made up of three the EC, Heads of Global Functions, Global Business Units and Re- non-executive members of the Board of Directors: Rudolf Wehrli gional Presidents. (Chairman), Jürg Witmer and Klaus Jenny. The Secretary to the CoC is the Head of Corporate Human Resources. The Chair of the CoC As a rule the CoC holds at least three meetings per year: may invite the CEO to discussions on individual agenda items, taking a) Spring: Discussion regarding the executive bonus plan allocation, into account potential conflicts of interest which would oblige him determination of bonus payments for members of the EC. to abstain. b) Summer: Fundamental matters concerning the Group’s HR priori- ties. The CoC establishes principles for compensation of members of the c) Autumn: Preparation of the Annual Report and planning of com- Board of Directors and submits them to the Board of Directors for pensation changes in the following year. approval. The Committee approves the employment contracts with the CEO and members of the Executive Committee (EC). Also, the The CoC also meets as needed. In 2011, the CoC met three times and Committee takes note of employment contracts for Heads of Global held several bilateral discussions and telephone conferences.
Compensation Report 872. Compensation concept b) he structure of the total remuneration should be highly perfor- TClariant wishes to be an appealing employer with the ability to at- mance- and success-oriented in order to ensure that shareholdertract and retain qualified employees and experts throughout the and management interests are aligned. Success in terms of bo-world. In particular, Clariant’s compensation policy for management nus payouts will be measured in general only in relevant financialis based on the following main principles: Group Performance Indicators. Only if Clariant is successful wea) he level of the total compensation should be competitive and T will share the profit with our employees. Details will be disclosed in line with market conditions and enable Clariant to recruit in- in chapter 3. Individual Performance will be reflected in the career ternational, experienced managers and experts, and secure their development and the annual salary reviews. Thus each managers longstanding commitment to the Group. Our understanding of or employees performance will be reflected in the yearly discus- competitiveness is defined in our Positioning Statement. We are sions and will lead in accordance with other factors like e.g. in- aiming for a corridor between median and upper quartile of Total ternal and external market conditions to transparent and consis- Compensation in the relevant local markets. Through this ongoing tent salary decisions. In general we apply a four-eyes-principles, benchmarking, we are able to define local compensation struc- e.g. line manager and next level supervisor as well as guidance tures e.g. annual paybands, which will be applied as an important through global or local HR processes. factor in all salary decisions. For the update and accuracy of mar- c) he compensation components should be straightforward, trans- T ket conditions we are participating in all major countries in local parent and focused, so as to guarantee all participants (sharehold- compensation benchmarks and align all activities through global ers, members of the Board of Directors, the CEO, members of the contracts with Global Compensation Consultants Hay Group and EC and all global Management Levels (MLs)) the highest degree of Mercer. Mercer have in addition different other mandates for Clar- clarity and objectives orientation. iant, e.g. in the Benefits area. In addition we encourage local HR Managers to participate in local compensation networks and Club In order to uphold these principles, the CoC analyzes and discusses Benchmarks inside the chemical industry, to ensure the access to market developments at regular intervals and considers the implica- relevant market information. tions of these developments for Clariant.Positioning Statement Global Pay-Mix (relative Structure)Benefits The benefits are aligned with local practices and present % of total compensation market practice. ML4 65 26 9Long-Term Investment reflects long-term-commitment and supports ML3 50 18 32Incentives (LTI) our strong dedication to sustainable performance ML2 43 21 36(only ML 1 – 4) orientation. ML1 39 23 38Short-Term The annual cash bonus targets aim to be more EC 24 29 47Incentives (STI) aggressive than the markets. CEO 20 30 50Base Salary (BS) In general, we aim to be at median level in our 0 25 50 75 100 respective markets and use different sources of compensation surveys (country-oriented, conducted by external consultants, including the relevant peer- companies of the chemical and/or industry area). Base Salary Short-term Incentives Long-term Incentives
88 Clariant Annual Report 2011 3. Overview of existing bonus plans The Performance Cycle of Clariant is based on a 12-month revolv- In the last two years all relevant bonus plans for Short-Term Incen- ing cycle process which starts in November each year with objective tives (STI) and Long-Term Incentives (LTI) have been reviewed and discussions focusing on the next business year. Group Performance redesigned to ensure the transition of Project Clariant and to align Indicators (GPI), Top Priorities and related projects are included and with the new business model. The key principles have been to re- will focus the organization. In January, alignment meetings take duce complexity, increase transparency and ensure an aligned and place with key leaders of the company to cascade GPI objectives unified “One Clariant” approach through all employee groups and and priorities of the new year. countries. Generic Performance Cycle of Clariant Bonus Landscape Alignment Meeting STI LTI Objective Dec Jan Discussion GMBP Nov Feb EC Matching TOP Business ~ 100 positions1 Share Review @ Oct Mar ML2 1 –3 Clariant Strategy Business ~ 200 positions 1 ML 4 2 Discussion Review Sep Apr ~ 600 positions1 ML2 5 GEBP & G-SIP Business Strategy Aug May Local Managers, Review Review ~ 5 300 positions 1 1 Professionals, Jul Jun Employees Number of positions without Süd-Chemie 1 3.1. Short-Term Incentive Plans (Cash bonus) ML: Management-Level 2 a) The Group Management Bonus Plan (GMBP) is embedded into the overall performance cycle of Clariant. This cycle ensures The following variable programs are currently in place for Clariant: through intensive discussions and systematic alignment meetings, a business specific but challenging target agreement for each Busi- 3.1. STI: Short-Term-Incentive Plans (Cash bonus) ness Unit (BU). a) Group Management Bonus Plan (GMBP) – started in 2010 b) Group Employee Bonus Plan (GEBP) – started in 2010/2011 The individual amount of bonus payments generated in a year is de- c) Global Sales Incentive Program (G-SIP) – started in 2011 termined by the achieved result of the Clariant Group against clear objectives. The achievement is measured by three elements: finan- 3.2. LTI: Long-Term-Incentive Plans (Equity-Linked Bonus) cial result of Group, financial results of Business Units and defined a) Tradable Option Plan (TOP@Clariant) – started in 2008 Top Priorities (Group Performance Indicators and strategic projects). b) roup Senior Management – Long-Term-Incentive Plan (GSM- G LTIP or Matching Share Plan) – started in 2010
Compensation Report 89GMBP 2011 – Three Pillars to balance Bonus Plan As a principle only collective/management team-related target achievements can serve as the basis for individual bonus payouts. Group Achievement Business TOP Priorities An employee’s individual performance will be honored in the an- Achievement nual review of total compensation and his/her career development. How do we as a What are the business Have we acted focused + + The annual evaluation of the achievement of objectives and alloca- company perform with results/contributions and aligned on regard to our targets? of my unit? our unit priorities? tion of funds for the GMBP are conducted by the CoC in February following the financial year in question, and approved by the Board ROIC 50 % EBIT BEI ROS% 50 % Mandatory Part: of Directors. This system ensures that the bonus payments made to 1) mprove Gross I Margin em loyees are closely aligned with the Group’s overall result. p 2) Improve Productivity 3) mprove NWC I b) The cash bonus for non-management-levels: The Group Em Performance ployee Bonus Plan (GEBP) ensures further alignment and stan- Operating Cash flow BU 50 % BUs/Services Part*: dardization to all local bonus plans of legal entities around the Cash flow 50 % 4) oster Clariant F Excellence world. In general (where legally possible and compliant) all legal 5) erformance P entities will apply the global Group Achievement or a combination towards customer of Group result (75 percent) and local Top Priorities (25 percent) as 6) Enhance EHS system the bonus payout. BUs: 25 % BUs: 35 % EC/BUs/Services: 40 % EC/Services: 60 % c) For the Sales Force: The Global Sales Incentive Plan Measurement Percentage * Example: EC (G-SIP) is aiming to establish dedicated and globally aligned lo-Glossary: cal Sales Incentive Plans (SIPs) for all Sales Representatives, SalesROIC = Return on invested capital Managers and Key Account Managers with clearly allocated annualEBIT = Earning before interest and taxBEI = Before exceptional items sales budget and commercial responsibilities (ML 1 4 excluded). – ROS % = Return on Sales in %NWC = Net working capital The G-SIP focus on the individual sales performance and underlyingEHS = Environment, Health, Safety Key Performance Indicators are in the areas of Sales (40 percent), Margin (40 percent) and Trade Receivables (20 percent). As an exam-As Clariant Performance Cycle agreements with each BU lead to ple a Sales Representative will receive tailor-made individual objec-business-specific but challenging target settings, and in order to tives for his allocated set of clients, which means a concrete Salesexclude any “windfall profiting” or “hidden buffers”, the maximum target in local currencies, a “Deal Score” target as an important in-bonus payout is explicitly capped at 100 percent (= target). As out- dicator to measure the margin, and Overdues and Receivables as anlined in our compensation concept, we aim for a more aggressive indicator for Trade Receivables. Each objective has a weighting andpay-mix than the international markets, therefore this 100 percent can be monitored out of the existing reporting systems. Thereforewill ensure an adequate positioning against our competitors. As the direct impact of individual success and payout can be calculateda consequence of this fixed cap at 100 percent, we increased – easily. In 2011 the global roll-out was started with approximatelywhere necessary – the cash bonus element in the countries. 800 employees; Japan and LATAM will follow in 2012. Employees can participate only in one bonus plan (G-SIP or GMBP/GEBP).The bonus-relevant achievement for 2011:› Group Achievement: 60 percent› BU Achievements: 14 percent to 100 percent› Top Priorities: 60 percent to 100 percentThe corresponding bonus payout ranges between 44 percentand 90 percent.
90 Clariant Annual Report 2011 3.2. Long-Term Incentive Plans (Equity-Linked Bonus) b) Group Senior Management – Long-Term Incentive Plan Clariant uses equity-based income components for approximately (GSM-LTIP) = Matching Share Plan 300 of its senior managers worldwide (EC and ML 1 – 4). The Matching Share Plan requires a personal investment decision and fosters the commitment of key managers (approximately 100 a) The Tradable Option Plan (“TOP@Clariant”) was introduced positions; EC and ML 1 3) for the long-term success of Clariant. – in 2008 for all senior managers, to ensure a stronger focus on cre Under this plan key managers can invest significant amounts of their ating additional shareholder value. compensation into Clariant shares. Thus this plan supports senior managers in meeting their requirement to permanently hold at mini- The term of Clariant’s Stock Option Plan is five years and membership mum 20 up to 100 shares (as of the end of calendar year 000 000 is limited to the Executive Committee and selected senior managers 2013) depending on their management level. To support the invest- of ML 1 – 4 (approximately 1.8 percent of employees). The Board of ment into Clariant shares 50 percent of their variable pay (out of the Directors will be included for the last time in 2011. The option term GMBP) is guaranteed – as long as they invest into Clariant shares of five years is divided into a “Vesting Period” (first two years) and an according to the requirements of the Matching Share Plan. “Exercise Period” (last three years). Eligible participants will receive a fixed number of options in accordance with an expected value Under the plan eligible senior managers are entitled to receive a cer- point set by the Board of Directors. As a principle the strike price for tain minimum percentage (minimum investment quota of 20 percent) the options is established by the Board of Directors at a level that is of their annual cash bonus for the respective bonus year in the form substantially higher than the market value of the Clariant shares at of investment shares. They are additionally entitled to voluntarily in- grant (“out of the money options”). Eligibility and endowment will be crease the percentage to be paid in shares to a maximum of 40 per- reviewed each year that the scheme is in operation. For 2011 it was cent (maximum investment quote). Title and ownership in the shares decided in February to grant options for 2011. The strike price was are transferred at allocation of the investment shares. These invest- settled at CHF 18 and with a fair value of CHF 4.15. The grant was ment shares will then be blocked and held in a custody account for endorsed on 31 March 2011. a period of three years. At the end of the blocking period, the par- ticipant is entitled to obtain for each investment share an additional If an employee should voluntarily leave Clariant before the waiting share free of charge (Matching Share). This matching is subject to period (2 years) expires, all rights to shares and stock options which the condition of a continued employment with Clariant throughout have not yet been transferred at this point in time become invalid. the blocking period. In case of termination of employment before the In case of retirement, employees will receive an immediate vesting according to the published regulations.
Compensation Report 91end of the blocking period, the right for Matching Shares lapses and 4. Structure of compensation for membersa cash amount will be paid instead equal to the pro rata temporis of the Board of Directorsportion (considering employment during the blocking period). The compensation structure for members of the Board of Directors is following the outlined compensation concept and is decided for theThe senior managers who do not participate in this plan or do not performance year 2011.invest according the plan regulations, will forfeit 50 percent of theirannual cash bonus and the eligibility to participate in any Long-Term- According to the aforementioned Guidelines the remuneration ofIncentive-Programs (including TOP@Clariant). members of the Board of Directors is made up of the following com- ponents:The decision to implement this plan was made to create a strong and a) Annual basic feesustainable link between the Clariant business cycle and the value b) Committee membership feesdevelopment of the company. Senior managers therefore strengthen c) Option based remunerationthe entrepreneurial and value-creating spirit of the Clariant Group. For the Performance Year 2012 the Board of Directors has decided to abandon option based compensation for directors. It will be replaced by the grant of restricted stock to enable the board to participate in the long term value creation of the company. The following graph illustrates the relative structure of the three components for 2011:Relative structure of Total Compensation (Board of directors)% of total compensationMember of the Board of Directors 46 9 45Member of the Chairman’s Committee 63 5 32Chairman of the Board 65 3 32 0 10 20 30 40 50 60 70 80 90 100 Honorarium Committee Fee (activity based – minimum of 20 000 CHF used) Option (value at grant)Annual Compensation of the Board of DirectorsCHF Chairman Member of the Member of the Total Total of the Board Chairmans Committee Board of Directors 2011 2010Cash Compensation: Honorarium* 500 000 250 000 100 000 1 475 000 1 400 000 Committee fee* Chair: 40 000/Member: 20 000 235 000 220 000Social Contribution: According individual situationOptions: Number of options 60 241 30 120 24 096 216 865 222 400 Value (at grant) 250 000 125 000 100 000 900 000 700 000* he fees are paid in cash in equal parts in March and September, due to new members starting mid of May 2011, there are pro rata temporis payments included. T
92 Clariant Annual Report 2011 Annual Compensation – Emoluments to members of the Board of Directors (IFRS) CHF Jürg Rudolf Peter Peter Klaus Dominik Carlo G. Hariolf Dolf Konstantin Total Total Witmer Wehrli Isler Chen Jenny Koechlin Soave Kott- Stock Winter- 2011 2010 mann1 hausen2 stein Cash Compensation Honorarium 500 000 250 000 100 000 100 000 250 000 100 000 100 000 0 37 500 37 500 1 475 000 1 400 000 Committee fee 20 000 40 000 20 000 40 000 60 000 20 000 20 000 0 7 500 7 500 235 000 220 000 Social Contribution 37 878 22 719 8 626 13 640 20 678 9 228 9 228 0 2 884 0 124 881 148 694 Options Number of options 60 241 30 120 24 096 24 096 30 120 24 096 24 096 0 0 0 216 865 222 400 Fair value (IFRS) 194 110 97 228 75 410 75 410 97 228 75 063 75 063 0 0 0 689 513 389 636 Total 2011 (Fair 751 988 409 947 204 036 229 050 427 906 204 291 204 291 0 47 884 45 000 2 524 394 value allocation to 2011 accor. IFRS) Total 2010 (Fair 678 563 374 312 175 307 191 566 394 726 168 062 168 062 7 733 na na 2 158 330 value allocation to 2010 accor. IFRS) In order to generate a transparent overview for the performance year, beside the usual IFRS view (allocation of expenses through the vesting period), the full fair values of shares and options granted are also disclosed in the following table. Annual Compensation – Emoluments to members of the Board of Directors (Total fair Value at Grant) CHF Jürg Rudolf Peter Peter Klaus Dominik Carlo G. Hariolf Dolf Konstantin Total Total Witmer Wehrli Isler Chen Jenny Koechlin Soave Kott- Stock Winter- 2011 2010 mann1 hausen2 stein Total 2011 (Total 807 878 437 719 228 626 253 640 455 678 229 228 229 228 0 47 884 45 000 2 734 881 fair value at grant date in 2011) Total 2010 (Total 767 784 416 491 208 971 225 230 436 211 207 283 207 283 0 na na 2 469 254 fair value at grant date in 2010) fter taking over the function as CEO, no further Board of Directors compensations are extended. Please refer to the Executive Committee table. 1 A ue to contractual agreement payout will take place in 2012. 2 D
Compensation Report 93Please find below the information about the actual share and optionownership of the Board of Directors.Shares held by members of the Board of Directors Number of shares Number of shares Number of shares Number of shares Number of Number of granted for 2011 granted for 2010 within vesting within vesting privately held privately held period for 2011 period for 2010 shares for 2011 shares for 2010Jürg Witmer 0 0 0 1 323 137 628 61 305Rudolf Wehrli 0 0 0 1 323 12 490 7 305Peter Isler 0 0 0 1 323 29 554 16 908Peter Chen 0 0 0 1 323 5 931 4 087Klaus Jenny 0 0 0 1 323 77 019 41 422Dominik Koechlin 0 0 0 0 11 100 10 100Carlo G. Soave 0 0 0 0 15 100 15 100Hariolf Kottmann –1 – 1 – 1 – 1 – 1 –1Dolf Stockhausen 0 na 0 na 11 461 304 naKonstantin Winterstein 0 na 0 na 5 000 na Total 0 0 0 6 615 11 755 126 156 227Options held by members of the Board of Directors Number of options Number of options Number of options Number of options Number of Number of granted for 2011 granted for 2010 within vesting within vesting privately held privately held period for 2011 period for 2010 options for 2011 options for 2010Jürg Witmer 60 241 63 500 123 741 63 500 80 000 80 000Rudolf Wehrli 30 120 31 750 61 870 31 750 40 000 40 000Peter Isler 24 096 23 850 47 946 23 850 20 000 20 000Peter Chen 24 096 23 850 47 946 23 850 20 000 20 000Klaus Jenny 30 120 31 750 61 870 31 750 40 000 40 000Dominik Koechlin 24 096 23 850 47 946 23 850 20 000 20 000Carlo G. Soave 24 096 23 850 47 946 23 850 20 000 20 000Hariolf Kottmann –1 –1 –1 –1 –1 –1Dolf Stockhausen 0 na 0 na 0 2 naKonstantin Winterstein 0 na 0 na 0 na Total 216 865 222 400 439 265 222 400 240 000 240 000 ee EC overview on page 95.1 S wnership of 20 700 options to sell.2 OThe compensation for members of the Board of Directors is subject entertainment expenses above and beyond actual expenditure onto the Swiss taxation and social security laws, with Clariant paying business trips. For detailed information on the compensation for thethe employer contributions which are required. The members of the Board of Directors refer to Note 11 of the Notes to the FinancialBoard of Directors do not receive any lump-sum reimbursement of Report of Clariant Ltd on pages 165 to 168.
94 Clariant Annual Report 2011 5. Compensation of Members of the Executive The bonus amounts of the total compensation packages are paid out Committee in relation to the achieved results for a particular financial year. The The CoC regularly reviews the level and structure of the compensa- actual bonus amounts may vary between zero and target values in tion packages for members of the EC. In 2010/2011 we conducted the financial year in question. selected market benchmarks regarding the chemical peers for the EC and the Board and enlarged our survey activities for all global Base salary & variable remuneration positions around the world. In our Individualized Chemical Bench- It is important to highlight, that the Executive Committee partici- mark analysis we focused on companies, which are comparable in pates in the same bonus programs as the senior managers. There- size and complexity (Global Scope; average turnover: CHF 8 200 mil- fore they participate in the GMBP, TOP@Clariant and the GSM-LTIP. lion (ranges between CHF 2 000 – 20 000 million); average number of employees: 17 600 (ranges between 4 000 and 55 000 employees)). As an outcome of the benchmarking exercise, the remuneration structure of the EC was adjusted to the following general structure: Key focus elements are: the CEO receives a Base Salary of CHF 1 000 000 and a Target Cash a) omparison of management remuneration packages of European C Bonus of CHF 2 500 000. A member of the Executive Committee re- chemical companies with global scope ceives a Base Salary of CHF 700 000 and a Target Cash Bonus of CHF b) omparison of management remuneration of Swiss-based multi- C 1 400 000. These terms have been fixed for 2011 and 2012. national companies Annual Compensation to the Members of the Executive Committee Hariolf Kottmann Others5 Total 2011 (CHF) Total 2010 (CHF) Total 2011 (CHF) Total 2010 (CHF) (fair value (fair value (Total fair value (Total fair value allocation to 2011 allocation to 2010 at grant date at grant date accor. IFRS2) accor. IFRS2) in 2011) in 2010) Base salary 1 000 000 2 450 000 3 450 000 3 100 000 3 450 000 3 100 000 Cash bonus1 1 020 150 2 094 708 3 114 858 4 092 000 3 114 858 4 092 000 Share-based bonus1 Number of investment shares 68 010 123 780 (191 790) Number of matching shares 68 010 123 780 (191 790) Number of additional shares2 – 125 000 (125 000) Total number of shares 136 020 372 560 (508 580) 290 338 (correction (508 580) 290 338 (correction of 287 118) 4 of 287 118)4 Fair value 1 279 209 2 345 756 3 624 965 3 309 822 (correction 4 782 133 4 966 277 of 3 264 787)4 Options Number of options 120 482 180 723 (301 205) 322 900 (301 205) 322 900 Fair value 412 568 564 750 977 318 461 853 1 250 001 1 017 135 Other benefits3 1 490 805 1 424 630 2 915 435 2 636 920 2 915 435 2 636 920 Total 5 202 732 8 879 844 14 082 576 13 600 595 (correc- 15 512 427 15 812 332 (correc- tion of 13 555 560)4 tion of 15 399 561)4 1 bligation to invest between 20 – 40 % of Cash bonus into shares. O Assumptions: Share price at grant = 10 CHF (not fixed yet, final share price will be fixed in April 2012 and therefore the numbers of shares can change.); Cash bonus payout = 68 % 2 pecial management grant provided to one EC-Member already in 2008 and one EC-Member in 2011 with a deferred grant of shares. S 3 ther benefits include contributions to pension funds and accrued pension benefits (73 %), social security (26 %) and other allowances (1 %). O 4 orrection needed due to adjustments of Final share price at grant: Allocation of shares with CHF 16.794. IFRS booking done with CHF 17.15 (investment shares) and CHF 16.72 (matching shares), C therefore the numbers of shares and IFRS cost allocation are slightly different. 5 urther details for new Executive Committee members are displayed in Note 11 on pages 165 – 168. F
Compensation Report 95Other benefits bers of the EC and all other Clariant employees, the insured incomeThe members of the EC participate in the pension plans of the Clari- is defined as the basic salary plus the 50 percent of cash bonus.ant Group, notably the Clariant pension fund with an insured income Equity-linked income components are not subject to pensionableof up to CHF 200 000 per annum, and the management pension fund income. The usual term insurance policies for death and disabilitywith an insured income of up to a further CHF 620 800 per annum. form part of Clariant’s pension plans. The total employer contribu-The maximum insured income under the pension plans therefore tion is approximately 11 percent of the insured income in the casestands at CHF 820 800 per annum. The CEO participates in Clariant’s of the Clariant pension fund, and 22 percent of the insured incomepension and insurance plans. Additional pension provisions must be in the case of the Clariant management pension fund. These contri-accrued over time, in order to match contractual granted retirement butions cover both the contributions to the formation of retirementplans. capital, and the risk components. Both plans are contribution-based; the management pension fund solely provides the members with re-Clariant’s pension plans conform with the legal framework of the tirement capital upon retirement, and does not incorporate pensionoccupational pension scheme (BVG). In future, the maximum con- payments.tribution will be dynamically aligned with Art. 79c BVG. For mem-Shares held by the Members of the Executive Committee Number of shares Number of shares Number of shares Number of shares Number of Number of granted for 2011 granted for 2010 within vesting within vesting privately held privately held period for 2011 period for 2010 shares for 2011 shares for 2010Hariolf Kottmann 136 020 95 274 (correction 131 637 84 000 479 637 452 000 of 94 118)2Patrick Jany 76 172 56 688 (correction 59 909 40 613 102296 39 904 of 56 000) 2Christian Kohlpaintner 76 172 56 688 (correction 28 344 0 90 000 60 000 of 56 000)2Mathias Lütgendorf 151 172 81 688 (correction 44 094 15 750 211 844 108 500 of 81 000) 2Hans-Joachim Müller 69 044 na 50 000 na 0 na Total 508 580 290 338 (correc- 313 984 140 363 883 777 660 404 tion of 287 118)2Options held by the Members of the Executive Committee Number of options Number of options Number of options Number of options Number of Number of granted for 2011 granted for 2010 within vesting within vesting privately held privately held period for 2011 period for 2010 options for 2011 options for 2010Hariolf Kottmann 120 482 142 900 263 382 142 900 128 0001 128 0001Patrick Jany 60 241 60 000 120 241 60 000 100 000 100 000Christian Kohlpaintner 60 241 60 000 120 241 60 000 0 0Mathias Lütgendorf 60 241 60 000 120 241 60 000 0 0Hans-Joachim Müller 0 na 0 na 0 na Total 301 205 322 900 624 105 322 900 228 000 228 000 ncluding 20 000 options granted 2008 in his role as a member of the Board of Directors.1 I orrection needed due to adjustments of Final share price at grant: Allocation of shares with CHF 16.794. IFRS booking done with CHF 17.15 (investment shares) and CHF 16.72 (matching shares),2 C therefore the numbers of shares and IFRS cost allocation are slightly different.
