Clariant AG

Anja Pomrehn - Head:Investor Relations Patrick Jany - Chief Financial Officer, Member of the Executive Committee

Thomas Wrigglesworth - Citi Christian Faitz - Kepler Cheuvreux Markus Mayer - Baader-Helvea Theodora Lee Joseph - Goldman Sachs Patrick Lambert - Raymond James Stephanie Boswell - Bank of America Merrill Lynch Alex Stewart - Barclays Paul Walsh - Morgan Stanley Patrick Rafaisz - UBS

Ladies and gentlemen, good afternoon or good morning. My name is Anja Pomrehn and I welcome you to Clariant's conference call and the live webcast for the first quarter 2017.

Joining me is Patrick Jany, CFO of Clariant. The slides for today's presentation can be found on our website along with our media release.

I would like to remind the participants that the presentation does includes forward-looking statements, which are subject to risks and uncertainties. listeners and readers are therefore strongly encouraged to refer to the disclaimer on slide two of our presentation.

The replay of this call will be available on the Clariant website for 30 days. And now I would like to turn over the call over to your host for today's call.

And with that, it's my pleasure to hand over to Patrick.

Thank you Anja. Ladies and gentlemen, good afternoon.

It is my pleasure to have you join our first quarter 2017 conference call today. Let us start with the highlights.

As you can see on slide four, in Q1 2017, Clariant delivered its strong performance, not only growing sales by 9% local currency, but also by expanding EBITDA before exceptional items by 10%, while the EBITDA margin before exceptional items rose by 10 basis points to 15.6%. This is the strongest first quarter that we have reported since 2012, not only in terms of sales growth, but also in terms of absolute EBITDA and EBITDA margin.

Slide five reflects that. In Q1, we have seen a quarter with good volume growth across all business areas.

Group sales were driven by 6% volume growth. The acquisitions added another 3% of sales, which totaled CHF1.6 billion for the group.

Prices marginally increased but stayed flat overall. Turning to the regions.

We saw double-digit growth in Europe and Asia of 12% and 11% respectively. Europe saw good growth in particular in care chemicals, catalysis and additives.

Asia advanced due to strong growth in care chemicals, functional minerals and plastics and coatings. North America also delivered double-digit growth, which however was due to the impact from the acquisitions which were consolidated in the fourth quarter of last year.

Adjusted for the acquisitions, sales in North America were slightly down due to a weak demand particularly in catalysis and aviation. The region of Middle East and Africa advanced 7% versus the same period last year.

Only Latin America saw a mid-single-digit decline, mainly driven by Brazil, which is not surprising given the overall economic pressure this region is facing. Moving on to slide six.

All business areas recorded because of the good sales performance, which was driven by strong volume growth. On the back of stronger sales and efficiency gains in all business areas in tandem with the differentiated steering of the plastic and coatings business area, profitability both in absolute terms as well as in margins could be further improved.

EBITDA before exceptional items rose 10% in local currency to CHF250 million. As a consequence, we could expand the EBITDA margin before extraordinary items to 15.6%.

This is an excellent result as we have even exceeded the very strong comparable base of the previous year Looking now at the figures of the business areas for Q1 2017 in more detail, starting with care chemicals on slide seven. Care chemicals delivered record sales growth of 9% in local currency.

Consumer care continued to deliver ongoing good sales growth in all segments against a strong comparable base. Crop solutions, in particular, reflected a recovery with a high single-digit sales increase.

Within the industrial applications segments, sales showed an enduring underlying progression despite the fact that year-on-year the aviation business was slightly weaker due to the shorter and milder winter months. Sales in Asia and Europe stand out while North America delivered only stable sales due to the weak aviation business in the first quarter of this year and Latin America was still negative.

The EBITDA margin before exceptional items at care chemicals remained stable at 18.2% as the result of stronger sales, despite the shortfall of the aviation business and the ongoing negative impact of ramp-up costs for new capacities. As mentioned before, we expect these ramp-up costs for new capacities to continue until the middle of the year.

In addition, the second quarter will also be marked by maintenance shutdowns of some plans in China, Germany, the U.S. and in Latin America.

Moving on to catalysis on slide eight. Catalysis sales increased by 2% in local currency, reaching CHF142 million.

This is the strongest first quarter that catalysis has reported since six years. The good sales growth in syngas and specialty catalyst was able to offset the shortfall in petrochemicals in North America.

On the regional level, demand accelerated in Europe and we also saw slight recovery in Asia where petrochemicals and syngas sales improved slightly. The EBITDA margin before exceptional items was 19%, 10 basis points short of the previous year.

The margin development is partially attributable to ramp-up costs for the polypropylene catalyst plant in the U.S. The reported margin can be seen as comparable to last year because margins in catalysis generally always to vary substantially from quarter-to-quarter.

This is why, as you know, catalysis should be looked at from a longer time horizon perspective. For 2017, we anticipate a continuing state demand in catalysis as a result from the uncertain economic environment.

However, the mid to long-term fundamentals remain positive based on client's portfolio strength, innovation capability, global footprint and growing partnerships. We would also like to inform you that as of April 1, 2017 Clariant's joint venture, Süd-Chemie India Private Limited, will be fully consolidated.

This step underlines our increasing focus on it. On page nine, we see that natural resources sales grew by 17% in local currency.

The sales were lifted by solid growth in functional minerals as well by acquisitions in the oil and mining service business, which contributed 16% sales growth in local currency. The sales growth in local currency was primarily supported by the regions of Middle East and Africa, Latin America and Asia.

In the oil and mining service business, sales grew double-digit supported by the acquisitions. Adjusted for those, the sales development was slightly negative year-on-year in a still challenging market.

