Clariant Shares Drop

Shares in Clariant (SIX:CLN) fell by over 5% in early European trading on Tuesday after the Swiss chemicals group lowered its annual sales target and reported third-quarter profits that missed expectations.

CEO's Comments

CEO Conrad Keijzer indicated that the company has faced a "continued challenging environment" and broader uncertainties despite easing inflationary pressures. The chemical industry is struggling with higher energy prices and weaker customer demand, negatively impacting revenues.

Revised Sales Expectations

Clariant now expects a low single-digit percent decline in local currency sales for 2024. Previously, it had anticipated flat or modest growth in annual sales.

Growth in its absorbents, additives unit, and care chemicals—including the recently acquired Lucas Meyer Cosmetics—is expected to only partially offset lower sales in its catalysts division.

2024 Guidance

Clariant, which produces products for de-icers and food ingredients, maintained its guidance for 2024 earnings before interest, taxes, depreciation, and amortization margin at around 16%. The impact of the Lucas Meyer acquisition and the reduced effect from closing its Sunliquid bioethanol production in Romania helped mitigate the decrease in catalytic product sales.

Future Projections

For 2025, Clariant forecasts a year of continued profitability improvement, expecting sales growth of 3% to 5% and a core income margin of 17% to 18%. The firm remains committed to medium-term targets amid anticipated market recovery over the next two to three years.

Third Quarter Results

In the third quarter, Clariant reported a 13% drop in core income to 139 million Swiss francs ($160.69 million) due to declining catalyst volumes and restructuring costs, which fell short of analyst expectations of 150 million Swiss francs.

Analysts at JPMorgan Chase noted that demand in the business is vulnerable to new capacity expansions in the industry, which are decelerating due to existing overcapacity.