96 Clariant Annual Report 2011
97Javorka Tovey, Commercial Black BeltSpecially trained project managers known as Black Beltssteer the Clariant Excellence continuous improvementprocess. A number of different Clariant Excellence projectshave already led to benefits of more than CHF 160 millionbetween 2009 and 2011.
98 Clariant Annual Report 2011 Index Consolidated Financial Statements of the Clariant Group Page 99 99 Consolidated balance sheets 100 Consolidated income statements 100 Consolidated statements of comprehensive income 101 Consolidated statements of changes in equity 102 Consolidated statements of cash flows 103 Notes to the consolidated financial statements 158 Report of the statutory auditor R eview of Trends Page 159 159 Five-year Group overview F inancial Statements of Clariant Ltd, Muttenz Page 160 160 Clariant Ltd balance sheets 161 Clariant Ltd income statements 162 Notes to the financial statements of Clariant Ltd 170 Appropriation of available earnings 171 Report of the statutory auditor 172 Forward-looking statements
financial report 99 Consolidated Financial statements of the clariant group Consolidated financial statements of the Clariant Group Consolidated balance sheets at 31 December 2011 and 2010 ASSETS 31.12.2011 31.12.2010 Notes 1 CHF mn % CHF mn % Non-current assets Property, plant and equipment 5 2 494 1 669 Intangible assets 6 1 762 269 Investments in associates and joint ventures 7 563 224 Financial assets 8 28 18 Prepaid pension assets 17 139 117 Deferred income tax assets 9 192 119 Total non-current assets 5 178 57.0 2 416 40.8 Current assets Inventories 10 1 151 800 Trade receivables 11 1 134 985 Other current assets 12 341 264 Current income tax receivables 41 26 Near cash assets 13 35 703 Cash and cash equivalents 14 1 199 716 Total current assets 3 901 43.0 3 494 59.0 Non-current assets held for sale 22 2 – 11 0.2 Total assets 9 081 100.0 5 921 100.0 EQUITY AND LIABILITIES 31.12.2011 31.12.2010 Notes 1 CHF mn % CHF mn % Equity Share capital 15 1 183 921 Treasury shares (par value) 15 – 51 – 36 Other reserves 1 047 275 Retained earnings 754 599 Total capital and reserves attributable to Clariant shareholders 2 933 1 759 Non-controlling interests 93 47 Total equity 3 026 33.3 1 806 30.5 Liabilities Non-current liabilities Financial debts 16 1 835 1 305 Deferred income tax liabilities 9 289 85 Retirement benefit obligations 17 538 443 Provision for non-current liabilities 18 242 320 Total non-current liabilities 2 904 32.0 2 153 36.4 Current liabilities Trade and other payables 19 1 325 1 170 Financial debts 20 1 139 240 Current income tax liabilities 323 242 Provision for current liabilities 18 364 310 Total current liabilities 3 151 34.7 1 962 33.1 Total liabilities 6 055 66.7 4 115 69.5 Total equity and liabilities 9 081 100.0 5 921 100.0 1 he notes form an integral part of the consolidated financial statements. T01_Financial_2011_en.indd 99 20.02.2012 15:04:51
100 Clariant Annual Report 2011 Consolidated income statements for the years ended 31 December 2011 and 2010 2011 2010 Notes 1 CHF mn % CHF mn % Sales 21 7 370 100.0 7 120 100.0 Costs of goods sold – 5 402 – 5 133 Gross profit 1 968 26.7 1 987 27.9 Selling, general and administrative costs – 1 176 – 1 177 Research and development – 176 – 135 Income from associates and joint ventures 7 47 21 Gain from the disposal of activities not qualifying as discontinued operations 23 5 1 Restructuring and impairment 25 – 161 – 331 Operating income 507 6.9 366 5.1 Finance income 26 19 15 Finance costs 26 – 192 – 138 Income before taxes 334 4.5 243 3.4 Taxes 9 – 83 – 52 Net income 251 3.4 191 2.7 Attributable to: Shareholders of Clariant Ltd 227 180 Non-controlling interests 24 11 Net income 251 3.4 191 2.7 Basic earnings per share attributable to the shareholders of Clariant Ltd (CHF/share) 27 0.86 0.81 Diluted earnings per share attributable to the shareholders of Clariant Ltd (CHF/share) 27 0.79 0.73 1 he notes form an integral part of the consolidated financial statements. T Consolidated statements of comprehensive income for the years ended 31 December 2011 and 2010 2011 2010 1 Notes CHF mn CHF mn Net income 251 191 Other comprehensive income: Net investment hedge 28 25 132 Currency translation differences – 102 – 334 Other comprehensive income for the period, net of tax – 77 – 202 Total comprehensive income for the period 174 – 11 Attributable to: Shareholders of Clariant Ltd 150 – 17 Non-controlling interests 24 6 1 he notes form an integral part of the consolidated financial statements. T Changes in fair value of financial assets classified as available for sale amount to less than CHF 1 million in 2011 and 2010.01_Financial_2011_en.indd 100 20.02.2012 15:04:51
financial report 101 Consolidated Financial statements of the clariant group Consolidated statements of changes in equity at 31 December 2011 and 2010 CHF mn Other reserves Total Treasury Share Cumulative Total Retained Total Non- Total share shares premium translation other earnings attributable controlling equity capital (par value) reserves reserves reserves to equity interests holders Balance 31 December 2009 921 – 17 798 – 326 472 468 1 844 52 1 896 Net income – 180 180 11 191 Net investment hedge 132 132 132 132 Currency translation differences – 329 – 329 – 329 – 5 – 334 Total comprehensive income for the period – – – – 197 – 197 180 – 17 6 – 11 Dividends to non-controlling interests – – – 11 – 11 Obligation to purchase Clariant Ltd shares classified – – 8 – 8 – 8 as equity (see note 1.23 and note 20) Employee share and option scheme: Effect of employee services – 21 21 21 Treasury share transactions – 19 – – 62 – 81 – 81 Balance 31 December 2010 921 – 36 798 – 523 275 599 1 759 47 1 806 Net income – 227 227 24 251 Net investment hedge 25 25 25 25 Currency translation differences – 102 – 102 – 102 – 102 Total comprehensive income for the period – – – – 77 – 77 227 150 24 174 Issuance of share capital (see note 15) 262 849 849 1 111 1 111 Dividends to non-controlling interests – – – 17 – 17 Non-controlling interest arising on business 70 70 combination (see note 24) Acquisition of non-controlling interests (see note 15) – – 52 – 52 – 31 – 83 Employee share & option scheme: Effect of employee services – 22 22 22 Treasury share transactions – 15 – – 42 – 57 – 57 Balance 31 December 2011 1 183 – 51 1 647 – 600 1 047 754 2 933 93 3 02601_Financial_2011_en.indd 101 20.02.2012 15:04:51
102 Clariant Annual Report 2011 Consolidated statements of cash flows for the years ended 31 December 2011 and 2010 2011 2010 Notes 1 CHF mn CHF mn Net income 251 191 Adjustment for: Depreciation of property, plant and equipment (PPE) 5 219 195 Impairment and reversal of impairment 25 21 75 Amortization of intangible assets 6 39 10 Impairment of working capital 89 41 Income from associates and joint ventures 7 – 47 – 21 Tax expense 83 52 Net financial income and costs 125 79 Gain from the disposal of activities not qualifying as discontinued operations 23 – 5 – 1 Other non-cash items 27 – 68 Total reversal of non-cash items 551 362 Dividends received from associates 7 25 31 Interest paid – 122 – 75 Interest received 14 13 Income taxes paid – 145 – 116 Payments for restructuring 25 – 155 – 155 Cash flow before changes in net working capital and provisions 419 251 Changes in inventories – 152 – 78 Changes in trade receivables 13 – 1 Changes in trade payables 17 172 Changes in other current assets and liabilities – 183 54 Changes in provisions (excluding payments for restructuring) 92 244 Cash flow from operating activities 206 642 Investments in PPE 5 – 370 – 224 Investments in financial assets, associates and joint ventures – 15 – 3 Investments in intangible assets 6 – 17 – 18 Changes in current financial assets and near cash assets 695 – 732 Sale of PPE and intangible assets 96 12 Acquisition of companies, businesses and participations 24 – 1 137 – Proceeds from the disposal of subsidiaries, associates and joint ventures 23 7 4 Cash flow from investing activities – 741 – 961 Proceeds from the issuance of share capital 356 – Acquisition of non-controlling-interest – 83 – Purchase of treasury shares – 69 – 79 Sale of treasury shares 1 – Proceeds from financial debts 1 485 209 Repayments of financial debts – 640 – 181 Dividends paid to non-controlling interests – 17 – 11 Cash flow from financing activities 1 033 – 62 Currency translation effect on cash and cash equivalents – 15 – 43 Net change in cash and cash equivalents 483 – 424 Cash and cash equivalents at the beginning of the period 14 716 1 140 Cash and cash equivalents at the end of the period 14 1 199 716 1 he notes form an integral part of the consolidated financial statements. T01_Financial_2011_en.indd 102 20.02.2012 15:04:51
financial report 103 Notes to the Consolidated Financial statements Notes to the consolidated 1.03 – International Financial Reporting financial statements Standards effective in 2011 There are no IFRSs or IFRIC interpretations that are effective for 1. Accounting policies the first time for the annual periods beginning on or after 1 January 2011 that have a material impact on the Group. 1.01 – General information Clariant Ltd (the “Company”) and its consolidated subsidiaries 1.04 – International Financial Reporting (together the “Group”) are a global leader in the field of specialty Standards not yet effective chemicals. The Group develops, manufactures, distributes and sells The other standards, interpretations and amendments already a broad range of specialty chemicals which play a key role in its issued by IASB but not yet effective have not been early adopted customers’ manufacturing and treatment processes or add value by the Group. to their end products. The Group has manufacturing plants around the world and sells mainly in countries within Europe, the Americas IAS 19, Employee benefits was revised in June 2011. This revised and Asia. standard is effective for accounting periods beginning on or after 1 January 2013. For the Group, this revised standard will entail the The Company is a limited liability company incorporated and elimination of the corridor approach and recognition of all actuarial domiciled in Switzerland. The address of its registered office is gains and losses in other comprehensive income as they occur. The Rothausstrasse 61, CH-4132 Muttenz, Switzerland. The Company Group will also be required to immediately recognize all past ser- is listed on the SIX Swiss Exchange. vice costs and to replace interest costs and expected return on plan assets with a net interest amount that is calculated by applying the The Board of Directors approved the consolidated financial state- discount rate to the net defined benefit liability or asset. When this ments for issue on 13 February 2012. They will be subject to revised standard becomes effective, it is expected to reduce equity approval by the Annual General Meeting of Shareholders sched- by CHF 235 million and net income by CHF 11 million. uled for 27 March 2012. For the other standards, interpretations and amendments that are 1.02 – Basis of preparation already issued but not yet effective the Group is still assessing The consolidated financial statements of the Clariant Group have their full impact. They will be adopted as they become effective. been prepared in accordance with the International Financial Reporting Standards (IFRS) and with the following significant 1.05 – Scope of consolidation accounting policies. The consolidated financial statements have ››Subsidiaries: Subsidiaries are those entities in which the been prepared under the historical cost convention as modified by Group has an interest of more than one half of the voting the revaluation of certain financial assets and liabilities (including rights or otherwise has the power to govern the financial and derivative instruments at fair value through profit or loss). operating policies. These entities are fully consolidated as per the requirements of IAS 27, Consolidated and Separate Financial The preparation of financial statements in conformity with the Statements. IFRS requires the use of estimates and assumptions. These affect the reported amounts of assets and liabilities and the disclosure ››Investments in associates: Associates are entities in which of contingent assets and liabilities at the date of the financial the Group holds between 20 percent and 50 percent of the voting statements and the reported amounts of revenues and expenses rights, or over which the Group has a significant influence, but during the reporting period. Although these estimates are based which it does not control. Investments in associates are accounted on management’s best knowledge of current events and circum- for by using the equity method as per IAS 28, Investments in stances, actual results may ultimately differ from those estimates. Associates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the con- solidated financial statements, are disclosed under note 4.01_Financial_2011_en.indd 103 20.02.2012 15:04:52
104 Clariant Annual Report 2011 ››Investments in joint ventures: Joint ventures are contractual 1.10 – Intangible assets arrangements wherby two or more parties undertake an economic Goodwill is recognized as per the requirements of IFRS 3, Business activity that is subject to joint control. Investments in associates combinations, IAS 38, Intangible assets and IAS 28, Investment in are accounted for by using the equity method as per IAS 31, associates. Goodwill is tested annually for impairment as required Interests in Joint Ventures. by IAS 36, Impairment of Assets. ››All joint ventures apply the same accounting principles as the Trademarks and licenses are capitalized at historical costs and Group. amortized on a straight-line basis to the income statement over their estimated useful lives, with a maximum of ten years. 1.06 – Principles and methods of consolidation The annual closing date of the individual financial statements is Acquired computer software licenses are capitalized on the basis 31 December. The consolidated financial statements are prepared of the costs incurred to acquire and bring to use the specific soft- by applying uniform presentation and valuation principles. ware. They are amortized on a straight-line basis to the income statement over their estimated useful lives (three to five years). The results of non-controlling interests are separately disclosed in Costs associated with developing and maintaining software pro- the income statement and balance sheet. grams are recognized as an expense when incurred. Costs directly associated with the production of identifiable and unique soft- 1.07 – Revenue recognition ware products controlled by the Group, that will probably generate Sales of goods, interest income and dividends are recognized in economic benefits beyond one year, are recognized as intangible line with the requirements of IAS 18, Revenue. assets. Direct costs include software development personnel costs directly related to the software development and an appropriate 1.08 – Exchange rate differences portion of relevant overheads. Exchange differences are recognized in line with the requirements of IAS 21, The Effect of Changes in Foreign Exchange Rates. The Intangible assets acquired in a business combination are amortized consolidated financial statements are presented in Swiss francs, using straight line method over their remaining useful lives of the which is the functional and presentation currency of the parent. following periods: ››Technology 3 to 15 years Income statements and cash flow statements of foreign entities ››Customer relationships 13 to 20 years are translated into the Group’s presentation currency at sales ››Trade name 10 years weighted average exchange rates for the year and their bal- ››Mining rights 19 years ance sheets are translated at the exchange rates prevailing on ››Order backlog 2 years 31 December. On 1 June 2007 a European Union regulation on chemicals and 1.09 – Property, plant and equipment their safe use came into effect. It deals with the Registration, Property, plant and equipment are valued at historical acquisition Evaluation, Authorization and Restriction of Chemical substances or production costs and depreciated on a straight-line basis to the (REACH). income statement, using the following maximum estimated useful lives in accordance with the Group guidelines: REACH applies to all substances manufactured, placed on the mar- ››Buildings 15 to 40 years ket and used in the European Union, either on their own, in mixtures ››Machinery and equipment 10 to 16 years or in products. REACH requires the registration of certain sub- ››Furniture, vehicles, computer hardware 3 to 10 years stances, i.e. with volumes equal to or exceeding 1 000 metric tons, ››Land is not depreciated by 2010 and various other substances depending on their category by 2018. As a company active in the chemical industry, Clariant Financing costs that are directly associated with the acquisition, has incurred costs in connection with REACH. Due to their nature, construction or production of qualifying property, plant and equip- these costs are considered within the context of IAS 38, Intangi- ment for which the commencement date for the capitalization ble Assets and those qualifying for capitalization are reported as is after 1 January 2009 are capitalized as a part of the costs of intangible assets. As the initial phase of the registration covering these assets. volumes equal to or exceeding 1 000 metric tons is completed, the01_Financial_2011_en.indd 104 20.02.2012 16:30:55
financial report 105 Notes to the Consolidated Financial statements corresponding costs capitalized as intangible assets are amortized 1.17 – Current income tax starting from 2011 on a straight-line basis to the income statement The taxable profits (losses) of Group companies are calculated in over their estimated useful lives of twelve years. accordance with the rules established by the taxation authorities of the countries in which they operate. They are the basis for the 1.11 – Impairment of assets determination of income tax payments (reimbursements) for the Impairment of assets are recognized and disclosed as per the reporting period in accordance with the prevailing national income requirements of IAS 36, Impairment of assets. tax rates. Current income tax is accounted for in accordance with the requirements of IAS 12, Income tax. 1.12 – Inventories Purchased goods are valued at acquisition costs, while self-ma 1.18 – Deferred income tax nufactured products are valued at manufacturing costs including Deferred income tax is calculated using the comprehensive liabil- related production overhead costs. Inventory held at the balance ity method as per the requirements of IAS 12, Income Taxes. No sheet date is primarily valued at standard cost, which approxi- deferred income tax is calculated for the temporary differences in mates actual costs on a weighted average basis. This valuation investments in Group companies, provided that the investor (parent method is also used for valuing the cost of goods sold in the income company) is able to control the timing of the reversal of the tem- statement. Adjustments are made for inventories with a lower porary difference and it is probable that the temporary differences net realizable value. Unsaleable inventories are fully written off. will not reverse in the foreseeable future. These adjustments are recorded as valuation allowances, which are deducted directly from the inventory value in the balance sheet. 1.19 – Obligations for pensions and similar employee The allowances are reversed when the inventories concerned are benefits either sold or destroyed and as a consequence are removed from Group companies operate various pension schemes. The Group has the balance sheet. both, defined benefit and defined contribution plans. Obligations for employee benefits are determined and recorded in line with the 1.13 – Trade receivables requirements of IAS 19, Employee Benefits. Trade receivables are recognized in accordance with IAS 39, Finan- cial Instruments: Recognition and Measurement. Defined contribution plans: Contributions to defined contribu- tion plans are recorded in the income statement in the period to 1.14 – Cash and cash equivalents which they relate. Cash and cash equivalents comprise cash in hand, deposits and calls with banks, as well as short-term investment instruments with an Defined benefit plans: For defined benefit plans, the amount initial lifetime of 90 days or less. Bank overdrafts are shown within to be recognized in the provision is determined using the pro- financial debt in current liabilities on the balance sheet. jected unit credit method. Independent actuaries perform the actuarial valuations for the defined benefit plans on a regular 1.15 – Derivative financial instruments and hedging basis, at least every three years. Derivative financial instruments and hedges are recognized in accordance with IAS 39, Financial Instruments: Recognition and The Group applies the corridor method. This means, that the por- Measurement. tion of the actuarial gains and losses to be recognized as income or expense is the excess of the net cumulative unrecognized actuarial 1.16 – Leases gains and losses at the end of the previous reporting year over the The Group classifies leases into finance and operating leases and greater of 10 percent of the present value of the defined benefit recognizes them based on the requirements of IAS 17, Leases. obligation at that date and 10 percent of the fair value of the plan assets at that date, divided by the expected average remaining working lives of the employees participating in the plan.01_Financial_2011_en.indd 105 20.02.2012 15:04:52
106 Clariant Annual Report 2011 Some Group companies provide post-retirement health care 1.21 – Research and development benefits to their retirees. The entitlement to these benefits is Development expenses are capitalized to the extent that the recog- usually conditional on the employee remaining in service up to nition criteria according to IAS 38, Intangible assets are met. retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period The Group considers that uncertainties inherent in the development of employment using an accounting methodology similar to that of key new products preclude it from capitalizing the development for the defined benefit pension plans. Actuarial gains and losses costs. At the balance sheet date, no research and development arising from experience adjustments and changes in actuarial projects met the recognition criteria. Laboratory buildings and assumptions are charged or credited to the income statement equipment included in property, plant and equipment are depreci- over the expected average remaining working lives of the related ated over their estimated useful lives. Experience has proven, that employees. These obligations are valued annually by independent the structure of research and development in the industries that qualified actuaries. Clariant engages in, makes it difficult to demonstrate how single intangible assets will generate probable future economic benefits. The charges for defined benefit plans, defined contribution plans and termination benefits are included in personnel expenses and 1.22 – Segment reporting reported in the income statement under the corresponding func- Segment information is presented in the same manner as in the tions of the related employees or in expenses for restructuring and internal reporting on behalf of the chief operating decision maker. impairment. The chief operating decision-maker, responsible for strategic deci- sions, for the assessment of the segments’ performance and for Other long-term employee benefits are employee benefits (other the allocation of resources to the segments, is the Executive Com- than post-employment benefits and termination benefits) which mittee. do not fall wholly due within twelve months after the end of the period in which the employees render the related services. These With effect from 1 January 2010, Clariant changed its operating include long-term compensated absences such as long-service or structure from formerly four divisions to ten business units, which sabbatical leave and jubilee or other long-service benefits. The have full responsibility for their operating results. Further, follow- accounting policy for other long-term employee benefits is equal ing the acquisition of the Süd-Chemie Group in April 2011, Clariant to that for post-employment benefits, with the exception that added the business units Catalysis & Energy and Functional Mate- actuarial gains and losses and past service costs are recognized rials as two new segments. In accordance with IFRS 8, “Operating immediately in the income statement. segments”, these twelve business units qualify to be reported in the following eight reportable segments: Short-term employee benefits are employee benefits (other ››Industrial & Consumer Specialties than termination benefits) which fall due wholly within twelve ››Masterbatches months after the end of the period in which the employees render ››Pigments the related service. ››Functional Materials ››Textile Chemicals 1.20 – Provisions ››Catalysis & Energy Provisions are recognized as per the requirements of IAS 37, Provi- ››Oil & Mining Services sions, Contingent Liabilities and Contingent assets. ››Leather Services01_Financial_2011_en.indd 106 20.02.2012 15:04:52
