Clariant Earnings: EBITDA’s 19% Decline Exceeds Consensus With Positive Cost Management Effects

No-moat Clariant CLN reported second-quarter EBITDA of CHF 175 million, experiencing a 19% decline compared with the previous year. Despite this decrease, it surpassed company guidance and exceeded the Vara consensus by 9%, even after the profit warning led to a downward revision of the consensus. The management maintained its adjusted outlook as of 7 July 2023, with projected EBITDA ranging from CHF 650 million to CHF 700 million for the full year. Investors responded positively to the results, reflected in a nearly 2% increase in shares at the time of writing. While we anticipate adjusting our near-term estimates, we do not foresee significant changes to our CHF 22 fair value estimate. At current levels, the shares appear undervalued.

The additives business experienced the most significant negative impact, facing a decline in volumes by 17%, closely followed by a 10% reduction in Care Chemicals. Conversely, the catalysis business, excluding Sunliquid, demonstrated continued improvement, achieving substantial volume growth of 25%. Clariant anticipates no significant macroeconomic recovery in the second half of 2023. Despite the challenging outlook, the company remains proactive in cost management, implementing further measures to align its cost base with the low volume environment. As a result, Clariant delivered an additional CHF 14 million in savings this quarter, demonstrating its dedication to attaining the revised CHF 170 million savings target by 2025, now increased by CHF 10 million.