ZURICH (Thomson Financial) - Clariant Ltd said its net loss from continuing operations widened during the third quarter to 45 mln sfr, from 15 mln, as the company failed to offset rising raw material and energy costs and booked 120 mln of restructuring charge for the closure of its Selby site in the UK.
Clariant warned that for the rest of the year it will not be able to fully compensate for the "high level of raw material and energy cost increases as well as for continued unfavourable exchange rates".
In parallel, the speciality chemicals group announced plans to close its Pigment & Additives site in Coventry, Rhode Island and the Masterbatches site in Naucalpan, Mexico.
Consequently, further restructuring costs will be booked in the fourth quarter, with restructuring costs for 2007 seen totaling 250 mln sfr.
Clariant also said that as part of a streamlining process 100 jobs at its corporate headquarter in Basel will go as accountability for its businesses will be shifted closer to customers and markets.
Sales during the third quarter rose to 2.111 bln sfr, from 2.009 bln, managing to beat the consensus forecast of 2.091 bln, even though Clariant said that it was faced with some slowdown, particularly in China and India, whereas the US remained more resilient.
The company said that price increase initiatives across all divisions have started bearing fruit.
For 2007 as a whole, Clariant sees higher sales in local currency terms in 2007, with operating profit before exceptionals seen at around 530 mln and net at last year's level.
The group's operating profit before exceptionals fell during the third quarter to a weaker-than-forecast 123 mln sfr, from 160 mln. Analysts had forecast operating profit before exceptionals of 131-160 mln sfr, or 148 mln on average.
Its operating income after exceptionals was down at 5 mln sfr, compared to 48 mln, due to the 120 mln sfr restructuring charge related to the closure of the Textile, Leather & Paper Chemicals site in Selby, UK.
Clariant also substantially increased operating cash flow in the quarter to 266 mln sfr, from 95 mln, resulting from the company's focus on net working capital improvement, especially driven by inventory reductions.
"In order to compensate for the delay in EBIT improvement, we will increase the pressure on executing our strategic initiatives focusing on site network reduction, reducing complexity, increasing prices and reducing selling, general & administrative costs," Clariant chief executive Jan Secher commented. "This will enable us to deliver an bove-industry average return on investment capital (ROIC) in 2010," he said.
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