financial report 107 Notes to the Consolidated Financial statements All other business units, namely Additives, Detergents & Interme- The business unit Oil & Mining Services provides custom- diates, Emulsions, and Paper Specialties, are combined in Perfor- designed and engineering solutions to the oil, refinery and min- mance Chemicals. ing industry. Oil Services operates in the area from drilling and exploration to production, transportation and refining in the oil and These business units can be described as follows: gas market. Mining Services supplies chemicals and integrated services to the mining, explosives and fertilizer industries. The business unit Industrial & Consumer Specialties supplies speciality chemicals and application solutions for the personal The business unit Leather Services produces chemicals and care, industrial & home care, crop protection, paints and coatings services for the global shoe, automotive and garment segments. to construction chemicals, industrial lubricants and engineering Chemical and technical solutions for the complete leather manu- and aviation. facturing process are offered, from the beamhouse to finishing. The business unit Masterbatches provides color, additive con- The business unit Additives provides flame retardants, waxes and centrates and performance solutions for plastics. The products of polymer additives for effects in plastics, coating and other applica- this business range from being used in medical devices such as tions. This business enhances and protects to make products safer, inhalers, to drink bottles made from recycled materials and car look better and last longer. components. The business unit Detergents & Intermediates provides key The business unit Pigments provides organic pigments, pigments raw material for laundry detergents and cleaning products. It also preparations and dyes used in coatings, printing, plastics, con- supplies chemical intermediates, especially for the manufacture of sumer products and other special applications. The portfolio of this agrochemicals and pharmaceuticals. business includes high-performance pigments to meet demands of automotive, architectural and plastic industries as well as colo- The business unit Emulsions provides water based emulsions and rants used in traditional printing, ink jet and laser printers. polymers dispersions for paints, coatings, adhesives, construction, sealants and for the textile, leather and paper industries. The business unit Functional Materials comprises the activities of the former adsorbents division of Süd-Chemie. This business unit The business unit Paper Specialties is a provider of expertise provides speciality products and solutions to markets of edible oil, in management of whiteness, coloration, special coatings and the foundry, the pharmaceuticals and the logistics industries, as strength for all kinds of paper. well as the water treatment industry. Corporate: Income and expenses relating to Corporate include the The business unit Textile Chemicals produces dyes and chemi- costs of the Corporate headquarters and those of corporate coordi- cals for the textile industry including apparel, upholstery, fab- nation functions in major countries. In addition, Corporate includes rics and carpets. The business provides special chemicals for certain items of income and expense, which are not directly attrib- pre-treatment, dyeing, printing and finishing of textiles; optical utable to specific business units. brighteners and chemicals for the functional treatment of tech- nical textiles; and dyes, such as dispersion reactive, acid and sulphur dyes. The business unit Catalysis & Energy comprises the activities of former catalyst division of Süd-Chemie. The business unit provides catalysts which improve the energy efficiency of processes in pet- rochemical, polymer, refinery industries, the environmental impact of the automotive industry and inorganic materials to allow for an efficient energy storage.01_Financial_2011_en.indd 107 20.02.2012 15:04:52
108 Clariant Annual Report 2011 The Group’s business units are operating segments that offer 1.23 – Share capital and other reserves different products. These operating segments are managed All issued shares are ordinary shares and as such are classified separately because they manufacture, distribute and sell distinct as equity. products, which require differing technologies and marketing strat- egies. These products are also subject to risks and returns that are Incremental costs, directly attributable to the issue of new shares different from those of other business segments. or options, are shown in equity as a deduction, net of tax, from the proceeds. Segment revenue is revenue reported in the Group’s income state- ment that is directly attributable to a segment and the relevant por- Written put options, where Clariant Ltd shares are the underly- tion of the company income that can be allocated on a reasonable ing, are reported as obligations to purchase Clariant Ltd shares if basis to a segment, whether from sales to external customers or the number of shares is fixed and physical settlement for a fixed from transactions with other segments. amount of cash is required, in case the option is exercised. At inception the obligation is recorded at the present value of the Segment expense is an expense resulting from the operating settlement amount of the option. A corresponding effect is recog- activities of a segment that is directly attributable to the segment nized in shareholders’ equity and reported as equity classified as and the relevant portion of an expense that can be allocated on an obligation to purchase Clariant Ltd shares. a reasonable basis, including expenses relating to sales to external customers and expenses relating to transactions with The liability is measured subsequently at amortized cost using other segments. effective interest method. Upon settlement of such written put options, the liability is extinguished and the charge to equity is Inter-segment transactions are entered into under the normal cir- reclassified to the treasury shares. cumstances and terms and conditions that would also be available to unrelated third parties. Clariant Ltd shares subject to such put options are not considered to be outstanding for the purpose of basic earnings per share cal- The segment net assets consist primarily of property, plant and culations, but are considered for the dilutive earnings per share equipment, intangible assets, inventories and receivables less seg- calculations to the extent that they are dilutive. ment liabilities. Usually, no allocation of Corporate items is made to the segments. Corporate assets and liabilities principally consist Other reserves comprise the following items: of net liquidity (cash, cash equivalents and other current financial assets less financial debts) and deferred and current taxes. ››Share premium: The share premium comprises the excess price paid over the par value of the share at the time of issuance of The Executive Committee assesses the performance of the the share capital. It also includes the equity component of the operating segments based on income statement parameters like convertible debts issued in 2009. third party sales, EBITDA, and operating income. Interest income, expenditure and taxes are not allocated to the segments. The ››Cumulative translation reserve: The translation reserve return on the capital invested in each segment is measured by the comprises the foreign exchange differences arising on the Return on Invested Capital (ROIC). translation of the financial statements of the foreign subsidiaries stated in a currency other than the Group’s functional currency. In addition the foreign exchange differences arising on the translation of financial liabilities denominated in a currency other than the functional currency of the parent company Clariant Ltd and which are at the same time designated as a hedge of a net investment in a foreign entity, are also reported here.01_Financial_2011_en.indd 108 20.02.2012 15:04:52
financial report 109 Notes to the Consolidated Financial statements 1.24 – Treasury shares 2. Enterprise Risk Management Identification, Treasury shares are deducted from equity at their par value of Assessment and Management CHF 4.00 per share. Differences between this amount and the amount paid for acquiring, or received for disposing of treasury Under the Group Risk Management Policy, based on the risk man- shares are recorded in retained earnings. agement standard of the Institute of Risk Managers, a tool is used to prepare risk assessments every year with quarterly updates 1.25 – Financial debt by Business Units, Business Services and Regions by assessing Financial debt is recognized as per the requirements of IAS 39, threats and opportunities that will impact the objectives set for Financial Instruments: Recognition and Measurement. Clariant overall. These objectives are a result of the overall strat- egy of the company as set by the Board of Directors (BoD) and 1.26 – Investments implemented by the Executive Committee (EC). Investments are classified, recognized, measured and impaired based on the requirements of IAS 39, Financial Instruments: Rec- The Investment Sub-Committee of the Executive Committee is ognition and Measurement. Purchases and sales of investments responsible for monitoring the risk management assessments for are recognized on settlement date, which is the date on which the relevance and consistency. Group receives or delivers the asset. Objective setting is finalized during the last quarter of the year. These objectives together with the threats and opportunities to these objectives are subject to scrutiny by the Executive Com- mittee (EC) during meetings with each Business Unit (BU). Also reviewed and discussed are the measures proposed to maximise opportunities and reduce or contain threats. The Group and the regions are also required to make risk assess- ments on the same criteria. All BU’s, functions and business ser- vices are required to report significant changes to existing identi- fied risks and new threats and opportunities as they arise. Risk Registers are maintained using financial, operational, reputa- tional and likelihood assessments to score and rank all identified risks. The assessment also addresses the measures in place to manage the risk identified with dates for completion of the mea- sures. Effectiveness of the measures is also assessed. Threats and opportunities have been identified, quantified and delegated to responsible named individuals being required to deliver effective risk management. The nature of the risk classifica- tion requires different skills to be applied to risk management. The assessments are shared between the different BU’s, services and individuals and subject to reassessment on a quarterly basis.01_Financial_2011_en.indd 109 20.02.2012 15:04:52
110 Clariant Annual Report 2011 Consolidated risk assessment is presented to the Audit Committee 3. Financial risk management and Board of Directors. There is a process for accelerated reporting of new or changed risks. 3.1 – Financial risk factors The Group’s activities expose it to a variety of financial risks: mar- Summaries of BU’s, Regions and Services risk assessments ket risk (including currency risk, interest rate risk and price risk), are shared within Clariant to deliver the group summary to all key credit risk, liquidity risk and settlement risk. The Group’s overall senior managers. risk management program focuses on the unpredictability of finan- cial markets and seeks to reduce potential adverse effects on the To support functional responsibility, certain functions have access Group’s financial performance at reasonable hedging costs. The to risk assessments to support them in their roles. Examples are Group uses derivative financial instruments to hedge certain risk Environmental Safety & Health Affairs (ESHA) to identify key sites exposures. for their property risk survey programme, internal audit and group procurement. Financial risk management is carried out by a central treasury department (Corporate Treasury) under policies approved by the The consolidated risk assessment is benchmarked against pub- Excecutive Committee and the Board of Directors. Corporate lished surveys dealing with risk management. Surveys that are Treasury identifies, evaluates and hedges financial risks in close industry specific, business wide and with broad economic coverage cooperation with the Group’s operating units. Written principles for are also included in the benchmarking process. overall foreign exchange risk, credit risk, use of derivative financial instruments, non-derivative financial instruments and investing Examples of identified risks included in the Risk Register: excess liquidity (counterparty risk) are in place. 2.1 – Regulation & Compliance: Environmental Market risk and product risks Foreign exchange risk Clariant is subject to many rules and regulations as well as compli- ››Exposure to foreign exchange risk: The Group operates ance standards. These include chemical industry, country, govern- internationally and is exposed to foreign exchange risks arising ment and customer requirements as well as the European Commu- from various currency exposures, primarily with respect to nity’s (EU) Regulations on Registration, Evaluation, Authorization the euro and the US dollar and increasingly the currencies of and Restriction of Chemical substances (REACH) being a significant emerging countries. Foreign exchange risks arise from future component. Group Responsible Care is responsible for this risk and commercial transactions, recognized assets and liabilities and net certain specific tasks are delegated to HR, Legal, ESHA and Logis- investments in foreign operations, when they are denominated tics functions. in a currency that is not the respective subsidiary’s functional currency. 2.2 – Site & Location: This includes sites, plant and equipment that are important for ››Foreign exchange risk management: To manage the foreign the production of Clariant products for sale to customers. Also exchange risk arising from future commercial transactions and addressed are country and culture issues that could create threats recognized assets and liabilities, entities in the Group use spot and opportunities to business objectives. The objective is to main- transactions, FX forward contracts, FX options and FX swaps taining high quality production facilities in key locations. Risk man- according to the Group’s foreign exchange risk policy. Corporate agement is delegated to ESHA and Regional Services. Treasury is responsible, in close co-ordination with the Group’s operating units, for managing the net position in each foreign 2.3 – Competitor Activity: currency by performing appropriate hedging actions. A number of identified risks include evaluating the merger and acquisition activity that could affect the nature and extent of com- The Group’s foreign exchange risk management policy is to petition. Clariant is a leading participant in its industrial sectors selectively hedge net transaction foreign exchange exposures in and each sector is monitored to identify changes and consider and each major currency according to defined hedging ratios. plan to deal with the consequences of changes to customers and competitors.01_Financial_2011_en.indd 110 20.02.2012 15:04:52
financial report 111 Notes to the Consolidated Financial statements Currency exposures arising from the net assets of the Group’s ››Interest rate risk sensitivity: To calculate the impact of a foreign operations are managed primarily through borrowings potential interest rate shift on profit and loss, a weighted average denominated in the relevant foreign currency. interest rate change was determined, based on the terms of the financial debt issued at variable rates, cash and cash equivalents Detailed information regarding foreign exchange management is and the movements of the corresponding interest rates (interest provided in note 28. rates comparison between the end of 2011 and end of 2010). ››Foreign exchange risk sensitivity: The estimated percentage At 31 December 2011, if the Swiss franc interest rates on net change of the following foreign exchange rates used in this current financial debt issued at variable interest rates had been calculation is based on the foreign exchange rate volatility for 71 basis points higher/lower with all other variables held constant, a term of 360 days in the future observed at 31 December 2011. pre-tax profit for the year would have been CHF 2.0 million lower/ higher (2010: CHF 0.5 million for a Swiss franc interest rate shift At 31 December 2011, if the euro had strengthened/weakened of 7 basis points). by 10 percent (2010: 10 percent) against the Swiss franc with all other variables held constant, pre-tax profit for the year would At 31 December 2011, if the US dollar interest rates on net current have been CHF 72 million higher/lower (2010: CHF 15 million), financial debt issued at variable interest rates had been 3 basis mainly as a result of foreign exchange gains/losses on translation points higher/lower with all other variables held constant, pre- of the euro-denominated cash and cash equivalents, intragroup tax profit for the year would have been not lower/higher (2010: financing and trade receivables. Equity would have been CHF 0.01 million for a US dollar interest rate shift of 3 basis points). CHF 85 million lower/higher (2010: CHF 65 million), arising mainly from foreign exchange gains/losses on translation of the euro- At 31 December 2011, if the euro interest rates on net current denominated hedging instruments. financial debt issued at variable interest rates had been 12 basis points higher/lower with all other variables held constant, At 31 December 2011, if the US dollar had strengthened/weakened pre-tax profit for the year would have been CHF 0.2 million lower/ by 16 percent (2010: 11 percent) against the Swiss franc with all higher (2010: CHF 0.1 million for a euro interest rate shift of 23 other variables held constant, pre-tax profit for the year would have basis points). been CHF 37 million higher/lower (2010: CHF 21 million) mainly as a result of foreign exchange gains/losses on translation of US dollar Other price risk denominated trade receivables. With regard to the financial statements as per 31 December 2011 the Group was not exposed to other price risks in the sense of IFRS 7, Interest rate risk Financial Instruments: Disclosures. ››Exposure to interest rate risk: Financial debt issued at variable rates and cash and cash equivalents expose the Group to Credit risk cash flow interest rate risk; the net exposure as per 31 December ››Exposures to credit risk: Credit risk arises from cash and cash 2011 was not significant. Financial debt issued at fixed rates does equivalents, derivative financial instruments and deposits with banks not expose the Group to fair value interest rate risk because it is and financial institutions, as well as credit exposures to wholesale recorded at amortized costs. At the end of 2011, 100 percent of and retail customers, including outstanding re eiv bles and c a the net financial debt was at fixed rates (2010: 100 percent). committed transactions. Customer credit risk exposure is triggered by customer default risk and country risk. As per 31 December 2011 ››Interest rate risk management: It is the Group’s policy to and 31 December 2010, the Group has a very diversified portfolio manage the cost of interest using fixed and variable rate debt with more than 55 000 (excl. Süd-Chemie) active credit accounts and interest-related derivatives. Corporate Treasury monitors the (2010: 50 000), with no significant concentration neither due to size net debt fix-to-float mix on an ongoing basis. of customers nor due to country risk.01_Financial_2011_en.indd 111 20.02.2012 15:04:52
112 Clariant Annual Report 2011 ››Credit risk management: The Group has a Group credit risk The table below shows in percent of total cash and cash policy in place to ensure that sales are made to customers only equivalents the share deposited with each of the three major after an appropriate credit risk rating, credit line allocation counterparties at the balance sheet date (excluding the bank process as well as recovery. Procedures are standardized within managing the euro cash pool): a Corporate customer credit risk policy and supported by the IT system with respective credit management tools. Credit lines Counterparty Rating 31.12.2011 are partially backed by credit risk insurance. Süd-Chemie has a Bank 1 AA 12% credit policy in place, credit risk management actively supported Bank 2 A 11% by IT in some affiliates. Credit Ratings and procedures will be Bank 3 A- 11% harmonized. Counterparty Rating 31.12.2010 Ageing balance of trade receivables 31.12.2011 31.12.2010 Bank A AA+ 0% Not due yet 88% 92% Bank B AA 15% Total overdue 12% 8% Bank C A+ 17% – less than 30 days 10% 7% Bank D A 12% – more than 30 days 2% 1% Liquidity risk Net trade receivables per group internal 31.12.2011 31.12.2010 ››Liquidity risk management: Cash flow forecasting is risk category performed in the subsidiaries of the Group and in aggregate by A – low credit risk 29% 23% Corporate Treasury. Corporate Treasury monitors the forecasts B – low to medium credit risk 38% 38% of the Group’s liquidity requirements to ensure it has sufficient C – medium to above average risk 25% 28% cash to meet its operational needs while maintaining sufficient D – high credit risk 8% 9% headroom on its undrawn committed and uncommitted borrowing N – new customer awaiting rating 0% 2% facilities. At all times the Group aims to meet the requirements set by the covenants of any of its borrowing facilities. Corporate Financial instruments contain an element of risk that the coun Management therefore takes into consideration the Group’s debt ter arty may be unable to either issue securities or to fulfil p financing plans and financing options. the settlement terms of a contract. Clariant therefore only cooperates with counterparties or issuers that are at least Cash which is not needed in the operating activities of the Group is A-rated. The cumulative exposure to these counterparties is invested in short-term money market deposits or marketable securi- constantly monitored by the Corporate management, therefore ties. At 31 December 2011, the Group held money market funds of there is no expectation of a material loss due to counterparty risk CHF 724 million (2010: CHF 836 million), thereof money market funds in the future. of CHF 35 million with initial tenor more than 90 days (2010: 703). The Group maintains a cash pooling structure with a leading The following table analyzes the maturity profile of the Groups European bank, over which most European subsidiaries execute financial liabilities. The amounts disclosed are the contractual their cash transactions denominated in Euro. As a result of this undiscounted cash flows and do therefore not reconcile with the cash pool the Group at certain times has substantial current financial liabilities disclosed in the consolidated balance sheet. financial assets and at other times substantial current financial liabilities. In view of the bank being rated AA- (2010: AA rated) by the most important rating agencies, Clariant does not consider this to pose any particular counterparty risk.01_Financial_2011_en.indd 112 20.02.2012 15:04:52
financial report 113 Notes to the Consolidated Financial statements As per 31 December 2011 Less than Between Between Over The following tables present the Group’s assets and liabilities CHF mn 1 year 1 and 2 years 2 and 5 years 5 years that are measured at fair value at 31 December 2011 and at Borrowings 1 137 751 934 102 31 December 2010 respectively: Interest on borrowings 82 73 55 3 Finance lease liabilities 4 4 5 12 31 December 2011 Level 1 Level 2 Level 3 Total Trade and other payables 1 033 CHF mn Derivative financial 3 29 2 Assets instruments Available-for-sale 20 – 16 36 financialassets As per 31 December 2010 Less than Between Between Over Financial instruments*’** – 13 – 13 CHF mn 1 year 1 and 2 years 2 and 5 years 5 years Total assets 20 13 16 49 Borrowings 238 250 1 019 – Interest on borrowings 54 49 50 – Liabilities Finance lease liabilities 2 3 3 13 Forward foreign exchange – – – – 46 Trade and other payables 809 – – – rate contracts*’** Derivative financial 35 – 37 – Total liabilities – – – – –46 instruments 31 December 2010 Level 1 Level 2 Level 3 Total The Group covers its liabilities out of operating cash flow gener- CHF mn ated, liquidity reserves in form of cash and cash equivalents includ- Assets ing time deposits and money market deposits (31 December 2011: Available-for-sale 8 – 18 26 CHF 1 234 million vs. 31 December 2010: CHF 1 419 million), uncom- financialassets mitted open cash pool limits (31 December 2011: CHF 219 million Financial instruments*’** – – – – vs. 31 December 2010: CHF 175 million), uncommitted net working Total assets 8 – 18 26 capital facilities and through the selected issuance of capital mar- ket instruments. Liabilities Forward foreign exchange – – 63 – – 63 3.2 – Fair value estimation rate contracts*’** IFRS 7 requires the disclosure of fair value measurements in accor- Total liabilities – – 63 – – 63 dance with the fair value measurement hierarchy for financial ** he fair value of forward foreign exchange rate contracts is determined using forward exchange T instruments that are measured at fair value in the balance sheet: market rates at the balance sheet date. ** or details, see note 28 F ››Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. ››Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). ››Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).01_Financial_2011_en.indd 113 20.02.2012 15:04:52
114 Clariant Annual Report 2011 3.3 – Capital risk management 4. Critical accounting estimates and judgments The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to pro- Estimates and judgments are continually evaluated and are based vide returns for the shareholders and benefits for other stakehold- on historical experience and other factors, including expectations ers and to maintain an optimal capital structure to minimize the of future events that are believed to be reasonable under the cir- cost of capital. cumstances. In order to maintain or adjust the capital structure, the Group may The Group makes estimates and takes assumptions concerning the adjust the amount of pay-outs to the shareholders, return capital to future. The resulting accounting estimates will, by definition, sel- the shareholders, issue new shares or sell assets to reduce debt. dom equal the related actual results. The estimates and as ump s tions that have a significant risk of causing a material adjustment The Group monitors capital on the basis of invested capital as to the carrying amounts of assets and liabilities within the next part of the return on invested capital concept. Invested capital financial year are discussed below. is calculated as the sum of total equity as reported in the consoli- dated balance sheet plus current and non-current financial liabili- 4.1 – Estimated impairment of goodwill and property, plant ties as reported in the consolidated balance sheet plus estimated and equipment liabilities from operating leases, less cash and cash equivalents The Group tests annually whether goodwill has suffered any impair- and near cash assets not needed for operating purposes, less net ment in accordance with the requirements of IAS 36, Impairment of assets held for sale as reported in the consolidated balance sheet. Assets. The recoverable amounts of all cash generating units have been determined based on value-in-use calculations except for the The Group always complied with the externally imposed capital CGUs Functional Material and Catalysis & Energy, for which the re uire ents related to leverage and gearing requirements pertain- q m recoverable amount is determined using fair value less cost to sell. ing to the acquisition term loan facility which is cancelled and termi- nated as of 30 January 2012. In the same procedure, the recoverable value of property, plant and equipment is also assessed according to the same rules. These cal- Invested capital was as follows on 31 December 2011 and 2010 culations require the use of estimates, in particular in relation to respectively: the expected growth of sales, the discount rates, the development of raw material prices and the success of restructuring measures CHF mn 2011 2010 implemented (see notes 5 and 6). Total equity 3 026 1 806 Total current and non-current 2 974 1 545 4.2 – Environmental liabilities financial liabilities The Group is exposed to environmental regulations in numerous Estimated operating lease liabilities 457 432 jurisdictions. Significant judgment is required in determining the Less cash and cash equivalents and near – 1 234 – 1 419 worldwide provision for environmental remediation. The Group cash assets * constantly monitors its sites to ensure compliance with legislative Cash needed for operating purposes 147 142 requirements and to assess the liability arising from the need to Invested capital 5 370 2 506 adapt to changing legal demands. The Group recognizes liabilities * Near cash assets represent deposits over 90 days for environmental remediation based on the latest assessment of the environmental situation of the individual sites and the most At the end of 2011, Clariant considers the invested capital to be recent requirements of the respective legislation. Where the final adequate. remediation results in expenses that differ from the amounts that were previously recorded, such differences will impact the income statement in the period in which such determination was made (see notes 18 and 32).01_Financial_2011_en.indd 114 20.02.2012 15:04:53
financial report 115 Notes to the Consolidated Financial statements 4.3 – Income and other taxes 4.5 – Acquisition accounting The Group is subject to income and other taxes in numerous Due to the acquisition of the Süd-Chemie Group during 2011, the use jurisdictions. Significant judgment is required in determining the of the acquisition method of accounting has had a significant impact worldwide provision for income and other taxes. There are many on the Group’s consolidated financial statements. The Group’s con- transactions and calculations for which the ultimate tax determi- solidated financial statements reflect the acquired business from nation is uncertain at the time a liability must be recorded. The the date the acquisition has been completed. Using the acquisition Group recognizes liabilities for anticipated tax audit issues based method of accounting requires the acquired assets and assumed on estimates of whether additional taxes will be due. Where the liabilities to be recorded as of the acquisition date at their respec- final tax outcome of these matters is different from the amounts tive fair values. Any excess of the purchase consideration over the that were initially recorded, such differences impact the income estimated fair values of acquired net identified assets is recorded tax and deferred tax provisions in the period in which such deter- as goodwill in the balance sheet and is allocated to an appropriate mination is made. cash-generating unit. The fair value of acquired assets and assumed liabilities is determined using valuation techniques. Estimating the Some subsidiaries generate tax losses. Often these can be used to fair value assigned to each class of acquired assets and assumed offset taxable gains of subsequent periods. The Group constantly liabilities is based on expectations and assumptions, in particular monitors the development of such tax loss situations. Based on the in relation to the expected growth rate, the discount rate and the business plans for the subsidiaries concerned, the recoverability of remaining useful life, that have been deemed reasonable by the Cor- such tax losses is determined. In the case that a tax loss is deemed porate management. to be recoverable, the capitalization of a deferred tax asset for such tax losses is then decided. The time horizon for such a calculation is in line with the mid-term planning scope of the Group. 4.4 – Estimates for the accounting for employee benefits IAS 19, Employee Benefits requires that certain assumptions are made in order to determine the amount to be recorded for retire- ment benefit obligations and pension plan assets, in particular for defined benefit plans. These are mainly actuarial assumptions such as expected inflation rates, long-term increase in health care costs, employee turnover, expected return on plan assets and discount rates. Substantial changes in the assumed development of any one of these variables may significantly change the Group’s retirement benefit obligation and pension assets (see note 17).01_Financial_2011_en.indd 115 20.02.2012 15:04:53
116 Clariant Annual Report 2011 5. Property, plant and equipment CHF mn Land Buildings Machinery Furniture, Plant under Total Insured and vehicles, construction value at equipment computer 31 December hardware At 1 January 2010 Cost 493 2 189 3 925 403 20 7 030 Accumulated depreciation – 153 – 1 570 – 3 018 – 346 – 16 – 5 103 and impairment Net book value 340 619 907 57 4 1 927 Additions 6 23 34 12 149 224 Reclassifications 2 14 43 4 – 63 – Reclassified to held for sale – 10 – 1 – 11 Disposals – 1 – 3 – 4 – 1 – 9 Depreciation – 49 – 129 – 17 – 195 Impairment – 4 – 27 – 34 – 2 – 67 Exchange rate differences – 39 – 52 – 90 – 2 – 17 – 200 At 31 December 2010 294 524 727 51 73 1 669 Cost 427 1 978 3 475 363 88 6 331 Accumulated depreciation and impairment – 133 – 1 454 – 2 748 – 312 – 15 – 4 662 Net book value 294 524 727 51 73 1 669 6 989 Additions 3 62 75 20 210 370 Acquired in business combinations (see note 24) 109 213 330 62 75 789 Reclassifications – 35 119 8 – 162 – Reclassified to held for sale – 6 – 2 – 1 – – – 9 Disposals – 4 – 5 – 4 – 1 – 1 – 15 Depreciation – – 53 – 142 – 24 – – 219 Impairment – 1 – 25 – 15 – 1 – – 42 Reversal of impairment 2 1 2 – – 5 Exchange rate differences – 9 – 25 – 13 – 2 – 5 – 54 At 31 December 2011 388 725 1 078 113 190 2 494 Cost 516 2 171 3 926 428 205 7 246 Accumulated depreciation and impairment – 128 – 1 446 – 2 848 – 315 – 15 – 4 752 Net book value 388 725 1 078 113 190 2 494 7 873 Impairments recognized in 2011 and 2010 arose as a result of the As at 31 December 2011, commitments for the purchase of PPE restructuring measures and the entailing site closures (see also totalled CHF 58 million (2010: CHF 53 million). note 25). The reversal of impairment in 2011 pertains to recov ries e from sale.02_Financial_2011_en.indd 116 20.02.2012 15:05:43
financial report 117 Notes to the Consolidated Financial statements Land, buildings, furniture and machinery and equipment include the following amounts where the Group is a lessee under a finance lease: CHF mn 31.12.2011 31.12.2010 Cost – capitalized finance leases 30 20 Accumulated depreciation – 12 – 11 Net book value 18 9 Finance lease liability – minimum lease payments: CHF mn 31.12.2011 31.12.2010 Not later than one year 4 2 Later than one year but not later than five years 9 6 Later than five years 12 13 Total minimum lease payments 25 21 Future finance charge on finance leases – 10 – 11 Present value of finance lease liabilities 15 10 The present value of finance lease liabilities is as follows: CHF mn 31.12.2011 31.12.2010 Not later than one year 4 1 Later than one year but not later than five years 6 4 Later than five years 5 5 Present value of finance lease liabilities 15 10 The non-current portion of the corresponding liability related to finance lease contracts is disclosed in note 16.02_Financial_2011_en.indd 117 20.02.2012 15:05:43
118 Clariant Annual Report 2011 6. Intangible assets CHF mn Goodwill Technology Customer Trade names Other Total relationships At 1 January 2010 Cost 417 198 615 Accumulated amortization and impairment – 209 – 112 – 321 Net book value 208 – – – 86 294 Additions 18 18 Disposals – 3 – 3 Amortization – 10 – 10 Impairment – 8 – 8 Exchange rate differences – 5 – 17 – 22 At 31 December 2010 203 – – – 66 269 Cost 412 191 603 Accumulated amortization and impairment – 209 – 125 – 334 Net book value 203 – – – 66 269 Additions 17 17 Acquired in business combinations (see note 24) 1 084 184 195 86 64 1 613 Reclassifications 3 – 3 – Amortization – 13 – 8 – 6 – 12 – 39 Impairment – 5 – 5 Exchange rate differences – 64 – 10 – 10 – 4 – 5 – 93 At 31 December 2011 1 223 161 180 76 122 1 762 Cost 1 432 174 188 82 262 2 138 Accumulated amortization and impairment – 209 – 13 – 8 – 6 – 140 – 376 Net book value 1 223 161 180 76 122 1 762 Amortization is allocated to the line in the income statement, which Impairment test for goodwill. Goodwill is allocated to the represents the function to which the intangible asset pertains. Group’s cash generating units (CGU). Cash generating units con- sist of business segments in accordance with the Group’s segment Intangibles reported under “Acquisitions” in 2011 arose on the reporting. acquisitions of Süd-Chemie, Prairie Petro-Chem, Octagon Process and Italtinto S.r.l. As of end 2011, other intangible assets include costs in the amount of CHF 41 million (2010: CHF 34 million) capitalized in connection with the REACH regulation.02_Financial_2011_en.indd 118 20.02.2012 15:05:43
financial report 119 Notes to the Consolidated Financial statements Goodwill is allocated to the following CGUs: CHF mn 31.12.2011 31.12.2010 Industrial & Consumer Specialties 34 1 Masterbatches 45 45 Pigments 19 11 Functional Materials 1 291 Catalysis & Energy 1 674 Oil & Mining Services 19 5 Leather Services 141 141 Net book value 1 223 203 1 he CGUs Functional Materials and Catalysis & Energy are added following the acquisition of Süd-Chemie. T The recoverable amount of all the CGUs except Functional Materi- material costs were assumed to be one percentage point of sales als and Catalysis & Energy is determined based on value-in-use higher, the recoverable amount of the net assets would exceed the calculations. carrying amount by CHF 132 million. The value in use calculations use cash flow projections based on The recoverable amount for the CGUs Functional Materials and financial budgets approved by the Board of Directors covering a Catalysis & Energy which were joined to the Group with the acqui- five-year period. No growth is assumed beyond this five-year sition of Süd-Chemie, is determined based on fair value less cost period. The main assumptions used for cash flow projections were to sell. Fair value of these CGUs is calculated using discounted EBITDA in percent of sales and sales growth. The assumptions cash flows. The cash flows are projected for a ten-year period. The regarding these two variables are based on Management’s past cash flow projections beyond this period are extrapolated using a experience and future expectations of business performance. The growth rate of 2.8 percent. The assumptions used in this calcula- pre-tax discount rates used are based on the Group’s weighted tion are based on past experience and future expectations of busi- average cost of capital adjusted for specific country risks asso- ness performance. The cash flows are discounted using a pre-tax ciated with the cash flow projections. The assumed pre-tax dis- discount rate of 11.60 percent. Cost to sell are estimated and are count rate was 11.60 percent for all cash generating units (2010: deducted in determining the recoverable amount. 11.40 percent). The recoverable amount of the CGUs Functional Materials and For all CGUs it was assumed that they achieve sales growth in line Catalysis & Energy exceeds the carrying amount of the net assets with or higher than market growth based on the specific strategci allocated to these CGUs. plans for those CGUs. It was also assumed that the EBITDA in per- cent of sales will improve over present performance as a result of The estimated recoverable amount of the CGU Functional Materials the restructuring measures implemented. For all these CGUs it was on a fair value less cost to sell basis exceeds its carrying amount determined that the net present value of their expected cash flows including goodwill. The recoverable amount would be equal to the exceeds the carrying amount of the net assets allocated on a value carrying amount if the assumed annual sales growth rate were in use basis. reduced by 1.1 percent, or alternatively, if the operating margin were reduced by 8.5 percent of sales. The estimated recoverable amount of the CGU Leather Services on a value in use basis exceeds its carrying amount including goodwill. If the assumed annual growth rate were reduced by one percent- The recoverable amount would be equal to the carrying amount age point the recoverable amount would exceed the carrying if the assumed annual sales growth rate were reduced by amount of the CGU’s net assets by CHF 103 million. If raw material 2.9 percent, or alternatively, if the operating margin were reduced by costs were assumed to be one percentage point of sales higher, the 5.2 percent of sales. recoverable amount would exceed the carrying amount of the net assets by CHF 729 million. If the assumed annual growth rate were reduced by one percent- age point the recoverable amount of the CGU would exceed the net asset value of the CGU’s net assets by CHF 104 million. If raw02_Financial_2011_en.indd 119 20.02.2012 15:05:43
120 Clariant Annual Report 2011 7. Investments in associates and joint ventures CHF mn 2011 2 010 Beginning of the year 224 273 Acquired in business combinations (see note 24) 334 Additions 8 1 Share of profit 47 21 Dividends received – 25 – 31 Exchange rate differences – 25 – 40 End of the year 563 224 The key financial data of the Group’s principal associates and joint ventures are as follows: CHF mn Country of Assets Liabilities Revenue Profit/(Loss) Interest held % incorporation 2010 Associates: Infraserv GmbH & Co. Höchst KG Germany 1 377 978 1 598 10 32 Infraserv GmbH & Co. Gendorf KG Germany 184 104 315 11 50 Infraserv GmbH & Co. Knapsack KG Germany 161 64 219 19 21 Others Germany 99 25 113 8 Total 1 821 1 171 2 245 48 2011 Associates: Infraserv GmbH & Co. Höchst KG Germany 1 398 1 036 1 422 23 32 Infraserv GmbH & Co. Gendorf KG Germany 195 104 327 22 50 Infraserv GmbH & Co. Knapsack KG Germany 140 55 201 16 21 Others 146 43 138 9 Joint ventures: ASK Group Germany 525 277 523 8 50 Scientific Design Company Inc. USA 96 56 32 – 3 50 Süd-Chemie India Pvt Ltd. India 73 17 52 13 50 Total 2 573 1 588 2 695 88 In the year 2011, accumulated unrecognized losses as at the Due to the specialized nature of these companies, there is no active balance sheet date amounted to less than CHF 1 million (2010: market in which these shareholdings could be traded, hence no fair CHF 0 million). value is indicated. However, there is no evidence that the recover- able amount would be lower than the carrying amount. The Infraserv companies were set up by the former Hoechst group to cater to the infrastructure needs of its subsidiaries prior to 1997. The joint ventures with ASK Group, Scientific Design Company Inc. The shareholdings in associates summarized under “Other” con- and Süd-Chemie India Private Limited were acquired as a part of cern mainly companies specializing in selling Clariant products. the acquisition of Süd-Chemie Group (see note 24). Clariant owns a 50 percent stake in these joint ventures, which are consolidated using the equity method.02_Financial_2011_en.indd 120 20.02.2012 15:05:43
financial report 121 Notes to the Consolidated Financial statements 8. Financial assets 9. Taxes CHF mn 2011 2010 CHF mn 2011 2010 Beginning of the year 18 19 Current income taxes – 164 – 123 Exchange rate differences – 1 – 3 Deferred income taxes 81 71 Additions 13 2 Total – 83 – 52 Impairment – 2 Reversal of impairment 23 The main elements contributing to the difference between the Repayments and disposals – 23 Group’s overall expected tax expense/rate and the effective tax End of the year 28 18 e xpense/rate are: Financial assets are measured at cost as these include a number of 2011 2010 small scale participations in companies, mostly in Germany, which CHF mn % CHF mn % are engaged in activities closely related to the ones of Clariant. Income before tax 334 243 Expected tax expense/rate 1 – 110 32.9 – 81 33.3 Due to the specialized nature of these companies, there is no active Effect of taxes – 61 18.3 – 88 36.2 market in which these shareholdings could be traded, hence no fair on items not tax-deductible value is indicated. However, there is no evidence that the recover- Effect of utilization and changes 103 – 30.8 98 – 40.3 able amount would be lower than the carrying amount. in recognition of tax losses and tax credits Financial assets also include those derivative financial instruments Effect of tax losses and tax credits – 26 7.8 – 13 5.4 with positive fair value for which the remaining lifetime exceeds of current year not recognized twelve months. Effect of adjustments to current 6 – 1.8 5 – 2.1 taxes of prior periods Financial assets are denominated in the following currencies: Effect of tax exempt income 29 – 8.7 31 – 12.7 Effect of other items – 24 7.2 – 4 1.6 CHF mn 31.12.2011 31.12.2010 Effective tax expense/rate – 83 24.9 – 52 21.4 EUR 27 15 alculated based on the income before tax of each subsidiary (weighted average). 1 C CHF 1 3 Total 28 18 The carrying amounts of the above assets are entirely classified as available for sale. A loan in the amount of CHF 23 million, which was impaired in full in 2009, was fully repaid in 2011 resulting in a reversal of the impair- ment loss. The reversal of impairment was recognised in “Restruc- turing and impairment” in the income statement and allocated to “Corporate”, consistent with the impairment charge in 2009.02_Financial_2011_en.indd 121 20.02.2012 15:05:43
122 Clariant Annual Report 2011 Taxes (continued) The movement of the net deferred tax balance is as follows: CHF mn PPE and Retirement Tax losses Other Total Thereof offset Total intangible benefit and accruals with deferred assets obligations tax credits and tax assets provisions within the same jurisdiction Deferred tax assets at 1 January 2010 31 52 36 106 225 – 150 75 Deferred tax liabilities at 1 January 2010 – 228 – 1 – – 33 – 262 150 – 112 Net deferred tax balance at 1 January 2010 – 197 51 36 73 – 37 – – 37 Charged/credited to income 8 4 77 – 18 71 Exchange rate differences 21 – 6 – 13 – 2 – Net deferred tax balance at 31 December 2010 – 168 49 100 53 34 Deferred tax assets at 31 December 2010 35 50 100 97 282 – 163 119 Deferred tax liabilities at 31 December 2010 – 203 – 1 – – 44 – 248 163 – 85 Net deferred tax balance at 31 December 2010 – 168 49 100 53 34 – 34 At January 1 2011 – 168 49 100 53 34 – 34 Charged/credited to income 12 – 1 69 1 81 Effect of business combinations (see note 24) – 225 23 22 – 50 – 230 Exchange rate differences 20 – 2 – 1 1 18 Net deferred tax balance at 31 December 2011 – 361 69 190 5 – 97 Deferred tax assets at 31 December 2011 41 69 190 140 440 – 248 192 Deferred tax liabilities at 31 December 2011 – 402 – – – 135 – 537 248 – 289 Net deferred tax balance at 31 December 2011 – 361 69 190 5 – 97 – – 97 Of the deferred tax assets capitalized on tax losses, CHF 9 million Deferred income tax liabilities have not been established for the refer to tax losses of the French subsidiaries (2010: CHF 22 million), withholding tax and other taxes that would be payable on the unre- CHF 10 million to tax losses of the Italian subsidiaries (2010: CHF 16 mitted earnings of certain foreign subsidiaries, as such amounts million), CHF 77 million to tax losses of the US subsidiaries (2010: are currently regarded as permanently reinvested. These unremit- CHF 26 million) and CHF 57 million to the tax losses of the Süd- ted earnings totalled CHF 2 234 million at the end of 2011 (2010: Chemie Group acquired in 2011. Clariant considers it highly prob- CHF 1 599 million). able that these tax losses can be recovered. The tax losses on which no deferred tax assets are recognized are The total of temporary differences on investments in subsidiaries, reviewed for recoverability at each balance sheet date. The larg- for which no deferred taxes were calculated, was CHF 1 021 million est part of these tax losses arose in Switzerland (with a weighted at 31 December 2011 (CHF 390 million at 31 December 2010). average tax rate of 14.6 percent) and in the United States (with a tax rate of 39.9 percent). At present their recoverability cannot be reliably assessed.02_Financial_2011_en.indd 122 20.02.2012 15:05:43
financial report 123 Notes to the Consolidated Financial statements Tax losses on which no deferred tax assets were recognized are 11. Trade receivables as follows: CHF mn 31.12.2011 31.12.2010 CHF mn 31.12.2011 31.12.2010 Gross accounts receivable – trade 1 162 1 018 Expiry by: Gross accounts receivable – associates 13 10 2011 6 and joint ventures 2012 14 4 Less: provision for impairment 2013 1 1 of accounts receivable – 41 – 43 2014 3 5 Total trade receivables – net 1 134 985 2015 19 After 2015 (2010: after 2014) 703 687 The following summarizes the movement in the provision for Total 740 703 doubtful accounts receivable: CHF mn 31.12.2011 31.12.2010 CHF mn 2011 2010 Unrecognized tax credits 20 47 At 1 January – 43 – 54 Charged to the income statement – 10 – 18 The tax credits in the amount of CHF 2 million expire between Amounts used 6 11 2012 and 2015 (2010: the tax credits in the amount of CHF 12 mil- Acquired in business combinations – 3 lion expire between 2011 and 2014). The remaining tax credits of Unused amounts reversed 6 12 CHF 18 million expire in and after 2016 (2010: the remaining tax Exchange rate differences 3 6 credits of CHF 35 million expire in and after 2015). At 31 December – 41 – 43 Of the provision for impairment the following amounts concerned 10. Inventories trade receivables that were individually impaired: CHF mn 31.12.2011 31.12.2010 CHF mn 31.12.2011 31.12.2010 Raw material, consumables, 493 329 Trade receivables aged up – 3 – 7 work in progress to six months Finished products 658 471 Trade receivables aged over six months – 28 – 29 Total 1 151 800 Total trade receivables – net – 31 – 36 CHF mn 2011 2010 There is no concentration of credit risk with respect to trade receiv- Movements in write-downs ables, as the Group has a large number of internationally dispersed of inventories customers. Beginning of the year 38 65 Additions 28 38 The Group recognizes the impairment of trade receivables in “Sell- Reversals – 31 – 60 ing, general and administrative costs” in the income statement. Exchange rate differences – 2 – 5 End of the year 33 38 The amount recognized in the books for trade receivables is equal to their fair value. As at 31 December 2011, inventories in the amount of CHF 15 mil- Collaterals are only required in rare cases (2011: 5 Mio. CHF, 2010: lion were pledged as collateral for liabilities (2010: CHF 15 million). 6 Mio. CHF). The cost for raw materials and consumables recognized as an expense and included in “costs of goods sold” amounted to CHF 3 347 million (2010: CHF 3 246 million).02_Financial_2011_en.indd 123 20.02.2012 15:05:44
124 Clariant Annual Report 2011 Trade receivables (continued) 12. Other current assets The maximum credit risk on trade receivables is equal to their fair Other current assets include the following: value. Collaterals are only taken in rare cases (2011: CHF 5 million, 2010: CHF 6 million). CHF mn 31.12.2011 31.12.2010 Other receivables 258 192 The carrying amounts of the Group’s trade receivables are denomi- Current financial assets 32 46 nated in the following currencies: Prepaid expenses and accrued income 51 26 Total 341 264 CHF mn 31.12.2011 31.12.2010 Currency Other receivables include staff loans, advances, advance pay- CHF 14 5 ments, VAT and sales tax receivables. EUR 456 435 USD 278 221 Current financial assets include securities and loans to third parties JPY 72 57 which are classified as available for sale. BRL 65 58 CNY 58 35 The amount recognized in the books for other current assets is INR 1 22 equal to their fair value. Other 190 152 Total trade receivables – net 1 134 985 The maximum exposure to credit risk of other current assets at the reporting date is their fair value. As of 31 December 2011, trade receivables in the amount of CHF 135 million (2010: CHF 83 million) were past due, but not impaired. There was no impairment of current financial assets in 2011 and These relate to a number of customers for whom there is no recent 2010. history of default. The ageing analysis of these trade receivables is as follows: Other receivables are denominated in the following currencies: CHF mn 31.12.2011 31.12.2010 CHF mn 31.12.2011 31.12.2010 Up to three months past due, 123 78 CHF 8 4 but not impaired EUR 88 78 Three to six months past due, 8 2 USD 20 11 but not impaired JPY 22 14 More than six months past due, BRL 21 24 but not impaired 4 3 CNY 20 8 Total trade receivables – net 135 83 INR 7 8 Other 72 45 Total 258 192 Current financial assets are denominated in the following currencies: CHF mn 31.12.2011 31.12.2010 CHF 4 4 EUR 18 14 BRL 1 INR 2 – JPY 1 USD 1 Other 5 28 Total 32 4602_Financial_2011_en.indd 124 20.02.2012 15:05:44
financial report 125 Notes to the Consolidated Financial statements 13. Near cash assets 14. Cash and cash equivalents Near cash assets include the short term deposits with an original CHF mn 31.12.2011 31.12.2010 maturity between 90 and 365 days. Cash at bank and on hand 510 583 Short-term bank deposits 689 133 Near cash assets are denominated in the following currencies: Total 1 199 716 CHF mn 31.12.2011 31.12.2010 The effective interest rate on short-term bank deposits in Swiss CHF 640 francs was 0.31 percent (2010: 0.22 percent); these deposits have EUR 63 an average maturity of 44 days (2010: 45 days). GBP 34 – Other 1 – The effective interest rate on short-term bank deposits in euro was Total 35 703 1.09 percent (2010: 0.59 percent); these deposits have an average maturity of 30 days (2010: 79 days). There were no near cash assets as of 1 January 2010. There were no material short-term bank deposits denominated in currencies other than the Swiss franc and the Euro. The maximum exposure to credit risk on cash and cash equivalents is equal to their book value. Cash and cash equivalents are denominated in the following currencies: CHF mn 31.12.2011 31.12.2010 CHF 398 163 EUR 439 225 USD 121 134 JPY 6 5 BRL 10 15 CNY 21 18 INR 49 41 Other 155 115 Total 1 199 71602_Financial_2011_en.indd 125 20.02.2012 15:05:44
126 Clariant Annual Report 2011 15. Changes in share capital and treasury shares Registered shares each with a par value Number of shares Par value Number of shares Par value of CHF 4.00 (2010: CHF 4.00) 2011 2011 2010 2010 CHF mn CHF mn At 1 January 230 160 000 921 230 160 000 921 Capital increase 65 592 254 262 – – At 31 December 295 752 254 1183 230 160 000 921 Treasury shares – 12 622 649 – 51 – 9 002 210 – 36 Outstanding capital at 31 December 283 129 605 1 132 221 157 790 885 Treasury shares (number of shares) 2 011 2 010 Holdings at 1 January 9 002 210 4 269 387 Shares purchased at fair market value 3 440 953 5 320 084 Shares purchased on exercise of put options 1 200 000 – Shares sold at fair market value – 174 000 – Shares transferred to employees – 846 514 – 587 261 Holdings at 31 December 12 622 649 9 002 210 All shares are duly authorized and fully paid in. These percentage figures are based on information received from the respective shareholders. At 31 December 2011 former Dividends are paid out when declared and are paid out equally on shareholders of Süd-Chemie AG, who had exchanged their shares all shares, excluding treasury shares. against Clariant shares, were holding in total 15.127 percent of the share capital of Clariant. These shareholders are affiliated In accordance with article 5 of the company’s Articles of Incorpora- with each other for family or other reasons. In addition, the fol- tion, no limitations exist with regard to the registration of shares lowing shareholders held a participation of 3 percent or more which are acquired in one’s own name and on one’s own account. of the total share capital: Fidelity Management & Research, Special rules exist for nominees. Boston (United States), 5.23 percent (2010: 5.23 percent); Teachers Insurance and Annuity Association of America – Col- In accordance with article 12 of the company’s Articles of Incor- lege Retirement Equity Fund (TIAA-CREF), New York (United poration, each share has the right to one vote. A shareholder can States), 3.097 percent (2010: < 3 percent); CS Asset Manage- only vote for his own shares and for represented shares, up to ment Funds AG, Zürich (Switzerland), 3.0184 percent (2010: a maximum of 10 percent of the total share capital. 3.04 percent). No other shareholder was registered as holding 3 percent or more of the total share capital. At 31 December 2010 the following shareholders held a participation of 3 percent or more of the total share capital: AXA, Paris (France), 5.09 percent; Amundi, Paris (France), 3.07 percent. No other shareholder was registered as holding 3 percent or more of the total share capital. Increase in share capital On 31 March 2011, the Annual General Meeting of Clariant AG approved a capital increase, as a result of which in April 2011 Clariant AG issued 65 591 085 newly registered shares with a nominal value of CHF 4.00 each (the new shares). The purpose of this share capital increase was to finance the acquisi- tion of Süd-Chemie.02_Financial_2011_en.indd 126 20.02.2012 15:05:44
financial report 127 Notes to the Consolidated Financial statements The new shares result from a two-tranche capital increase out of existing authorized capital of the Company. The first tranche consists of 42 575 085 new shares (the exchange shares) issued in connection with the completion of the acquisition of Süd-Chemie in consideration for the contribution in kind of 4 816 187 bearer shares in Süd-Chemie AG (see note 24). The second tranche consists of 23 016 000 new shares (the rights issue) issued at a subscription price of CHF 16.00 per share. This issuance of the new shares increased the share capital of Clariant AG by CHF 262 million. The share premium reserve increased by CHF 849 million, net of costs of CHF 13 million incurred in connection with the capital increase. In addition to the above mentioned increase in the share capital, in July 2011, Clariant AG issued 1169 newly registered shares for the conversion of two convertible bonds. Non-controlling interest. In 2011, the Group increased its stake in Masterbatches producer Colex Spolka z o.o in Poland to 100 percent by purchasing the remaining non-controlling interests with the carrying amount of less than CHF 1 million, at a purchase consideration of CHF 11 million. Also, the Group purchased an addi- tional 3.85 percent stake in the Süd-Chemie Group subsequent to the business combination, with the carrying amount of CHF 31 mil- lion, for a purchase consideration of CHF 72 million (see note 24). The excess consideration paid to acquire the non-controlling inter- est over its carrying amount is recognized directly in equity.02_Financial_2011_en.indd 127 20.02.2012 15:05:44
128 Clariant Annual Report 2011 16. Non-current financial debts CHF mn Interest rate Term Notional Net amount Net amount in % amount 31.12.2011 31.12.2010 Straight bond 3.125 2007 – 2012 250 CHF mn 250 250 Straight bond 4.375 2006 – 2013 600 EUR mn 716 736 Certificate of indebtedness mixed 2008 – 2011 100 EUR mn 125 Convertible bond 3.000 2009 – 2014 300 CHF mn 279 271 Straight bonds 2.750 2011 – 2015 200 CHF mn 199 Straight bond 3.125 2011 – 2017 100 CHF mn 99 Certificate of indebtedness mixed 2011 – 2014 242 EUR mn 294 Certificate of indebtedness mixed 2011 – 2016 123 EUR mn 150 Total straight bonds and certificates of indebtedness 1 987 1 382 Liabilities to banks and other financial institutions 1 87 39 Obligations under finance leases 11 9 Subtotal 2 085 1 430 Less: current portion – 250 – 125 Total 1 835 1 305 The value of the liability part of the convertible bond recognized in the balance sheet is calculated as follows: Face value 300 300 Equity component – 31 – 31 Liability component on initial recognition on 2 July 2009 269 269 Transaction cost – 4 – 5 Interest expense 32 16 Interest paid – 18 – 9 Total 279 271 Breakdown by maturity 2012 – 250 2013 803 775 2014 576 271 2015 201 2016 150 after 2016 (2010: after 2014) 105 9 Total 1 835 1 305 Breakdown by currency CHF 618 521 EUR 1 173 780 Other 44 4 Total 1 835 1 305 Fair value comparison (including current portion) Straight bonds 1 281 1 018 Certificates of indebtedness 444 125 Convertible bond 350 617 Others 99 47 Total 2 174 1 807 Total net book value of assets pledged as collateral for financial debts 44 40 Total collateralized financial debts 9 13 1 hereof non interest bearing foreign exchange contracts with negative fair value of CHF 41 million (2010: CHF 37 million). Average interest rate on the interest bearing part of the liabilities in 2011: T 1.72 percent (Japan, Pakistan, Turkey) (2010: 8.73 percent – Pakistan, GB and Germany).02_Financial_2011_en.indd 128 20.02.2012 15:05:44
financial report 129 Notes to the Consolidated Financial statements In March 2011, Clariant signed an acquisition term loan facil- The value of the liability component and the equity component of ity with a group of seven banks amounting to CHF 1 120 million. the convertible bond was determined at the issuance of the bond. The initial term of the facility is one year from 21 April 2011 with The fair value of the liability component, included in the non-cur- an extension option of another year. Any drawdowns from this rent borrowings, was calculated using a market rate of interest for facility were intended to be utilized for the partial financing of the an equivalent bond without conversion rights. The residual amount, acquisition of Süd-Chemie (see note 24). In 2011, CHF 120 million representing the value of the equity conversion option, is included and CHF 400 million were withdrawn under this facility, of which in shareholder’s equity in share premium reserve. CHF 120 million was repaid subsequently during the year. CHF 400 million were still outstanding at the year-end and are classified as The fair values for the bonds and convertible bond are quoted mar- current financial debts (see note 20). Certain financial covenants ket prices as of the balance sheet date. The fair values of the other tested semi-annually were applicable for this acquisition term loan non-current financial debts, which are equal to their book value, are facility. The facility is repaid and terminated as of 30 January 2012. determined on a discounted cash flow basis. In May and June 2011, the Group launched two new bonds in the Covenants. There are no financial covenants for non-current amount of CHF 200 million and CHF 100 million with a term of 4.5 financial debts as of end of 2011. years and 6 years respectively. Exposure of the Group’s borrowings to interest rate changes In June 2011, after the acquisition of Süd-Chemie, Clariant repaid ››Bonds: the interest rates of all bonds, including the convertible a bond (US dollar private placement) worth CHF 117 million in full. bond, are fixed. Clariant also settled the accrued interest, cross currency swaps and interest payment swaps in connection with this bond. One- ››Liabilities to banks and other financial institutions: mostly time costs pertaining to this repayment amounting to CHF 16 consisting of syndicated bank loans with variable interest rates million are recognized in finance costs in the second quarter of (LIBOR plus applicable margin according to a defined pricing grid 2011. This amount includes a make-whole payment and costs based on the Group’s performance). incurred to terminate early the overlaying derivatives pertaining to this placement. ››Other financial debts: mostly current debt at variable interest rates. In October 2011, a certificate of indebtedness with a nominal amount of EUR 100 million was paid back. Including accrued inter- ››Certificate of Indebtedness of EUR 242 million with a fixed est the repayment amounted to CHF 124 million. interest rate of 3.740 percent and a floating interest rate of 3.783 percent. Using interest rate swaps, the floating interest rate was In October 2011, the Group issued two certificates of indebtedness swapped to a fixed rate. in the German market amounting to EUR 365 million. The two cer- tificates have a term of three years (EUR 242 million) and 4.5 years ››Certificate of Indebtedness of EUR 123 million with a fixed (EUR 123 million) each with fix and float coupons. The interest to interest rate of 4.24 percent and a floating interest rate of 3.983 be paid for the certificates of indebtedness is based on six months percent. Using interest rate swaps, the floating interest rate was Euribor (variable tranche) or mid-swap (fixed tranche), respectively, swapped to a fixed rate. plus a credit margin premium (spread). Collateral. Certain Asian subsidiaries pledge trade receivables In December 2011, Clariant cancelled Süd-Chemie’s syndicated and inventories as a security for bank overdraft facilities. In case multicurrency revolving credit facility after repayment of the the subsidiaries default on their obligations, the borrowers have the amount of EUR 183 million (including accrued interests) drawn right to take possession of these assets and receive the cash flows under this facility. resulting from them. Valuation. Non-current financial debt is recognized initially at fair The assets are pledged at the usual market conditions. value, net of transaction costs incurred. Financial debt is subse- quently stated at amortized cost. There are no long-term financial liabilities valued at fair value through profit and loss.02_Financial_2011_en.indd 129 20.02.2012 15:05:44
130 Clariant Annual Report 2011 17. Retirement benefit obligations In the US Clariant operates a defined benefit pension plan that is a funded plan covering the pension liabilities of employ- Apart from the legally required social security schemes, the Group ees who joined the company before 31 December 2000. Staff has numerous independent pension plans. The assets are princi- members who joined after this date are covered by a defined pally held externally. For certain Group companies however, no contribution plan. For members of management whose annual independent assets exist for the pension and other non-current salaries exceed the amount of USD 245 000 an additional pen- employee benefit obligations. In these cases the related liability is sion scheme is in place in the form of an unfunded defined ben- included in the balance sheet as part of the non-current liabilities. efit obligation, which covers the part exceeding this amount. Defined benefit post-employment plans. Defined benefit In Switzerland Clariant operates a funded defined benefit pen- pensions and termination plans cover the majority of the Group’s sion plan that covers the pension liabilities of all employees of the employees. Future obligations and the corresponding assets of Swiss Clariant companies up to a salary level of CHF 200 000. those plans considered as defined benefit plans under IAS 19 are reappraised annually and reassessed at least every three years by For members of management whose annual salaries exceed this independent actuaries. Assets are valued at fair value. US employ- amount, an additional pension scheme is in place in the form of ees transferred to Clariant with the Hoechst Specialty Chemicals a funded defined benefit obligation. business remain insured with Hoechst for their pension claims incurred prior to 30 June 1997. Any shortfalls in funded provisions for pension commitments to members of the Executive Committee are accounted for as an The largest defined benefit plans are operated in Switzerland, UK, unfunded defined benefit obligation. US and Germany. These plans make up more than 90 percent of the total defined benefit obligation. In addition, in 2011, Clariant acquired the Süd-Chemie group (see note 24) with the most important pension plans in Germany and The German plan is unfunded and covers the supplementary pen- the US. sion liabilities for plan members whose salaries exceed the level of the German mandatory social security coverage. All other pen- Post-employment medical benefits. The Group operates a sion liabilities regarding German staff members are covered by a number of post-employment medical benefit schemes in the USA, funded multi-employer plan which is accounted for as a defined Canada and France. The method of accounting for the liabilities contribution plan. associated with these plans is largely equal to the one used for defined benefit pension schemes. These plans are not externally The defined benefit obligation in UK is a funded plan covering the funded, but are recognized as provisions in the balance sheets of pension liabilities of UK employees who joined the company before the Group companies concerned. 31 December 2003. Staff members who joined after this date are covered by a defined contribution plan. Expenses for net benefits are recorded in the same line and func- tion in which the personnel costs are recorded.02_Financial_2011_en.indd 130 20.02.2012 15:05:44
financial report 131 Notes to the Consolidated Financial statements Changes in the present value of defined benefit obligations: CHF mn Pension plans Post-employment (funded and unfunded) medical benefits (unfunded) 2011 2010 2011 2010 Beginning of the year 1 959 1 933 78 78 Current service costs 44 61 1 2 Interest costs on obligation 81 84 4 4 Contributions to plan by employees 14 13 Benefits paid out to personnel in reporting period – 106 – 104 – 3 – 4 Actuarial losses/gains of reporting period 40 112 2 8 Past service costs of reporting period 1 2 Liabilities acquired in a business combination (see note 24) 158 7 Termination benefits 2 Effect of curtailments 1 – Effect of settlements – 5 – 1 Exchange rate differences – 12 – 139 – 9 End of the year 2 180 1 959 89 78 Changes in the fair value of plan assets: CHF mn 2011 2010 Beginning of the year 1 475 1 461 Assets acquired in business combinations (see note 24) 60 Expected return on plan assets 72 73 Contributions to plan by employees 14 13 Contributions to plan by employer 56 55 Benefits paid out to personnel in reporting period – 83 – 85 Actuarial gain/loss of the reporting period – 56 32 Effect of settlements – 3 Exchange rate differences 6 – 71 End of the year 1 544 1 475 The Group expects to contribute CHF 95 million to its defined ben- efit pension plans in 2012. As at 31 December 2011 and 2010, the pension plan assets included no directly held registered shares or bonds issued by the Company.02_Financial_2011_en.indd 131 20.02.2012 15:05:45
132 Clariant Annual Report 2011 Retirement benefit obligations (continued) The amounts recognized in the balance sheet: CHF mn Defined benefit Post-employment Total pension plans medical benefits 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 Present value of funded obligations – 1 742 – 1 569 – 1 742 – 1 569 Fair value of plan assets 1 544 1 475 1 544 1 475 Deficit/surplus – 198 – 94 – – – 198 – 94 Present value of unfunded obligations – 438 – 390 – 89 – 78 – 527 – 468 Unrecognized actuarial losses (gains) 336 250 2 2 338 252 Unrecognized past service costs (gains) – – – 1 – – 1 Net liabilities in the balance sheet – 300 – 234 – 87 – 77 – 387 – 311 Thereof recognized in: CHF mn 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 Retirement benefit obligation – 439 – 351 – 87 – 77 – 526 – 428 Prepaid pension assets 139 117 139 117 Net liabilities in the balance sheet for defined benefit plans – 300 – 234 – 87 – 77 – 387 – 311 The amounts recognized in the income statement are as follows: CHF mn 2011 2010 2011 2010 2011 2010 Current service costs – 44 – 61 – 1 – 2 – 45 – 63 Interest costs – 81 – 84 – 4 – 4 – 85 – 88 Expected return on plan assets 72 73 72 73 Net actuarial gains/losses recognized in the 1 – 14 – 2 – 1 – 14 current year Past service costs recognized in the current year – 1 1 3 – 3 Termination benefits – 2 – – 2 Effect of curtailments – 1 – 1 – Effect of settlements 1 1 – 2 Total expenses – 54 – 87 – 6 – 2 – 60 – 89 CHF mn 2011 2 010 2011 2010 2011 2010 Actual return on plan assets 16 105 – – 16 10502_Financial_2011_en.indd 132 20.02.2012 15:05:45
financial report 133 Notes to the Consolidated Financial statements Reconciliation to prepaid pension asset and retirement benefit obli- gations reported in the balance sheet: CHF mn 31.12.2011 31.12.2010 Defined benefit obligation – 526 – 428 Defined contribution obligation – 12 – 15 Retirement benefit obligation – 538 – 443 Prepaid pension plan asset 139 117 Net retirement benefit obligation recognized – 399 – 326 The major categories of plan assets as a percentage of total plan assets: 31.12.2011 31.12.2010 % % Equities 31 31 Bonds 39 34 Cash 6 6 Property 16 16 Alternative investments 8 13 The principal actuarial assumptions at balance sheet date in percent: 2011 2010 % % Group Most important countries Group Most important countries Weighted Switzer- United United Germany Weighted Switzer- United United Germany average land Kingdom States average land Kingdom States Discount rate 3.9 2.8 4.8 4.8 4.9 4.0 2.8 5.5 5.4 4.8 Expected return on plan assets 4.6 3.8 4.7 7.5 – 4.8 3.8 6.0 7.5 – Expected inflation rate 1.7 0.5 3.1 2.8 2.0 1.7 0.5 3.6 3.0 2.0 Future salary increases 2.9 2.0 4.4 4.0 2.5 2.9 2.0 4.9 4.0 2.5 Long-term increase in health care costs 8.2 – – 8.9 – 8.8 – – 10.0 – Current average life expectancy in years 17 19 21 19 18 17 18 22 18 18 for a 65 year old male Current average life expectancy in years 21 21 24 20 23 20 21 24 20 22 for a 65 year old female02_Financial_2011_en.indd 133 20.02.2012 15:05:45
134 Clariant Annual Report 2011 Retirement benefit obligations (continued) cal actual returns on the Group’s plan assets. Using this reference information, the Group develops for each pension plan a weighted The weighted average expected long-term rate of return on plan average expected long-term rate of return. assets represents the average rate of return expected to be earned on plan assets over the period the benefits included in the benefit A one percentage point change in health care cost trend rates obligation are to be paid. In developing the expected rate of return, would have the following effects on the obligation for post- the Group considers long-term compound annualized returns of employment medical benefits: historical market data for each asset category, as well as histori- CHF mn One percentage One percentage point increase point decrease Effect on the aggregate of the service cost and interest costs 1 – 1 Effect on defined benefit obligation 7 – 6 Amounts for current and previous periods: Defined benefit pension plans 2011 2010 2009 2008 2007 CHF mn Defined benefit obligation for pension plans, – 2 180 – 1 959 – 1 933 – 1 765 – 2 012 funded and unfunded Fair value of plan assets 1 544 1 475 1 461 1 294 1 743 Deficit – 636 – 484 – 472 – 471 – 269 Experience adjustments on plan liabilities – 1 8 25 27 – 23 Experience adjustments on plan assets – 56 32 95 – 394 – 24 Post-employment medical benefits 2011 2010 2009 2008 2007 CHF mn Defined benefit obligation for post-employment – 89 – 78 – 78 – 80 – 88 medical plans Experience adjustments on plan liabilities 2 1 – 7 – 2 – 2 Defined contribution post-employment plans. In 2011, CHF and former employees of other companies which are members of 27 million were charged to the income statements of the Group the same pension plan. There is no consistent or reliable basis for companies as contributions to defined contribution plans (2010: CHF allocating the obligation, plan assets and cost to individual compa- 28 million). nies participating in the plan. In Germany, approximately 6 700 Clariant employees are insured Based on the statutory actuarial calculation of 2010, the pension in a defined benefit plan which is a multi-employer plan and as fund’s obligations are fully funded. Also for 2011 it is anticipated such is accounted for as a defined contribution plan. The reason for that the pension plan liabilities are covered by the respective assets. this accounting practice is that the plan exposes the participating Clariant companies to actuarial risks associated with the current02_Financial_2011_en.indd 134 20.02.2012 15:05:45
financial report 135 Notes to the Consolidated Financial statements In case the multi-employer plan faces a situation where the pen- Clariant contributions to this pension plan amounted to CHF 12 mil- sion plan liabilities exceed the assets, this can be remedied either lion in 2011 (CHF 15 million in 2010) . by increasing the employer’s contributions to the pension plan or by reducing the benefits which are paid out to the entitled par- The multi-employer plan originates in the pension plan scheme ties. In the case of a reduction of the benefits it has to be verified of the German companies of the former Hoechst Group, to which whether this triggers the requirement for additional funding by the a part of the activities of Clariant pertained until 1997. Several of employer. The decision is at the discretion of the board of the pen- the companies which were formerly part of the Hoechst Group con- sion fund, which is constituted by representatives of the compa- tinue to participate in this multi-employer plan. nies participating in the multi-employer plan and their employee representatives. 18. Movements in provisions CHF mn Environmental Personnel Restructuring Other Total Total provisions provisions provisions provisions provisions provisions 2011 2010 At 1 January 120 139 261 110 630 636 Additions 13 124 160 36 333 534 Effect of business combinations (see note 24) 15 1 6 22 – Amounts used – 15 – 118 – 155 – 32 – 320 – 433 Unused amounts reversed – 2 – 3 – 20 – 21 – 46 – 54 Changes due to the passage of time 4 1 1 6 8 and changes in discount rates Exchange rate differences – 3 – 6 – 4 – 6 – 19 – 61 At 31 December 132 138 242 94 606 630 Of which – Current portion 30 109 186 39 364 310 – Non-current portion 102 29 56 55 242 320 Total provision 132 138 242 94 606 630 Expected outflow of resources Within one year 30 109 186 39 364 310 Between one and three years 56 22 53 27 158 223 Between three and five years 22 2 3 5 32 42 Over five years 24 5 – 23 52 55 Total provision 132 138 242 94 606 630 Environmental provisions. Provisions for environmental li il ab i The material components of the environmental provisions consist ties are made when there is a legal or constructive obligation for of the costs to fully clean and refurbish contaminated sites and to the Group which will result in an outflow of economic resources. treat and contain contamination at sites where the environmental It is difficult to estimate the action required by Clariant in the exposure is less severe. The Group’s future remediation expenses future to correct the effects on the environment of prior disposal or are affected by a number of uncertainties which include, but are release of chemical substances by Clariant or other parties and the not limited to, the method and extent of remediation and the per- associated costs, pursuant to environmental laws and regulations. centage of material attributable to Clariant at the remediation sites relative to that attributable to other parties.02_Financial_2011_en.indd 135 20.02.2012 15:05:45
136 Clariant Annual Report 2011 Movements in provisions (continued) restructuring provisions newly added in 2011 concern site clo- sures and headcount reductions in various countries with the The environmental provisions reported in the balance sheet con- largest amounts incurred in Germany, Switzerland, France and cern a number of different obligations, mainly in Switzerland, the the United States. For more information regarding the restructur- United States, Germany, Brazil and Italy. ing measures see also note 25. Provisions are made for remedial work where there is an obligation Other provisions. Other provisions include provisions for obliga- to remedy environmental damage, as well as for containment work tions relating to tax and legal cases and other items in various coun- where required by environmental regulations. All provisions relate tries and/or for which the amount can only be reliably estimated. to environmental liabilities arising in connection with activities that occurred prior to the date when Clariant took control of the relevant All non-current provisions are discounted to reflect the time value of site. At each balance sheet date, Clariant critically reviews all pro- money where material. Discount rates reflect current market assess- visions and makes adjustments where required. ments of the time value of money and the risk specific to the provi- sions in the respective countries. Personnel provisions. Personnel provisions include holiday en i t tlements, compensated absences such as sabbatical leave, jubilee, annual leave or other long-service benefits, profit sharing and bonuses. Such provisions are established in proportion to the ser- vices rendered by the employee concerned. Restructuring provisions. Restructuring provisions are estab- lished where there is a legal or constructive obligation for the Group that will result in the outflow of economic resources. The term restructuring refers to the activities that have as a conse- quence staff redundancies and the shutdown of production lines or entire sites. When the Group has approved a formal plan and has either started to implement the plan or announced its main features to the public, a restructuring provision is created. The02_Financial_2011_en.indd 136 20.02.2012 15:05:45
financial report 137 Notes to the Consolidated Financial statements 19. Trade and other payables CHF mn 31.12.2011 31.12.2010 Trade payables 782 622 Payables to associates and joint ventures 61 31 Accruals 292 361 Other payables 190 156 Total 1 325 1 170 The amount recognized for trade payables is equal to their fair value. 20. Current financial debts CHF mn 31.12.2011 31.12.2010 Banks and other financial institutions 889 107 Obligation to purchase Clariant Ltd shares – 8 Current portion of non-current financial debts 250 125 Total 1 139 240 Breakdown by maturity: CHF mn 31.12.2011 31.12.2010 Up to three months after the balance sheet date 824 107 Three to six months after the balance sheet date 296 3 Six to twelve months after the balance sheet date 19 130 Total 1 139 240 Current financial debt is recognized initially at fair value, net of In 2010, an obligation to purchase Clariant Ltd shares arose on transaction costs incurred. Financial debt is subsequently stated at written put options that cover 500 000 shares of Clariant Ltd with amortized cost. There are no current financial liabilities valued at a strike price of CHF 17.00. A corresponding effect of these fair value through profit and loss. options was recognised in shareholders’ equity (see note 1.23) in the year 2010. In 2011, CHF 120 milllion and CHF 400 million have been drawn under the acquisition term loan facility, of which CHF 120 million The fair value of current financial debt other than the current por- was repaid subsequently during the year (see Note 16). CHF 400 tion of non-current financial debt approximates its carrying amount million, which was outstanding at the year-end, is included in the due to the short-term nature of these instruments. current debts from bank and other financial institutions. Certain financial covenants tested semi-annually were applicable for this acquisition term loan facility. The facility is canceled and termi- nated as of 30 January 2012.02_Financial_2011_en.indd 137 20.02.2012 15:05:45
138 Clariant Annual Report 2011 21. Segment information Segment assets consist of property, plant and equipment, good- will, intangible assets, inventories, receivables and investments Intersegment transactions are entered into under the normal cir- in associates. They exclude deferred tax assets, financial assets cumstances and terms and conditions that would also be available and operating cash. Segment liabilities comprise trade payables. to unrelated third parties. They exclude items such as tax liabilities, provisions, pension SEGMENTS Industrial & Con- Masterbatches Pigments Functional CHF mn sumer Specialities Materials 1 2011 2010 2011 2010 2011 2010 2011 2010 Segment sales 1 479 1 544 1 124 1 260 988 1 191 456 Sales to other segments – 6 – 18 – – – 15 – 23 – Total sales 1 473 1 526 1 124 1 260 973 1 168 456 Operating expenses – 1 268 – 1 325 – 1 022 – 1 141 – 809 – 974 – 430 Income from associates and joint ventures 10 5 – 1 20 8 6 Gain from the disposal of subsidiaries and associates – – – – – 1 – Restructuring and impairment – 3 – 25 – 4 – 16 – 22 – 63 – 1 Operating income 212 181 98 104 162 140 31 Finance income Finance costs Income before taxes Taxes Net income Segment assets 856 719 560 570 757 738 1 077 Segment liabilities – 159 – 154 – 87 – 88 – 71 – 79 – 74 Net operating assets 697 565 473 482 686 659 1 003 Corporate assets without cash Corporate liabilities without financial liabilities Net debts 4 Total net assets 697 565 473 482 686 659 1 003 Thereof: Investments in PPE and intangibles for the period 97 72 31 25 34 26 18 Investments in associates and joint ventures 54 46 2 2 138 136 158 Operating income 212 181 98 104 162 140 31 Add: systematic depreciation of PPE 35 37 26 29 25 34 19 Add: impairment 5 12 2 5 6 30 1 Add: amortization of intangible assets 1 – 1 2 1 – 8 EBITDA 3 253 230 127 140 194 204 59 Add: restructuring and impairment 3 25 4 16 22 63 1 Less: impairment (Reported under restructuring and impairment) – 5 – 12 – 2 – 5 – 6 – 30 – 1 Less: gain from the disposal of subsidiaries and associates – – – – – – 1 – Add: Additional charge to COGS as a result of the sale of Süd-Chemie inventories revalued to fair value less cost to sell EBITDA before restructuring and disposals 251 243 129 151 210 236 59 Operating income 212 181 98 104 162 140 31 Add: restructuring and impairment 3 25 4 16 22 63 1 Less: gain from the disposal of subsidiaries and associates – – – – – – 1 – Add: Additional charge to COGS as a result of the sale of Süd-Chemie inventories revalued to fair value less cost to sell Operating income before restructuring, impairment and disposals 215 206 102 120 184 202 32 1 he segments “Catalysis & Energy” and “Functional Materials” represent the activities of T 4 Süd-Chemie, consolidated for May to December 2011. Calculation of net debt 31.12.2011 31.12.2010 2 erformance Chemicals includes all other business units namely, Additives, P CHF mn Detergents & Intermediates, Emulsions and Paper Specialties. 3 BITDA is earning before interest, tax, depreciation and amortization. E Non-current financial debt 1 835 1 305 Add: current financial debt 1 139 240 Less: cash and cash equivalents – 1 199 – 716 Less: Near cash assets – 35 – 703 Net debt 1 740 12602_Financial_2011_en.indd 138 20.02.2012 15:05:46
140 Clariant Annual Report 2011 Segment information (continued) Geographic information Sales 1 Non-current assets 2 CHF mn 2011 2010 2011 2010 EMEA 3 671 3 529 3 345 1 447 of which Germany 1 039 996 2 303 741 of which Switzerland 95 110 177 189 of which MEA 642 552 78 49 North America 958 860 807 152 of which USA 848 777 730 146 Latin America 1 144 1 199 323 319 of which Brazil 535 579 199 211 Asia / Pacific 1 597 1 532 372 262 of which China 442 424 151 119 of which India 170 205 29 33 Total 7 370 7 120 4 847 2 180 1 llocated by region of third-party sales destination. A 2 on-current assets exclude deferred tax assets and pension plan assets. N All of the Group’s segments generate their revenues to the larg- Other Disposals: On 10 June 2011, the Group sold a building in est extent from the sale of products. These come in such a great Tsuen Wan, Hong Kong, for a sale consideration of CHF 17.4 million. variety that a meaningful grouping below the segment information The sale transaction resulted in a gain of CHF 16.9 million, recog- is not possible. nized in “Selling, general and administrative costs” in Corporate in the income statement in 2011. 22. Discontinued operations On 9 December 2011, Clariant sold land and building in Onsan, and assets held for sale South Korea, for a sale consideration of CHF 24 million. The sales transaction resulted in a gain of CHF 17 million, recognized in “Sell- D uring the years 2011 and 2010 there were no discontinued ing, general and administrative costs” in Pigments in the income operations. statement in 2011. Assets held for sale in the amount of CHF 2 million as at 31 December 2011 refer to land in the US pertaining to Corporate. The sale transaction for the land in the United States is expected to be completed in 2012. Assets held for sale in the amount of CHF 11 million as at 31 December 2010 refer to land in India and land in the US pertain- ing to Corporate. The land in India was sold on 1 February 2011 for a sale consideration of CHF 51 million. This sale transaction resulted in a gain of CHF 43 million, which is recognized in “Selling, general and administrative costs” in the income statement in 2011.03_Financial_2011_en.indd 140 20.02.2012 15:05:22
financial report 141 Notes to the Consolidated Financial statements 23. Disposal of activities not qualifying On 4 January 2010 Clariant India sold the business of diketene and as discontinued operations downstream intermediate products at Balkum site pertaining to the business unit Pigments. In this section, disposals of subsidiaries, associates and activities are reported that do not qualify as discontinued operations in the sense The net cash flow of 2010 reported in this note also includes the of IFRS 5. The following disposals took place in 2011 and 2010: remaining proceeds received from the buyer of the industrial park services in Griesheim in Germany, which were sold in 2009. On 4 October 2011 Clariant sold its Polysilazane coatings business pertaining to the segment Performance Chemicals. On 11 Novem- ber 2011, Clariant disposed its product range of Licomer wax emul- sions and acrylic polymer dispersions for floor-care applications pertaining to business unit Additives. Net income and cash flow from the disposal of activities 2011 2010 CHF mn Consideration for sale received 7 3 Total consideration for sale 7 3 Net assets sold including disposal-related expenses: PPE and intangibles 1 2 Inventories 1 – Net assets disposed of 2 2 Disposal related costs – – Total net assets sold including disposal-related expenses 2 2 Gain on disposals 5 1 Net cash flow 7 4 24. Business combinations With this acquisition Clariant aims to complement its portfolio with high growth businesses, less cyclicality and to gain access to new Acquisition – Süd-Chemie. On 21 April 2011, Clariant acquired attractive market segments. a 96.15 percent stake in the German-based, specialty chemicals company Süd-Chemie for an overall purchase consideration of CHF Since the acquisition date, Süd-Chemie is fully consolidated in 1 790 million. The transaction was officially announced on 16 Feb- Clariant’s financial statements. The summary of the financial ruary 2011. impact of consolidating Süd-Chemie in the accounts at the acquisi- tion date, using the provisional fair values of identified assets and Clariant acquired 11 384 093 shares in Süd-Chemie directly and liabilities is as follows. indirectly by way of a cash payment of CHF 1 034 million and by exchanging the newly issued shares of Clariant AG for those As some of the allocated values are still under assessment, this of Süd-Chemie in the ratio of 1:8.84, resulting in an amount of overview should be considered as provisional. CHF 756 million (see note 15).03_Financial_2011_en.indd 141 20.02.2012 15:05:22
142 Clariant Annual Report 2011 Business combinations (continued) CHF mn 2011 Total cash outflow for the acquisition 1 034 Purchase of shares in Süd-Chemie from the Family Shareholders against Exchange Shares (see note 15) 756 Total consideration for purchase of 96.15 percent of shares in Süd-Chemie 1 790 Recognised amounts of identifiable assets and liabilities assumed: Property plant and equipment 785 Intangible assets 482 Shareholdings in associated companies and joint ventures 334 Inventories 301 Receivables 228 Cash and cash equivalents 25 Financial debt – 646 Pension plan liabilities – 104 Other assets and liabilities – 345 Deferred tax liabilities – 227 Provisional fair value of net assets acquired – 833 Non-controlling interests (including reported non-controlling interest) 70 Goodwill 1 027 The goodwill arising from the acquisition of Süd-Chemie is attrib- If the acquisition had occurred on 1 January 2011, group sales utable to a number of factors such as future growth potential, would have been CHF 404 million higher and the net result would cost synergies and the acquired workforce. The tax deductibility have been CHF 2 million lower. of goodwill is still to be assessed. The non-controlling interest is allocated proportionately and has no goodwill allocated to it. The activities of Süd-Chemie are represented by the two new Busi- ness Units Catalysis & Energy and Functional Materials, which are For this purchase, acquisition costs of CHF 26 million, comprising included from the acquisition date onwards. M&A and legal costs and tax advisory and consulting charges, are recognized in “Selling, general and administrative costs” in the Subsequent to the acquisition of the 96.15 percent stake in Süd- year 2011. Chemie, Clariant initiated a public takeover offer to acquire the remaining 455 907 shares representing a 3.85 percent non-con- From the acquisition date up to the end of the year 2011, Süd- trolling interest in Süd-Chemie. By the end of 2011 Clariant has Chemie reported net sales of CHF 948 million and a net loss of acquired all of these shares for a total consideration of CHF 72 mil- CHF 75 million. This result includes a significant number of items lion. The excess consideration paid to acquire the non-controlling of a one time nature which were incurred in connection with the interest over its carrying amount is recognized directly in equity. takeover by Clariant. The operating result was in line with the expectations.03_Financial_2011_en.indd 142 20.02.2012 15:05:22
financial report 143 Notes to the Consolidated Financial statements Acquisition – Prairie Petro-Chem. On 1 April 2011, Clariant to the end of the year 2011 amounted to CHF 27 million and CHF 3 acquired the assets of the Canadian partnership entity Prairie Petro- million respectively. If the acquisition had occurred on 1 January Chem, a leading supplier of specialty oil and gas production, drill- 2011, group sales would have been CHF 54 million higher and net ing and industrial chemicals. With this acquisition, Clariant aims to profit would have been around CHF 1 million higher. enhance its presence in Bakken Shale, positioned to be one of North America’s leading oil and gas producing regions. The purchase con- Acquisition – Italtinto S.r.l. On 15 April 2011, Clariant acquired sideration for this acquisition amounts to CHF 35 million. The net 100 percent of the corporate capital of Italtinto S.r.l., an Ital- identified assets amount to CHF 20 million and goodwill to CHF 15 ian company, for a total purchase consideration of CHF 22 mil- million. Net sales and net profit from the acquisition date up to the lion in cash. Italtinto S.r.l. produces and sells integrated tinted end of the year 2011 by Prairie Petro-Chem amounted to CHF 25 systems for paints, colorants, automatic dispensing machines, million and CHF 4 million respectively. If the acquisition had color matching software and paint mixers. With this acquisition, occurred on 1 January 2011, group sales would have been CHF 8 Clariant gains access to attractive markets for color management million higher and the net profit would have been CHF 2 million systems. The net identified assets are estimated to amount to higher. CHF 14 million and goodwill to CHF 8 million. Net sales from the acquisition date up to the end of the year 2011 by Italtinto S.r.l. Acquisition – Octagon Process. On 19 March 2011, Clariant amounted to CHF 5 million. The net loss during this period was acquired 100% of the equity interests in US-based privately-held less than CHF 1 million. If the acquisition had occurred on 1 Jan- Octagon Process L.L.C. and its service company Katapullt L.L.C., for uary 2011, the Group‘s net sales would have been CHF 2 million a total purchase consideration of CHF 75 million in cash. Octagon higher and the net profit would have been higher by less than Process L.L.C. is a specialty manufacturer and distributor of air- CHF 1 million. craft wing de-icing and runway de-icing fluids to the airline indus- try. With this acquisition, Clariant is expanding its capacities in the The summary of the impact of consolidating Prairie Petro-Chem, North American de-icing market. The purchase price allocation of Octagon Process and Italtinto S.r.l. on the consolidated accounts at the transaction is still preliminary. The provisional net identified their respective acquisition dates, using the provisional fair values assets are estimated to amount to CHF 41 million and goodwill to of identified assets and liabilities is as follows: CHF 34 million. Net sales and net loss from the acquisition date up CHF mn 2011 Cash outflow for the acquisition 132 Total purchase consideration 132 Recognised provisional amounts of identifiable assets and liabilities assumed: Property plant and equipment 4 Intangible assets 47 Inventories 19 Receivables 24 Cash and cash equivalents 4 Pension plan liabilities – 1 Other assets and liabilities – 19 Deferred tax liabilities – 3 Provisional fair value of net assets acquired – 75 Goodwill 57 There were no business combinations in 2010.03_Financial_2011_en.indd 143 20.02.2012 15:05:22
144 Clariant Annual Report 2011 25. Restructuring and impairment Restructuring and impairment expenses for the years ended 31 December 2011 and 2010: 2011 2010 CHF mn Restructuring expenses (CHF mn) 140 256 Payments for restructuring 155 155 Impairment loss (CHF mn) 21 75 thereof charged to PPE (see note 5) 37 67 thereof charged to intangible assets (see note 6) 5 8 thereof charged to financial assets (see note 8) – 21 0 Total Restructuring and impairment 161 331 In order to increase profitability over a sustained period, Clariant In June 2010, Clariant further announced the closure of its produc- implements far-reaching measures designed to improve the Group’s tion facilities at Onsan, Korea, pertaining to the Business Unit Pig- performance. The aim of these efforts is to increase the Group’s ments. This closure will lead to a reduction of approximately 130 operating result and reduce net working capital. The changes that positions and to restructuring and impairment expenses of up to are being made to the processes and structures in order to achieve CHF 50 million. In the year 2010, CHF 17 million were incurred for these goals in a substantial loss of jobs across the Group. the closure of this facility. Restructuring. In 2011, Clariant recorded expenses for restructur- In October 2010, Clariant announced the closure of sites and ing in the amount of CHF 140 million. This concerned not only site activities mainly in Switzerland, France and the United States. The closures, but also restructuring measures regarding the subsidi resulting restructuring and impairment costs are posted in accor- aries in Germany and the United States, which were acquired with dance with IFRS requirements over the period to the finalization of Süd-Chemie. these measures in 2013. In 2010, Clariant recorded expenses for restructuring in the amount Impairment. Impairment expenses recognized in 2011 and 2010 of CHF 256 million mainly in Switzerland, France, Korea, China, the arose as a result of restructuring measures and the entailing site United States and Spain where sites are closed and headcount is closures. These impairment expenses were partly offset by the being further reduced. repayment of an impaired loan in the amount of CHF 23 million in 2011 (see note 8). In February 2010, Clariant announced the closure of production facil- ities in Muttenz, Switzerland, and Thane, India, pertaining to the Business Units Textile Chemicals, Paper Specialties and Pigments. The closures will lead to a reduction of approximately 500 positions and to restructuring and impairment expenses of up to CHF 150 million. In the year 2010, CHF 104 million were incurred for these closures.03_Financial_2011_en.indd 144 20.02.2012 15:05:22
financial report 145 Notes to the Consolidated Financial statements 26. Finance income and costs Finance income 2011 2010 CHF mn Interest income 14 12 thereof interest on loans and receivables 6 7 thereof income from financial assets held to maturity 7 5 Other financial income 5 3 Total finance income 19 15 Finance costs 2011 2010 CHF mn Interest expense – 122 – 74 thereof effect of discounting of non-current provisions – 6 – 8 Other financial expenses – 22 – 20 Currency result, net – 48 – 44 Total finance costs – 192 – 138 Other financial expenses include losses on the sale of securities, Interest costs capitalised on qualifying assets for 2011 is CHF 4 bank charges and miscellaneous finance expenses. million (2010: CHF 1 million). In the year 2011 foreign exchange gains of CHF 6 million pertaining Interest income on impaired financial assets amounted to less than to the ineffective part of hedges on net investment were recog- CHF 1 million in 2011 (2010: less than CHF 1 million). nized in the income statement (2010: CHF 7 million). Interest expense, other than the effect of discounting of non-cur- rent provisions, pertains to financial debts measured at amortised costs. Interest expenses in 2011 also include expenses for the acquisition loan facility to acquire Süd-Chemie in the amount of CHF 12 million and the one time effect of the repayment of the US Private Placement of Süd-Chemie in June 2011 in the amount of CHF 16 million.03_Financial_2011_en.indd 145 20.02.2012 15:05:22
146 Clariant Annual Report 2011 27. Earnings per share (EPS) Earnings per share are calculated by dividing the Group net income by the average number of outstanding shares (issued shares less treasury shares). 2011 2010 Net income attributable to shareholders of Clariant Ltd (CHF mn) 227 180 Diluted net income attributable to shareholders of Clariant Ltd (CHF mn) Net income attributable to shareholders of Clariant Ltd 227 180 Impact of assumed conversion of convertible bond on net income 12 10 Total 239 190 Shares Holdings on 1 January 223 544 786 225 905 255 Effect of the issuance of share capital and transactions with treasury shares 41 041 968 – 2 360 469 on weighted average number of shares outstanding Weighted average number of shares outstanding 264 586 754 223 544 786 Adjustment for granted Clariant shares 2 248 782 1 959 325 Adjustment for dilutive share options 181 127 383 194 Adjustment for assumed conversion of the convertible bond, where dilutive 35 086 549 35 087 718 Weighted average diluted number of shares outstanding 302 103 212 260 975 023 Basic earnings per share attributable to shareholders of Clariant Ltd (CHF/share) 0.86 0.81 Diluted earnings per share attributable to shareholders of Clariant Ltd (CHF/share) 0.79 0.73 The dilution effect is triggered by various different items. One is The third dilution effect arises from the convertible bond issued in the effect of Clariant shares granted as part of the share based 2009. In calculation of dilutive earnings per share, the convertible payment plan, which have not yet vested. To calculate this dilutive bond is assumed to have been converted into ordinary shares at the potential it is assumed that they had vested on 1 January of the beginning of the reporting period, and the net income is adjusted respective period. for the impact of the assumed conversion. The other item is the effect of options granted as part of the share Diluted earnings per share are calculated adjusting the weighted based payment plan, which have not yet vested. To calculate this average number of ordinary shares outstanding to assume conver- dilutive potential, it is assumed that all options which were in the sion of all dilutive potential ordinary shares. money at the end of the respective period had been exercised on 1 January of the same period. The effect of the services still to be No dividends were paid out to shareholders in 2011 and 2010. rendered during the vesting period were taken into consideration.03_Financial_2011_en.indd 146 20.02.2012 15:05:22
financial report 147 Notes to the Consolidated Financial statements 28. Financial instruments Foreign exchange management. To manage the exposure to the fluctuations in foreign currency exchange rates, the Group follows Risk management (hedging) instruments and off-balance a strategy of hedging both balance sheet and revenue risk, partially sheet risks. Clariant uses forward foreign exchange rate and through the use of forward contracts and currency swaps in various option contracts, interest rate and currency swaps, commodity currencies. In order to minimize financial expenses, the Group does contracts and other financial instruments to hedge the Group’s risk not hedge the entire exposure. exposure to volatility in interest rates, currencies and prices and to manage the return on cash and cash equivalents. Risk exposures The following tables show the contract or underlying principal from existing assets and liabilities as well as anticipated transac- amounts and the respective fair value of financial instruments by tions are managed centrally. type at year-end. Interest rate management. It is the Group’s policy to manage The contract or underlying principal amounts indicate the volume of the cost of interest using fixed and variable rate debt and interest- business outstanding at the balance sheet date and do not repre- related derivatives. sent the amount at risk. Financial instruments Contract or underlying Positive fair values Negative fair values CHF mn principal amount 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 Commodity related instruments Commodity contracts 24 1 0 Interest rate related instruments Interest swaps 468 – 3 Currency related instruments Forward foreign exchange rate contracts 567 451 12 0 – 43 – 63 Total financial instruments 1 059 451 13 0 – 46 – 63 The fair value of these financial instruments is recorded in “Other value is recorded in financial assets in case it is positive and in current assets” in the balance sheet in the case of a positive value non-current financial debt in case it is negative. Commodity related or as an accrual in “Trade and other payables” in the case of a instruments refer to raw material price risks hedged by subsidiar- negative value and if the instruments expire within the next twelve ies of Süd-Chemie. They are scheduled to be discontinued in the months. If the remaining lifetime exceeds twelve months, the course of 2012. Financial instruments by maturity 31.12.2011 31.12.2010 CHF mn Due dates: Up to one month after the balance sheet date 9 8 More than one and up to three months after the balance sheet date 15 15 More than three and up to twelve months after the balance sheet date 277 146 More than one and up to five years after the balance sheet date 758 282 Total financial instruments 1 059 45103_Financial_2011_en.indd 147 20.02.2012 15:05:23
148 Clariant Annual Report 2011 Financial instruments (continued) Financial instruments by currency 31.12.2011 31.12.2010 CHF mn USD 60 43 EUR 998 408 JPY 1 Total financial instruments 1 059 451 Financial instruments effective for hedge-accounting purposes 31.12.2011 31.12.2010 CHF mn Notional amount of hedges of net investments in foreign entities: 274 188 Contracts with positive values 61 – Contracts with negative values 213 188 Borrowings denominated in foreign currencies – 1 160 – 8 61 On 6 April 2006, Clariant issued a bond in the amount of EUR the amount of CHF 7 million resulting from the translation of the 600 million, denominated in euros (see note 16). The bond was certificates of indebtedness into Swiss francs was recognized in designated as a hedge of a net investment in some of Clariant’s the cumulative translation reserves in shareholders’ equity. European subsidiaries. The unrealized foreign exchange gain as at 31 December 2011 in the amount of CHF 22 million (2010: CHF 140 In 2010 Clariant did not engage in any cash flow hedges. In 2011, million gain) resulting from the translation of the bond into Swiss certain cash flow hedges were taken over through the acquisition francs was recognized in the cumulative translation reserves in of the Süd-Chemie group which were terminated before the end shareholders’ equity. In 2011, forward contracts in the amount of of 2011. EUR 225 million (2010: EUR 150 million) and repurchased EUR-bond tranches in the amount of EUR 11 million (2010: EUR 11 million), Securitization. During 2011 Süd-Chemie entered into factoring were also designated as hedging instruments as a part of the arrangements. hedge of net investments. A foreign exchange loss of CHF 5 million (2010: 24 million loss) was recognized in the cumulative translation The volume of the factoring is disclosed in the table below. reserves in the shareholders’ equity. Volumes of securitization of trade receivables 31.12.2011 On 17 July 2008 Clariant issued a certificate of indebtedness in CHF mn the amount of EUR 100 million, denominated in euros (see note Trade receivables denominated in euros 18 16). The certificate of indebtedness was designated as a hedge Trade receivables denominated in US dollars 8 of a net investment in some of Clariant’s European subsidiaries. Others 13 The realized foreign exchange gain as at 31 December 2011 in the Total 39 amount of CHF 1 million (2010: 23 million unrealized gain) resulting Related liability in the balance sheet denominated 7 from the translation of the Certificate of Indebtedness into Swiss in euros francs was recognized in the cumulative translation reserves in Total 7 shareholders’ equity. In 2011, no unrealized foreign exchange result pertaining to the ineffective portion of the hedge of net investment has been recognized in the income statement (2010: 7 million gain). On 21 October 2011, Clariant issued two certificates of indebted- ness amounting to EUR 365 million, denominated in euros (see note 16). The certificate of indebtedness were designated as a hedge of a net investment in some of Clariant’s European subsidiaries. The unrealized foreign exchange gain as at 31 December 2011 in03_Financial_2011_en.indd 148 20.02.2012 15:05:23
financial report 149 Notes to the Consolidated Financial statements 29. Employee participation plans have vested. The bank in return has the right to claim a share from Clariant at the pre-determined strike price for each option that is In 2010, the former Clariant Executive Bonus Plan (CEBP) was sold to it by plan participants. replaced with the Group Senior Management – Long Term Incen- tive Plan (GSM-LTIP). Under this new plan, a certain percentage The options become vested and are exercisable after two years and of the actual bonus is granted to the plan participants in form of expire after five years. The fair value of the stock options granted registered shares of Clariant Ltd (investment shares). These shares in 2011 at grant date was CHF 4.15 (2010: CHF 3.15) determined vest immediately upon grant, but are subject to a 3-year blocking using a share price of CHF 15.02 (2010: CHF 12.74) and an exercise period. The plan participants receive an additional share free of price of CHF 18.00 (2010: CHF 15.50). The expected volatility was cost (matching share) for each investment share held at the end of determined at 32.0 percent (2010: 35.5 percent), based on market the blocking period. assumptions. Assumed dividends range between CHF 0.10 and CHF 0.30 (2010: between CHF 0.10 and CHF 0.30) for later periods. These shares were granted for the first time in 2011, based on the The risk-free interest rate was determined at 1.69 percent (2010: performance achieved in the base year 2010. The number of shares 1.85 percent). The Black-Scholes valuation Model was used to not yet vested and thus disclosed for this period are the matching determine the fair values. shares. The expense recorded in the income statement spreads the costs The CEBP plan established in 2005 continues to exist until all of each grant equally over the measurement period of one year and granted shares have vested. Under this plan the granted registered the vesting period of three years for shares and the vesting period shares of Clariant Ltd become vested and are exercisable after of two years for options. Assumptions are made concerning the three years. No options are granted under the CEBP. forfeiture rate which is adjusted during the vesting period so that at the end of the vesting period there is only a charge for the The options granted under the CESOP established in 1999 entitle vested amounts. the holder to acquire registered shares in Clariant Ltd (one share per option) at a predetermined strike price. They become vested During 2011, CHF 22 million (2010: CHF 21 million) for equity- and are exercisable after three years and expire after ten years. settled share based payments and less than CHF 1 million (2010: CHF 1 million) for cash-settled share based payments were charged In April 2008, Clariant established a new stock option plan for to the income statement. members of management and the Board of Directors. Options granted under this plan in 2011, 2010 and 2008, entitle the holder As of 31 December 2011 the total carrying value of liabilities aris- to acquire registered shares of Clariant Ltd (one share per option) ing from share-based payments is CHF 41 million (2010: CHF 26 at a predetermined strike price. The plan is set up in a way that million). Thereof CHF 39 million (2010: CHF 24 million) was re- Clariant contracted a third party bank to issue tradable options to cognized in equity for equity-settled share-based payments and the plan participants in accordance with the rules of the plan. The CHF 2 million (2010: CHF 2 million) in non-current liabilities for cash- plan participants can sell the options back to this bank after they settled share-based payments. Options for Board of Directors (non-executive members) 1 Base year Granted Exercisable Expiry date Exercise Share price Number Number from price at grant date 31.12.2011 31.12.2010 2008 2008 2010 2013 12.50 8.58 260 000 260 000 2010 2010 2012 2015 15.50 12.74 222 400 222 400 2011 2011 2013 2016 18.00 15.02 216 865 Total 699 265 482 400 1 ast and current members. P03_Financial_2011_en.indd 149 20.02.2012 15:05:23
150 Clariant Annual Report 2011 Employee participation plans (continued) Options for senior members of Management and Executive Committee 1 Base year Granted Exercisable Expiry date Exercise Share price Number Number from price at grant date 31.12.2011 31.12.2010 2000 2001 2004 2011 41.80 42.02 – 7 229 2001 2002 2005 2012 27.20 26.87 166 354 166 354 2002 2003 2006 2013 14.80 14.88 87 352 87 352 2003 2004 2007 2014 12.00 18.74 49 326 49 326 2003 2004 2007 2014 16.30 18.74 53 479 53 479 2004 2005 2008 2015 19.85 19.85 146 237 146 237 Total 502 748 509 977 Options for members of Management and Executive Committee 1 Base year Granted Exercisable Expiry date Exercise Share price Number Number from price at grant date 31.12.2011 31.12.2010 2008 2008 2010 2013 12.50 8.58 954 675 1 102 731 2010 2010 2012 2015 15.50 12.74 2 764 000 2 823 300 2011 2011 2013 2016 18.00 15.02 2 328 807 Total 6 047 482 3 926 031 1 ast and current members. P As per 31 December 2011, the weighted average remaining con- tractual life of all share options was 2.86 years (2010: 3.28 years). Shares for Board of Directors (non-executive members) Base year Granted Vesting in Share price Number Number at grant date 31.12.2011 31.12.2010 2008 2008 2011 9.45 – 6 615 Total – 6 615 Shares for members of Management and Executive Committee Base year Granted Vesting in Share price Number Number at grant date 31.12.2011 31.12.2010 2007 2008 2011 9.45 318 789 2008 2009 2012 7.45 634 306 738 881 2009 2010 2013 12.50 862 518 895 040 2010 2011 2014 17.15 447 018 2011 2011 2016 16.60 50 000 Total 1 993 842 1 952 71003_Financial_2011_en.indd 150 20.02.2012 15:05:23
financial report 151 Notes to the Consolidated Financial statements Weighted Options Shares Weighted Options Shares average 2011 2011 average 2010 2010 exercise price exercise price Shares/options outstanding at 1 January 15.08 4 918 408 1 959 325 15.08 3 139 397 1 645 807 Granted 2 549 998 944 036 3 045 700 979 339 Exercised/distributed* 16.45 – 179 956 – 898 770 14.42 – 1 154 269 – 664 946 Cancelled/forfeited – 38 955 – 10 749 – 112 420 – 875 Outstanding at 31 December 16.21 7 249 495 1 993 842 15.08 4 918 408 1 959 325 Exercisable at 31 December 14.77 1 717 423 – 6.94 1 872 708 Fair value of shares/options outstanding in CHF 5 741 883 18 482 915 32 197 421 37 109 616 * ptions exercised/distributed include 134 456 options (2010: O The fair value of shares granted during 2011 is CHF 16 million 942 269) pertaining to the 2008 and 2010 Option plan, which (2010: CHF 12 million) calculated based on market value of shares were sold by the plan participants in the market and are cur- at grant date. rently held by third parties. Total options of these plans sold in the market at 31 December 2011 are 1 362 225 (31 December The fair value of options granted in 2011 was CHF 11 million 2010: 1 227 769) with a fair value at grant date of CHF 946 315 (2010: CHF 20 million) calculated based on the Black-Scholes (31 December 2010: CHF 9 367 877). valuation model. 30. Personnel expenses CHF mn 2011 2010 Wages and salaries – 1 186 – 1 234 Social welfare costs – 327 – 273 Shares and options granted to directors and employees – 23 – 22 Pension costs – defined contribution plans – 27 – 28 Pension costs – defined benefit plans – 54 – 87 Other post-employment benefits – 6 – 2 Total – 1 623 – 1 64603_Financial_2011_en.indd 151 20.02.2012 15:05:23
152 Clariant Annual Report 2011 31. Related party transactions Payables and receivables 31.12.2011 31.12.2010 with related parties CHF mn Clariant maintains business relationships with related parties. One group consists of the associates and joint ventures, where the most Receivables from related parties 13 11Feintypohead Höhe richten important ones are described in note 7. The most important busi- Payables to related parties 31 32 ness with these companies is the purchase of services by Clariant Loans to related parties 3 – (e.g. energy and rental of land and buildings) in Germany. Loans from related parties 31 – Guarantees to third parties on behalf of 46 – The second group of related parties is key management compris- related parties ing the Board of Directors and the Executive Committee. The infor- mation required by Art. 663bbis of the Swiss Code of Obligations Transactions with Key Management 2011 2010 regarding the emoluments for the members of the Board of Direc- CHF mn tors and the Executive Committee is disclosed in the Statutory Salaries and other short-term benefits 9 9 Accounts of Clariant Ltd on pages 165 to 169 of this report. More Post-employment benefits 3 3 information on the relationship with the Board of Directors is given Share-based payments 5 4 in the chapter Corporate governance (non-audited). Total 17 16 The third group of related parties are the pension plans of major There are no outstanding loans by the Group to any members of the subsidiaries. Clariant provides services to its pension plans in Swit- Board of Directors or Executive Committee. zerland, the United Kingdom and the United States. These services comprise mainly administrative and trustee services. The total cost of these services is CHF 1 million (2010: CHF 1 million), of which 32. Commitments and contingencies approximately half is charged back to the pension plans. The num- ber of full-time employees corresponding to these is approximately Leasing commitments. The Group leases various land, buildings, eight (2010: five). machinery and equipment, furniture and vehicles under fixed-term agreements. The leases have varying terms, escalation clauses and Transactions with related parties 2011 2010 renewal rights. CHF mn Income from the sale 37 23 Commitments arising from fixed-term operating leases mainly con- of goods to related parties cern buildings in Switzerland and Germany. The most important Income from the rendering 4 9 partners for operating leases of buildings in Germany are the Infra- of services to related parties serv companies. There exist no particular renewal options other Expenses from the purchase – 62 – 51 than annual prolongations in case there is no explicit termination of goods to related parties of the lease contract. Expenses from services – 208 – 254 rendered by related parties 03_Financial_2011_en.indd 152 20.02.2012 15:05:23
FINANCIAL REPORT 153 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSCHF mn 31.12.2011 31.12.2010 that there are no such matters pending which would be likely to 2011 46 have any material adverse effect in relation to its business, finan- 2012 48 29 cial position, or results of operations. 2013 31 16 2014 20 11 Environmental risks. Clariant is exposed to environmental liabili- 2015 14 9 ties and risks relating to its past operations, principally in respect 2016 10 of remediation costs. Provisions for non-recurring remediationThereafter 20 20 costs are made when there is a legal or constructive obligation Total 143 131 and the cost can be reliably estimated. It is difficult to estimate theGuarantees in favor of third parties 31 39 action required by Clariant in the future to correct the effects on the environment of prior disposal or release of chemical substancesExpenses for operating leases were CHF 74 million in 2011 (2010: by Clariant or other parties, and the associated costs, pursuant toCHF 79 million). environmental laws and regulations. The material components of the environmental provisions consist of costs to fully clean andPurchase commitments. In the regular course of business, refurbish contaminated sites and to treat and contain contamina-Clariant enters into relationships with suppliers whereby the Group tion at sites where the environmental exposure is less severe.commits itself to purchase certain minimum quantities of materialsin order to benefit from better pricing conditions. These commit-ments are not in excess of current market prices and reflect normal 33. Exchange rates of principal currenciesbusiness operations. At present, the purchase commitments onsuch contracts amount to about CHF 210 million (2010: CHF 200 Rates used to translate the consolidated balance sheets (closingmillion). rate):Contingencies. Clariant operates in countries where political, 31.12.2011 31.12.2010economic, social, legal and regulatory developments can have an 1 USD 0.94 0.94impact on the operational activities. The effects of such risks on 1 EUR 1.22 1.25the company’s results, which arise during the normal course of 1 BRL 0.50 0.56business, are not foreseeable and are therefore not included in the 1 CNY 0.15 0.14accompanying financial statements. 100 INR 1.76 2.09 100 JPY 1.21 1.15In the aftermath to the procedure to acquire subsequent to theacquisition of Süd-Chemie the 1.36 percent of shares still in Average sales-weighted rates used to translate the consolidatedpossession of third parties (squeeze-out) a law office initiated income statements and consolidated statements of cash flows:appraisal proceedings to reassess the adequacy of the cash com-pensation paid to the minority shareholders. Clariant opines that 2011 2010the cash compensation agreed is fair and complies with all legal 1 USD 0.89 1.04and economic requirements. At this time it cannot be determined if 1 EUR 1.24 1.38and to what extent these proceedings will lead to additional finan- 1 BRL 0.53 0.59cial liabilities. 1 CNY 0.14 0.15 100 INR 1.91 2.28In the ordinary course of business, Clariant is involved in lawsuits, 100 JPY 1.11 1.19claims, investigations and proceedings, including product liability,intellectual property, commercial, environmental and health andsafety matters. Although the outcome of any legal proceedingscannot be predicted with certainty, management is of the opinion
154 Clariant Annual Report 2011 34. Important subsidiaries Country Company name Participation Holding/ Sales Production Research % Finance/Service Argentina Clariant (Argentina) SA, Lomas de Zamora, Buenos Aires 100.0 n n Australia Clariant (Australia) Pty. Ltd, Glen Waverley 100.0 n n Süd-Chemie Australia Pty Ltd, Penrith 100.0 n n Austria Clariant (Österreich) GmbH, Vienna 100.0 n n Belgium Clariant Masterbatches Benelux SA, Louvain-La-Neuve 100.0 n n Bermuda Clariant Reinsurance Ltd, Hamilton 100.0 n Brazil Clariant S.A., São Paulo 100.0 n n Clariant Administração de Bens Ltda., São Paulo 100.0 n Süd-Chemie do Brasil Ltda, Jacarei 100.0 n British Virgin Islands Clariant Finance (BVI) Ltd, Tortola 100.0 n Clearwater Technologies Ltd, Tortola 100.0 n Canada Clariant (Canada) Inc., Toronto 100.0 n n Phostech Lithium Inc., St. Bruno de Montarville 100.0 n n Chile Clariant Colorquímica (Chile) Ltda., Maipú-Santiago de Chile 100.0 n n China Baotou Süd-Chemie Chemical Materials Co., Ltd, Baotou 100.0 n Clariant (China) Ltd, Hong Kong 100.0 n n n Clariant (Tianjin) Ltd, Tianjin 94.8 n n Clariant Bohai Pigments Preparations (Tianjin) Ltd 90.0 n n Clariant Chemicals (China) Ltd, Shanghai 100.0 n n Clariant Chemicals (Guangzhou) Ltd, Guangzhou 100.0 n n Clariant Chemicals (Huizhou) Ltd, Daya Bay, Huizhou 100.0 n Clariant Masterbatches (Beijing) Ltd, Beijing 100.0 n n Clariant Masterbatches (Shanghai) Ltd, Shanghai 100.0 n n Clariant Pigments (Tianjin) Ltd, Tianjin 60.0 n n Clariant Specialty Chemicals (Zhenjiang) Co., Ltd, Zhenjiang 100.0 n Jiangsu Süd-Chemie Chemical Materials Co., Ltd, Zhenjiang 100.0 n n Jiangsu Süd-Chemie Performance Packaging Material Co., Ltd, Changshu 100.0 n n Panjin Süd-Chemie Liaohe Catalyst Co., Ltd, Panjin City 60.0 n n Shanghai Süd-Chemie Catalysts Co., Ltd, Shanghai 100.0 n n Süd-Chemie Catalysts (Nanjing) Co., Ltd, Nanjing 100.0 n n n Süd-Chemie China Holding Limited, Hong Kong 100.0 n Süd-Chemie Investment Management (Shanghai) Co., Ltd, Shanghai 100.0 n Süd-Chemie Redhill Bentonite (Liaoning) Co., Ltd, Jianping 100.0 n Colombia Clariant (Colombia) SA, Cota-Cundinamarca 100.0 n n Egypt The Egyptian German Company for Dyes & Resins SAE, Cairo 100.0 n n Finland Clariant Masterbatches (Finland) Oy, Vantaa 100.0 n France Airsec S.A.S., Choisy Le Roi 100.0 n n n Bentofrance S.A.S., Portes-les-Valence 100.0 n n Clariant Masterbatches (France), Trosly Breuil 100.0 n n n Clariant Production (France), Trosly Breuil 100.0 n n Clariant Services (France), Trosly Breuil 100.0 n Clariant Specialty Fine Chemicals (France), Trosly Breuil 100.0 n n n K.J. Quinn, Graulhet 100.0 n Société Française des Bentonites et Dérivés S.A.S., Le Tréport 100.0 n n n Süd-Chemie France S.A.S., Choisy Le Roi 100.0 n03_Financial_2011_en.indd 154 20.02.2012 15:05:23
financial report 155 Notes to the Consolidated Financial statements Country Company name Participation Holding/ Sales Production Research % Finance / Service Germany Clariant Advanced Materials GmbH, Frankfurt-Höchst 100.0 n n n Clariant Beteiligungs GmbH, Frankfurt-Höchst 100.0 n Clariant Masterbatches (Deutschland) GmbH, Lahnstein 100.0 n n n Clariant Produkte (Deutschland) GmbH, Frankfurt-Höchst 100.0 n n n Clariant Vertrieb (Deutschland) GmbH und Co. KG, Frankfurt-Höchst 100.0 n Clariant Verwaltungsgesellschaft mbH, Frankfurt-Höchst 100.0 n Clariant SE, Frankfurt-Höchst 100.0 n n Phostech Lithium GmbH, Munich 100.0 n SC Beteiligungsgesellschaft mbH, Bensheim 100.0 n Süd-Chemie AG, Munich 100.0 n n n n Süd-Chemie Alvigo Catalysts GmbH, Munich 60.0 n Süd-Chemie Finance GmbH, Munich 100.0 n Süd-Chemie Zeolites GmbH, Bitterfeld-Wolfen 100.0 n n n Süd-Chemie IP GmbH & Co KG, Munich 100.0 n n Süd-Chemie Verwaltungs GmbH, Munich 100.0 n Great Britain Clariant Distribution UK Limited, Yeadon, Leeds 100.0 n Clariant Horsforth Limited, Yeadon, Leeds 100.0 n Clariant Masterbatches UK Ltd, Yeadon, Leeds 100.0 n Clariant Oil Services UK Ltd, Yeadon, Leeds 100.0 n Clariant Production UK Ltd, Yeadon, Leeds 100.0 n n Clariant Services UK Ltd, Yeadon, Leeds 100.0 n Süd-Chemie (UK) Limited, Northwich 100.0 n Greece Süd-Chemie Hellas Monoprosopi E.P.E., Adamas, Milos 100.0 n Guatemala Clariant (Guatemala) SA, Guatemala City 100.0 n n Clariant Trading (Guatemala) SA, Guatemala City 100.0 n Honduras Clariant Honduras S.A. de C.V., San Pedro Sula 100.0 n n India Clariant Chemicals (India) Ltd, Thane 63.4 n n n Italtinto India Private Limited, Mahape Navi Mumbai 100.0 n n Süd-Chemie Adsorbents Pvt. Ltd, New Delhi 100.0 n Indonesia PT Clariant Indonesia, Tangerang 100.0 n n P.T. Süd-Chemie Indonesia, Cileungsi, Bogor West Java 100.0 n n Ireland Clariant Masterbatches Ireland Limited, Naas 100.0 n n Italy Clariant (Italia) S.p.A., Milan 100.0 n Clariant Masterbatches (Italia) S.p.A., Milan 100.0 n n n Clariant Prodotti (Italia) S.p.A., Milan 100.0 n Italtinto S.r.l., Carasco 100.0 n n n Società Sarda di Bentonite S.r.l., Santa Giusta 100.0 n n n Süd Chemie Catalysts Italia S.r.l., Novara 100.0 n n n Süd-Chemie Imic Italia S.r.l., Silvano Pietra 75.0 n n Japan Clariant (Japan) K.K., Tokyo 100.0 n n n San-Ai Co., Ltd, Osaka 100.0 n Süd-Chemie Catalysts Japan, Inc., Tokyo 61.4 n n n Korea Clariant (Korea) Ltd, Seoul 100.0 n Süd-Chemie Korea Co., Ltd, Pohang, Gyeongbuk 94.8 n n n Liechtenstein Clariant Insurance AG, Triesen 100.0 n Luxemburg Clariant Finance (Luxembourg) S.A., Luxemburg 100.0 n Malawi Süd-Chemie Water and Process Technologies (Malawi) (Pty) Ltd, Blantyre 100.0 n n03_Financial_2011_en.indd 155 20.02.2012 15:05:24
156 Clariant Annual Report 2011 Country Company name Participation Holding/ Sales Production Research % Finance / Service Malaysia Chemindus Sdn. Bhd., Kuala Lumpur 55.0 n n Clariant (Malaysia) Sdn. Bhd., Petaling Jaya 100.0 n Clariant Masterbatches (Malaysia) Sdn Bhd, Petaling Jaya 60.0 n n Mexico Clariant (Mexico) S.A. de C.V., Ecatepec de Morelos 100.0 n n Clariant Productos Químicos S.A. de C.V., Ecatepec de Morelos 100.0 n Minera Sumex, S.A. de C.V., Mexico-City, DF 100.0 n Süd-Chemie de México, S.A. de C.V., Puebla 100.0 n n n Morocco Clariant (Maroc) S.A., Casablanca 100.0 n n Netherlands Clariant Participations (The Netherlands) B.V., Maastricht 100.0 n New Zealand Clariant (New Zealand) Ltd, Albany-Auckland 100.0 n n Norway Clariant Oil Services Scandinavia AS, Bergen 100.0 n n n Pakistan Clariant Pakistan Ltd, Karachi-Korangi 75.0 n n Peru Clariant (Perú) SA, Lima 90.8 n n Minera Doña Herminia S.A., Callao 100.0 n Süd-Chemie Perú S.A., Callao 100.0 n n Poland COLEX Spolka z o.o., Zgierz 100.0 n n Süd-Chemie Polska Sp. z o.o., Gdansk 100.0 n Qatar Süd-Chemie Qatar W.L.L., Mesaieed 65.0 n n Russia Süd-Chemie Alvigo Catalysts LLC, Moscow 60.0 n Süd-Chemie CIS LLC, Moscow 100.0 n Saudi Arabia Clariant Masterbatches (Saudi Arabia) Ltd, Riyadh 93.0 n n Singapore Clariant (Singapore) Pte. Ltd, Singapore 100.0 n n Süd-Chemie South East Asia Pte. Ltd, Singapore 100.0 n n South Africa Clariant Southern Africa (Pty) Ltd, Weltevreden Park, Johannesburg 100.0 n n Süd-Chemie SA (Proprietary) Limited, Chloorkop, Gauteng 100.0 n Süd-Chemie-Sasol Catalysts (Proprietary) Limited, Chloorkop, Gauteng 80.0 n Spain Clariant Ibérica Producción S.A., El Prat de Llobregat, Barcelona 100.0 n n Clariant Ibérica Servicios S.L., El Prat de Llobregat, Barcelona 100.0 n Clariant Masterbatch Ibérica S.A., Sant Andreu de la Barca 100.0 n n Süd-Chemie España, S.L., Yuncos-Toledo 100.0 n n Sweden Clariant (Sverige) Holding AB, Gothenburg 100.0 n Clariant Masterbatches Norden AB, Malmö 100.0 n n n Switzerland Clariant Beteiligungen AG, Muttenz 100.0 n Clariant Chemiebeteiligungen AG, Muttenz 100.0 n Clariant Consulting AG, Muttenz 100.0 n Clariant International AG, Muttenz 100.0 n Clariant Produkte (Schweiz) AG, Muttenz 100.0 n n EBITO Chemiebeteiligungen AG, Muttenz 100.0 n LiFePO4+C Licensing AG, Muttenz 100.0 n Taiwan Clariant Chemicals (Taiwan) Co., Ltd, Taipei 100.0 n n Thailand Clariant (Thailand) Ltd, Klongton, Bangkok 100.0 n n Clariant Masterbatches (Thailand) Ltd, Chonburi 100.0 n n Süd-Chemie (Thai) Co., Ltd, Bangkok 100.0 n Turkey Clariant (Türkiye) A.S., Gebze 100.0 n n Süd-Chemie (TR) Madencilik Sanayi ve Ticaret A.S., Balikesir 100.0 n n UAE Clariant (Gulf) FZE, Jebel Ali, Dubai 100.0 n03_Financial_2011_en.indd 156 20.02.2012 15:05:24
financial report 157 Notes to the Consolidated Financial statements Country Company name Participation Holding/ Sales Production Research % Finance / Service Ukraine Süd-Chemie Alvigo Catalysts Ukraine LLC, Severodonetsk 60.0 n n Uruguay Clariant (Uruguay) SA, Montevideo 100.0 n USA Clariant Corporation, Charlotte, NC 100.0 n n n Katapullt LLC, Albany, NY 100.0 n Octagon Process, L.L.C., Las Vegas, NV 100.0 n n n Süd-Chemie & Co. Limited Partnership, Wilmington, DE 100.0 n Süd-Chemie Corporation of America, Wilmington, DE 100.0 n Süd-Chemie Inc., Wilmington, DE 98.8 n n n Süd-Chemie North America Inc., Wilmington, DE 100.0 n Tecpro Holding Corporation Inc., Wilmington, DE 100.0 n Venezuela Clariant Venezuela S.A., Maracay 100.0 n n 35. Events subsequent to the balance sheet date On 17 January 2012, Clariant Finance (Luxembourg) S.A. issued an Eurobond in the amount of EUR 500 million, guaranteed by Clariant Ltd. The fixed rate notes with a minimum denomination of EUR 100 000 and a final coupon of 5.625 percent per annum will mature on 24 January 2017. The proceeds are to be used for gen- eral corporate purposes optimizing Clariant’s debt maturity profile. With value date January 30, 2012, the last drawn part of the syn- dicated bridge loan facility to acquire Süd Chemie (CHF 400 million as of 31 December 2011) has been repaid in full. All commitments under the facility have been cancelled by then. The facility there- fore ceases to exist.03_Financial_2011_en.indd 157 20.02.2012 15:05:24
158 Clariant Annual Report 2011 Report of the statutory auditor to the Opinion general meeting of Clariant Ltd, Muttenz In our opinion, the consolidated financial statements for the year ended 31 December 2011 give a true and fair view of the financial Report of the statutory auditor on the position, the results of operations and the cash flows in accordance consolidated financial statements with the International Financial Reporting Standards (IFRS) and As statutory auditor, we have audited the consolidated financial comply with Swiss law. statements of Clariant Ltd, which comprise the consolidated bal- ance sheet, consolidated income statement, consolidated state- Report on other legal requirements ment of comprehensive income, consolidated statement of changes We confirm that we meet the legal requirements on licensing in equity, consolidated statement of cash flows and notes (pages according to the Auditor Oversight Act (AOA) and independence 99 to 157, for the year ended 31 December 2011. (article 728 CO and article 11 AOA) and that there are no circum- stances incompatible with our independence. Board of Directors’ Responsibility The Board of Directors is responsible for the preparation and fair In accordance with article 728a paragraph 1 item 3 CO and Swiss presentation of the consolidated financial statements in accordance Auditing Standard 890, we confirm that an internal control system with the International Financial Reporting Standards (IFRS) and the exists which has been designed for the preparation of consolidated requirements of Swiss law. This responsibility includes designing, financial statements according to the instructions of the Board of implementing and maintaining an internal control system relevant Directors. to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due We recommend that the consolidated financial statements submit- to fraud or error. The Board of Directors is further responsible for ted to you be approved. selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances. PricewaterhouseCoopers Ltd Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as the International Standards on Auditing. Those standards Dr. Daniel Suter Ruth Sigel require that we plan and perform the audit to obtain reasonable Audit expert Audit expert assurance whether the consolidated financial statements are free Auditor in charge from material misstatement. An audit involves performing procedures to obtain audit evidence Basel, 13 February 2012 about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judg- ment, including the assessment of the risks of material misstate- ment of the consolidated financial state-ments, whether due to fraud or error. In making those risk assessments, the auditor con- siders the internal control system relevant to the entity’s prepara- tion and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the cir- cumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting pol- icies used and the reason-ableness of accounting estimates made, as well as evaluating the overall presentation of the consoli-dated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.03_Financial_2011_en.indd 158 20.02.2012 15:05:24
financial report 159 REVIEW OF TRENDS Review of trends Five-year Group overview Five-year Group overview 2007–2011 2011 2010 2009 2008 2007 Segment sales CHF mn 7 413 7 190 6 716 8 189 8 660 Change relative to preceding year in Swiss francs % 3 7 – 18 – 5 5 in local currency % 16 13 – 16 1 4 Group sales 1 CHF mn 7 370 7 120 6 614 8 071 8 533 Change relative to preceding year in Swiss francs % 4 8 – 18 – 5 5 in local currency % 16 13 – 14 1 4 Operating income before exceptionals CHF mn 717 696 270 530 539 Change relative to preceding year % 3 158 – 49 – 2 – 9 as a % of sales 9.7 9.8 4.1 6.6 6.3 Operating loss/income CHF mn 507 366 – 20 229 278 Change relative to preceding year % 39 – – 109 – 18 – 28 as a % of sales 6.9 5.1 – 0.3 2.8 3.3 EBITDA CHF mn 786 646 263 691 628 Change relative to preceding year % 22 146 – 62 10 – 21 as a % of sales 10.7 9.1 4.0 8.6 7.4 Net loss/income CHF mn 251 191 – 194 – 37 5 Change relative to preceding year % 31 – 424 – 840 – 106 as a % of sales 3.4 2.7 – 2.9 – 0.5 0.1 Investment in property, plant and equipment CHF mn 370 224 135 270 306 Change relative to preceding year % 65 66 – 50 – 12 – 6 as a % of sales 5 3 2 3 4 Personnel costs CHF mn 1 623 1 646 1 757 1 759 1 930 Change relative to preceding year % – 1 – 6 – – 9 6 as a % of sales 22 23 27 22 23 Employees at year-end number 22 149 16 176 17 536 20 102 20 931 Change relative to preceding year % 37 – 8 – 13 – 4 – 4 1 ncluding trading. I03_Financial_2011_en.indd 159 20.02.2012 15:05:24
160 Clariant Annual Report 2011 Financial statements of Clariant Ltd, Muttenz Clariant Ltd balance sheets at 31 December 2011 and 2010 ASSETS 31.12.2011 31.12.2010 CHF % CHF % Non-current assets Shareholdings in Group companies 2 059 579 865 1 725 063 497 Loans to Group companies 2 278 400 300 241 734 360 Intangible assets 15 333 895 7 097 697 Total non-current assets 4 353 314 060 84.0 1 973 895 554 62.0 Current assets Receivables from Group companies 48 899 273 85 902 866 Other receivables 886 832 1 289 474 Accrued income 5 489 206 1 384 696 Marketable securities 127 661 512 182 312 477 Short term deposits – 702 590 000 Cash and cash equivalents 647 726 281 237 464 536 Total current assets 830 663 104 16.0 1 210 944 049 38.0 Total assets 5 183 977 164 100.0 3 184 839 603 100.0 EQUITY AND LIABILITIES 31.12.2011 31.12.2010 CHF % CHF % Total share capital 1 183 009 016 920 640 000 Reserves General reserve 1 454 963 681 648 346 529 – thereof reserves from capital contributions 1 2 719 261 672 – thereof from retained earnings 2 – 1 264 297 991 Reserve for treasury shares 181 148 697 124 032 351 – thereof reserves from capital contributions 1 181 148 697 – thereof from retained earnings Free reserves 236 981 551 141 761 615 Total reserves 1 873 093 929 914 140 495 Accumulated gains Gain for the financial year 124 436 035 95 219 936 Total accumulated gains 124 436 035 95 219 936 Total equity 3 180 538 980 61.4 1 930 000 431 60.6 Liabilities Non-current liabilities Bonds 300 000 000 Straight bonds – 250 000 000 Convertible bond 299 990 000 300 000 000 Certificate of indebtedness 451 831 100 160 400 000 Loans from Group companies 24 886 683 35 040 674 Total non-current liabilities 1 076 707 783 20.8 745 440 674 23.4 Current liabilities Straight bonds 250 006 544 Provisions 1 282 113 862 512 Liabilities to Group companies 208 040 184 419 753 075 Other liabilities 443 399 342 45 437 289 Accrued expenses 24 002 218 43 345 622 Total current liabilities 926 730 401 17.8 509 398 498 16.0 Total liabilities 2 003 438 184 38.6 1 254 839 172 39.4 Total equity and liabilities 5 183 977 164 100.0 3 184 839 603 100.0 1 his amount of capital contribution reserves is subject to the approval of the Swiss Federal Tax Administration. Until now, the Swiss Federal Tax Administration provisionally confirmed qualifying capital T contributions of approximately CHF 1.6 billion. For further information see also note 8 to the financial statements of Clariant Ltd. 2 his amount corresponds to capital contribution reserves formerly offset with losses. For further information see also note 8 to the financial statements of Clariant Ltd. T04_Financial_2011_en.indd 160 20.02.2012 15:05:08
financial report 161 FINANCIAL STATEMENTS OF CLARIANT LTD, MUTTENZ Clariant Ltd income statements for the years ended 31 December 2011 and 2010 31.12.2011 31.12.2010 CHF CHF. Income Income from participation and interests on loans 351 946 174 156 835 981 Income from cash and cash equivalents, marketable securities and short-term deposits 14 033 296 4 117 099 Exchange rate gains realized 164 908 886 116 340 100 Reversal of depreciation of financial assets 155 716 157 209 920 000 Other income 32 595 452 9 793 378 Total income 719 199 965 497 006 558 Expenses Financial expenses 475 682 354 217 830 934 Administrative expenses 118 462 800 80 485 748 Depreciation of financial assets – 52 847 000 Other expenses (including taxes) 618 776 622 940 Exceptional expense – 50 000 000 Total expenses 594 763 930 401 786 622 Gain for the financial year 124 436 035 95 219 9 3604_Financial_2011_en.indd 161 20.02.2012 15:05:08
162 Clariant Annual Report 2011 Notes to the financial statements 2. Financial assets of Clariant Ltd After a regular review of the cash generating capabilities of all sub- 1. Accounting policies sidiaries of Clariant Ltd, write-downs of previous periods amount- ing to CHF 156 million on the investments (including non-current Introduction. The statutory financial statements of Clariant Ltd loans) in some of these companies were reversed (2010: reversal of comply with the requirements of the Swiss company law. a write-down of investments of CHF 210 million and write-down of loans of CHF 53 million) Exchange rate differences. Balance sheet items denominated in foreign currencies are converted at year-end exchange rates. Real- The principal direct and indirect affiliated companies and other ized exchange gains and losses as well as all unrealized exchange holdings of Clariant Ltd are shown on pages 154 to 157 of the losses are recorded in the income statement. Financial Report of the Clariant Group. Financial assets. These are valued at acquisition cost less adjustments for impairment of value. 3. Cash, marketable securities and current financial assets Provisions. Provisions are made to cover existing liabilities. Securities include treasury shares valued at fair market value in the amount of CHF 117 million (prior year CHF 171 million) (see also note 5). Because of the decreasing share price a depreciation about CHF 111 million was recorded. 4. Share capital Capital issued 31.12.2011 31.12.2010 Number of registered shares each with a par value of CHF 4.00 (2010: CHF 4.00) 295 752 254 230 160 000 In CHF 1 183 009 016 920 640 000 Conditional capital 31.12.2011 31.12.2010 Number of registered shares each with a par value of CHF 4.00* (2010: CHF 4.00) 40 000 000 40 000 000 In CHF 160 000 000 160 000 000 *Thereof 1’169 shares with a par value of CHF 4 676 were already converted. At the Annual General Meeting 2011, a capital increase in the amount of CHF 262 million was approved. It was executed in two steps. The first tranche consisted of 23 016 000 new shares issued at a subscription price of 16 CHF. The second tranche consisted of 42 575 085 shares extended to shareholders of the Süd-Chemie AG in exchange for Süd-Chemie shares. The calculated exchange price amounted to CHF 17.80. CHF 864 million were recorded as an agio into the general reserves. In July, Clariant AG issued 1 169 newly registered shares for the conversion of convertible bonds.04_Financial_2011_en.indd 162 20.02.2012 15:05:08
financial report 163 Notes to the financial statements of Clariant Ltd 5. Treasury shares (number with a par value of CHF 4.00 each (2010: CHF 4.00) 2011 2010 Holdings on 1 January 9 002 210 4 269 387 Shares bought at market value 3 440 953 5 320 084 Shares purchased on exercise of put options 1 200 000 – Shares sold at market value – 174 000 – Shares to employees – 846 514 – 587 261 Holdings on 31 December 12 622 649 9 002 210 The average price of shares bought in 2011 was CHF 14.94 (2010: CHF 15.05). The average price of shares sold in 2011 was CHF 9.31 (2010: 7.82 CHF). 6. Reconciliation of equity CHF Share capital General reserve Reserve for treasury shares Free reserves Net income Total from capital from retained from capital from retained contribution 1 earnings 2 contribution 1 earnings Balance 31 December 2010 920 640 000 648 346 529 124 032 351 – 141 761 615 95 219 936 1 930 000 431 Treasury share transactions – 57 116 346 57 116 346 – Appropriation of profit/loss 95 219 936 – 95 219 936 – carried forward to reserves Reclassified Capital 1 264 297 991 – 1 264 297 991 – contribution reserve Capital contribution 262 369 016 863 733 498 1 126 102 514 Profit of the financial year 124 436 035 124 436 035 Balance 31 December 2011 1 183 009 016 2 719 261 672 – 1 264 297 991 181 148 697 – 236 981 551 124 436 035 3 18 538 980 1 T his amount of capital contribution reserves is subject to the approval of the Swiss Federal Tax Administration. Until now, the Swiss Federal Tax Administration provisionally confirmed qualifying capital contributions of approximately CHF 1.6 billion. For further information see also note 8 to the financial statements of Clariant Ltd. 2 T his amount corresponds to capital contribution reserves formerly offset with losses. For further information see also note 8 to the financial statements of Clariant Ltd.04_Financial_2011_en.indd 163 20.02.2012 15:05:08
164 Clariant Annual Report 2011 7. Bonds and certiﬁcates of indebtedness CHF thousand Interest rate Term Amount 31.12.2011 Amount 31.12.2010 Straight bond 3.125 2007 – 2012 250 000 250 000 Convertible bond 3.000 2009 – 2014 299 990 300 000 Certificate of indebtedness 6.211 2008 – 2011 – 32 080 Certificate of indebtedness 2.461 2008 – 2011 – 128 320 Certificate of indebtedness 3.740 2011 – 2014 299 160 – Certificate of indebtedness 4.240 2011 – 2016 152 671 – Straight bond 2.750 2011 – 2015 200 000 – Straight bond 3.125 2011 – 2017 100 000 – Total 1 301 821 710 400 The bond issued in 2007 of CHF 250 million was reclassified from Under Swiss tax law, qualifying capital contributions contributed to non-current to current liabilities. the company Clariant Ltd by its shareholders since 1997 may be dis- tributed without being subject to Swiss withholding tax effective In May and June 2011, Clariant Ltd launched two new bonds in the 1 January 2011, if certain conditions are met. The balance sheet amount of CHF 200 million and CHF 100 million with a term of 4.5 2011 of Clariant Ltd was adapted in order to document the potential years and 6 years respectively. capital contribution reserves in the relevant sub-accounts (General reserves from capital contributions and treasury reserves from In October 2011, a certificate of indebtedness with a nominal capital contributions) of the General reserve as requested by the amount of EUR 100 million was paid back. Including accrued inter- Swiss Federal Tax Administration (SFTA). Until now, the SFTA pro- est the repayment amounted to CHF 124 million. visionally confirmed capital contribution reserves of approximately CHF 1.6 billion. Due to a remaining Swiss withholding tax expo- In October 2011, Clariant Ltd issued two certificates of indebted- sure, these provisionally confirmed capital contribution reserves ness in the German market amounting to EUR 365 million. The two cannot be distributed until the SFTA has explicitly allowed such certificates have a term of 3 years (EUR 242 million) and 4.5 years distributions (request currently pending as per 13 February 2012). (EUR 123 million) each with fix and float coupons. The interest to At this stage, the SFTA is of the opinion that capital contribu- be paid for the certificates of indebtedness is based on six months tion reserves which were formerly offset with losses (CHF 1.26 Euribor (variable tranche) or mid-swap (fixed tranche), respectively, billion) will not qualify as capital contribution reserves anymore plus a credit margin premium (spread). (even if compensated with newly generated retained earnings). Clariant Ltd does not unconditionally share this opinion, why such potential capital contribution reserves are also documented as 8. General reserves capital contribution reserves in the balance sheet 2011. The general reserve must be at least 20 percent of the share capi- tal of Clariant Ltd as this is the minimum amount required by the 9. Reserve for treasury shares Swiss Code of Obligations. Clariant Ltd has met the legal requirements for treasury shares required by the Swiss Code of Obligations. 10. Contingent liabilities CHF mn Outstanding Outstanding liabilities liabilities 31.12.2011 31.12.2010 Outstanding liabilities as guarantees in favor of Group companies 973 984 Outstanding liabilities as guarantees in favor of third parties – –
financial report 165 Notes to the financial statements of Clariant Ltd 11. Emoluments to members of the Board of Directors and the Executive Committee 1. Board of Directors Emoluments to members of the Board of Directors Name Member of the Cash compensation Social contribution Cash amount Cash amount Board of Directors 2011 2010 Membership Honorarium Committee in CHF in CHF in CHF in 2011 in CHF fee in CHF Jürg Witmer full year 500 000 20 000 37 878 557 878 567 759 Rudolf Wehrli full year 250 000 40 000 22 719 312 719 316 479 Peter Isler full year 100 000 20 000 8 626 128 626 133 844 Peter Chen full year 100 000 40 000 13 640 153 640 150 103 Klaus Jenny full year 250 000 60 000 20 678 330 678 336 198 Dominik Koechlin full year 100 000 20 000 9 228 129 228 132 156 Carlo G. Soave full year 100 000 20 000 9 228 129 228 132 156 Hariolf Kottmann 1 full year – – – – – Dolf Stockhausen 2 since 15.05.2011 37 500 7 500 2 884 47 884 NA Konstantin Winterstein since 15.05.2011 37 500 7 500 – 45 000 NA Total 1 475 000 235 000 124 881 1 834 881 1 768 695 1 fter taking over the function as CEO, no further Board of Directors‘ compensations are extended. A 2 Due to contractual agreement payout will take place in 2012. Name Share based Share based compensation compensation in 2011 3 in 2010 3 Jürg Witmer 194 110 110 804 Rudolf Wehrli 97 228 57 833 Peter Isler 75 410 41 463 Peter Chen 75 410 41 463 Klaus Jenny 97 228 58 528 Dominik Koechlin 75 063 35 906 Carlo G. Soave 75 063 35 906 Hariolf Kottmann – 7 733 Dolf Stockhausen – NA Konstantin Winterstein – NA Total 689 513 389 636 3 he values above are in accordance with IFRS principles. T04_Financial_2011_en.indd 165 20.02.2012 15:05:09
166 Clariant Annual Report 2011 Emoluments to members of the Board of Directors and the Executive Committee (continued) Shares held Name Number of Number of Number of Number of Number of Number of shares granted shares granted shares within shares within privately privately vesting period vesting period held shares held shares 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 Jürg Witmer – – – 1 323 137 628 61 305 Rudolf Wehrli – – – 1 323 12 490 7 305 Peter Isler – – – 1 323 29 554 16 908 Peter Chen – – – 1 323 5 931 4 087 Klaus Jenny – – – 1 323 77 019 41 422 Dominik Koechlin – – – – 11 100 10 100 Carlo G. Soave – – – – 15 100 15 100 Hariolf Kottmann 1 See EC Overview Dolf Stockhausen – NA – NA 11 461 304 NA Konstantin Winterstein – NA – NA 5 000 NA Total – – – 6 615 11 755 126 156 227 Options held Name Number of Number of Number of Number of Number of Number of options granted options granted options within options within excercisable excercisable vesting period vesting period options options 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 Jürg Witmer 60 241 63 500 123 741 63 500 80 000 80 000 Rudolf Wehrli 30 120 31 750 61 870 31 750 40 000 40 000 Peter Isler 24 096 23 850 47 946 23 850 20 000 20 000 Peter Chen 24 096 23 850 47 946 23 850 20 000 20 000 Klaus Jenny 30 120 31 750 61 870 31 750 40 000 40 000 Dominik Koechlin 24 096 23 850 47 946 23 850 20 000 20 000 Carlo G. Soave 24 096 23 850 47 946 23 850 20 000 20 000 Hariolf Kottmann 1 See EC Overview Dolf Stockhausen 2 – NA – NA – NA Konstantin Winterstein – NA – NA – NA Total 216 865 222 400 439 265 222 400 240 000 240 000 1 After taking over the function as CEO, no further Board of Directors compensations are extended. Please refer to the Executive Management table. 2 Additionally holding: 20 700 options to sell04_Financial_2011_en.indd 166 20.02.2012 15:05:09
financial report 167 Notes to the financial statements of Clariant Ltd 2. Executive Committee Hariolf Others Total 2011 Total 2010 Kottmann Annual compensation Base salary 1 000 000 2 450 000 3 450 000 3 100 000 Cash bonus 1 020 150 2 094 708 3 114 858 4 092 000 Share-based bonus: Value 1 279 209 2 345 756 3 624 965 3 264 787 Options: Value 412 568 564 750 977 318 461 853 Other payments 1 490 805 1 424 630 2 915 435 2 636 920 Total annual compensation 5 202 732 8 879 844 14 082 576 13 555 560 Total compensation 5 202 732 8 879 844 14 082 576 13 555 560 On 1 July 2011 Dr. Hans-Joachim Müller joined the Executive Com- The values above are in accordance with IFRS. Other benefits mittee as a member. Due to his contractual relationship with Süd- include contributions to pension funds (73 percent), social security Chemie, he received an additional payment from Süd-Chemie for (26 percent) and other allowances (1 percent). The totals of the his responsibilities, that is not included in the Executive Commit- table above together with the totals of the remuneration for the tee Remuneration in the table above. This payment includes royalty Board of Directors add up to the total reported in note 31. Related payments for 2010 (EUR 810 990), eligibility for royalty for 2011, parties of the consolidated financial statements for the transaction and cash payments for Long-Term-Incentives in the amount of EUR with Key Management. 530 145 (Payments in 2011 and 2012).04_Financial_2011_en.indd 167 20.02.2012 15:05:09
168 Clariant Annual Report 2011 Emoluments to members of the Board of Directors and the Executive Committee (continued) Shares held Name Number of Number of Number of Number of Number of Number of shares granted 2 shares granted 2 shares within shares within privately privately vesting period vesting period held shares held shares for 2011 for 2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 Hariolf Kottmann 1 136 020 95 274 131 637 84 000 479 637 452 000 Patrick Jany 76 172 56 688 59 909 40 613 102 296 39 904 Christian Kohlpaintner 76 172 56 688 28 344 – 90 000 60 000 Mathias Lütgendorf 151 172 81 688 44 094 15 750 211 844 108 500 Hans-Joachim Müller 3 69 044 NA 50 000 NA NA Total 508 580 290 338 313 984 140 363 883 777 660 404 Options held Name Number of Number of Number of Number of Number of Number of options granted options granted options within options within excercisable excercisable vesting period vesting period options options 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010 Hariolf Kottmann 120 482 142 900 263 382 142 900 128 000 1 128000 1 Patrick Jany 60 241 60 000 120 241 60 000 100 000 100 000 Christian Kohlpaintner 60 241 60 000 120 241 60 000 – Mathias Lütgendorf 60 241 60 000 120 241 60 000 – Hans-Joachim Müller 3 – NA – NA – NA Total 301 205 322 900 624 105 322 900 228 000 228 000 1 ncluding shares immediately vested. I 2 he number of shares granted as part of the matching share program will be determined after the balance sheet date. The number disclosed is based on the target achievement, the amount of variable T estimated remuneration accrued and an estimated fair value of the shares at the grant date. Therefore correction of the 2010 figures were made. 3 ember of the Executive Committee since 01.07.2011 M04_Financial_2011_en.indd 168 20.02.2012 15:05:09
financial report 169 Notes to the financial statements of Clariant Ltd 12. Voting and legal registration limitations 14. Risk management In accordance with article 5 of the Articles of Incorporation, no The Board of Directors and Group Management annually engage limitations exist with regard to registration of shares which are in a comprehensive risk assessment procedure, which includes acquired in one’s own name and on one’s own account. Special the risks arising on the activities of Clariant Ltd. In the process, rules exist for nominees. the enterprise risks and their developments are analyzed and it is ensured that measures to the effect of their containment are In accordance with article 12 of the Articles of Incorporation, each implemented. Particular attention is paid to the risks of financial share has the right to one vote. A shareholder can only vote for reporting. A more detailed description of the risk assessment can his own shares and for represented shares up to a maximum of be found in the notes of the consolidated financial statements in 10 percent of total share capital. note 2, “Enterprise risk management” on page 109. 13. Shareholders holding three percent or more of total capital These percentage figures are based on information received from the respective shareholders. At 31 December 2011 former share- holders of Süd-Chemie AG, who had exchanged their shares against Clariant shares, were holding in total 15.127 percent of the share capital of Clariant. These shareholders are affiliated with each other of family or other reasons. In addition, the following shareholders held a participation of 3 percent or more of the total share capital: Fidelity Management & Research, Boston (United States), 5.23 per- cent (2010: 5.23 percent); Teachers Insurance and Annuity Asso- ciation of America – College Retirement Equity Fund (TIAA-CREF), New York (United States), 3.097 percent (2010: < 3 percent); CS Asset Management Funds AG, Zürich (Switzerland), 3.0184 percent (2010: 3.04 percent). No other shareholder was registered as holding 3 percent or more of the total share capital. At 31 December 2010 the following shareholders held a participation of 3 percent or more of the total share capital: AXA, Paris (France), 5.09 percent; Amundi, Paris (France), 3.07 percent. No other shareholder was registered as holding 3 percent or more of the total share capital.04_Financial_2011_en.indd 169 20.02.2012 15:05:09
170 Clariant Annual Report 2011 Appropriation of available earnings The Board of Directors proposes to transfer the gains for the finan- cial year in the amount of CHF 124 436 035 to free reserves. Available unappropriated earnings CHF Balance from prior year – Gain for the financial year 124 436 035 Total available unappropriated earnings 124 436 035 Appropriation CHF Transfer to free reserves – 124 436 035 Balance to be carried forward – Proposed payout of nominal value reduction The Board of Directors proposes to repay CHF 0.30 of the nomi- nal value of each registered share, as a result of a reduction of the nominal value from CHF 4.00 to CHF 3.70 per registered share. The proposed payout would reduce the share capital by CHF 88 725 676.20. The proposed payout of the nominal value reduc- tion of CHF 0.30 each is expected at the end of June 2012, subject to approval by the ordinary General Meeting of shareholders and subject to the fulfillment of the necessary requirements and the entry of the share capital reduction in the Commercial Register of the Canton of Baselland.04_Financial_2011_en.indd 170 20.02.2012 15:05:09
financial report 171 Notes to the financial statements of Clariant Ltd Report of the statutory auditor to the Opinion general meeting of Clariant Ltd, Muttenz In our opinion, the financial statements for the year ended 31 December 2011 comply with Swiss law and the company’s arti- Report of the statutory auditor on the cles of incorporation. financial statements As statutory auditor, we have audited the financial statements of Report on other legal requirements Clariant Ltd, which comprise the balance sheet, income statement We confirm that we meet the legal requirements on licensing and notes (pages 160 to 169), for the year ended 31 December 2011. according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circum- Board of Directors’ Responsibility stances incompatible with our independence. The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss In accordance with article 728a paragraph 1 item 3 CO and Swiss law and the company’s articles of incorporation. This responsibil- Auditing Standard 890, we confirm that an internal control system ity includes designing, implementing and maintaining an internal exists which has been designed for the preparation of financial control system relevant to the prepa-ration of financial statements state-ments according to the instructions of the Board of Directors. that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting We further confirm that the proposed appropriation of available and applying appropriate accounting policies and making account- earnings complies with Swiss law and the company’s articles of ing estimates that are reasonable in the circumstances. incorporation. We recommend that the financial statements sub- mitted to you be approved. Auditor’s Responsibility Our responsibility is to express an opinion on these financial state- PricewaterhouseCoopers Ltd ments based on our audit. We con-ducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. Dr. Daniel Suter Ruth Sigel An audit involves performing procedures to obtain audit evidence Audit expert Audit expert about the amounts and disclosures in the financial statements. The Auditor in charge procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the finan- cial statements, whether due to fraud or error. In making those risk Basel, 13 February 2012 assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appro-priate in the cir- cumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting pol- icies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial state- ments. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.04_Financial_2011_en.indd 171 20.02.2012 15:05:10
172 Clariant Annual Report 2011 Forward-looking statements Forward-looking statements contained herein are qualified in their entirety as there are certain factors that could cause results to differ materially from those anticipated. Investors are cautioned that all forward-looking statements involve risks and uncertainty. In addition to the factors discussed above, among the factors that could cause actual results to differ materially are the following: 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 con- tinue 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.04_Financial_2011_en.indd 172 20.02.2012 15:05:10