However, as in the previous quarters, we outpaced the industry, which is a very auspicious result. Functional minerals, sales grew favorably in all regions and delivered solid sales performance.

There was strong expansion in foundry, which was supported by new product launches. And the edible oil purification business also continued to develop and encouragingly.

The EBITDA margin before exceptional items declined from 17.8% to 16.4% due to several specific factors which included a weaker demand for the seasonal refinery business due to the mild winter as well as integration cost for the Kel-Tech and X-Chem acquisitions. Slide 10 shows that sales in the plastic and coatings business area rose by 6% in local currency year-on-year, which is a very good result against a very strong first quarter last year.

Masterbatches had a continued good growth performance in all regions apart from Latin America. The European, North American markets as well as the Middle East and Africa were particularly strong.

The pigments business continued to develop solidly with particular strong sales in Europe and China and the progress was primarily driven by sales in plastics and special applications segment. The strong sales improvement in the additive business was attributable to increased demand in all three business lines.

In particular strength was recorded in flame retardants as a result of increasing demand in the construction and the electronic industry markets. The EBITDA before exceptional items increased by 7% in local currency to CHF110 million.

This good result was achieved in spite of an already strong first quarter in the previous year. The improvement on an absolute basis is largely the result of a higher capacity utilization and the continued positive effect of the differentiated business steering.

So let me summarize our good start. In local currency, Clariant continued to grow sales by 9%, mainly driven by a 6% volume growth and 3% due to acquisitions.

EBITDA before exceptional items rose by 10% year-on-year, leading to an EBITDA margin before exceptional items increase of 10 basis points to 15.6%. The economic view on the current business year can be seen on slide 11.

For 2017, Clariant expects the uncertain environment characterized by a high volatility in commodity prices, currencies and political uncertainties, to continue. We expect that the economic environment for emerging markets will remain both challenging and volatile.

Moderate growth is anticipated in the United States and growth in Europe is expected to remain stable. Slide 12 shows that over the full year 2017, we will continue to focus on growing our businesses by means of innovation, seizing internal and external growth opportunities and maximizing cost-efficiency.

We are confident to be able to achieve growth in local currency, to progress operating cash flow and to further improve absolute EBITDA as well as EBITDA margin before exceptional items. We confirm our target for the mid-term to reach a position in the top tier of the specialty chemicals industry.

This corresponds to an EBITDA margin before exceptional items in the range of 16% to 19% and a return on invested capital above the peer group average. With that, I turn the call back over to Anja.

Thank you Patrick for taking us through the numbers of the first quarter of 2017. I think the results do present another step forward towards reaching Clariant's group target in spite of the tough comparable basis, which we were actually able to beat.

And with that, I would like to open the line for questions.

Hi Anja. Hi Patrick.

Thanks very much for the presentation. I will limit myself to two questions.

The first one is, the price development through the quarter, obviously at the group level, was zero. But could you give us some color around that by division?

I guess I am surprised that given that there probably is an increasing cost pressure in the business that the prices haven't risen and also the volumes were good and prices still didn't go up, but I suspect there are positive and minuses in that. And I guess, this is my second question.

In oil and gas, you talked about integration costs. Could you just try and or could you help dimensionalize that for us so we get some sense of how long that might last for and when those cost in oil and gas will drop out?

Thank you.

Hi Thomas. So starting with the first question.

The price development at group level was indeed close to zero, slightly positive. So we slightly started to increase prices.

And I think from the global group point of view we do expect still an increase in raw material during the year. So we are very watchful of this not to lose margin and we are expecting that our price dynamics will pick up in Q2 and Q3 to be able to compensate the expected increase of raw materials of 2% to 3% over the course of the yes.

So with no impact on the margin. Looking at a bit of more color on the different businesses, I would say that typically the one business which is more reacting fast to increases in raw materials are linked to oil particularly is care chemicals and in that particular segment you actually have an increase in price already which is starting to be significant and will not be rounded down to zero while in other areas which are further away from the actual raw material, like for instance in plastic and coatings, we still don't have an increase dynamics, but we are more flattish, right.

So it does represent an average over the different businesses which ensures as well that we are speedy enough in increasing our price.

Okay.

And in terms of oil and gas integration cost, indeed we guide for some integration in our oil business driven by the acquisitions we have done in United States in the fourth quarter of last year. I think it is important to see that we are talking about integration cost, so we talk really about integration of people, workshops, IT and so on, which are not restructuring cost or major cost which is not booked as exceptional items, right.

So the proportion is fairly small and it will be finished by the end of Q2, mostly or totally. And the main deviation, in fact from EBITDA or EBIT for oil and mining and therefore financial resources came off on the weakness of the refinery business which was a bit lower than usual, given the milder winter as well.

Okay. Very helpful.

Thank you very much.

Thank you.

Yes. Thanks.

Just a couple of questions, please. First of all, can you please share with us how Q2 has started off in terms of demand conditions for key customer industries such as agriculture and petrochemicals and oil and gas?

Second of all, can you share with us an indication how cash flow levels have developed up to date versus last year, if that is possible? And final question, in statements this morning you talked about your willingness to do small add-on acquisition.

So could you please remind us of your current M&A strategy? Thanks.

So many questions. So very first to the start of Q2, I think as always you know that we don't guide on the current quarter, but I would say there is certainly with the unchanged dynamics as far as we can see, which means as you probably notice we actually do have quite a good dynamic in the crop solutions business or the agro business, which has certainly picked up from the rather mid-single digit growth we had for 2016.

So we look forward to actually quite a good season in the crop business, particularly as well in Latin America. I would say, care chemicals would continue to grow.

I think there we have seen a very nice growth pattern, well distributed amongst all the segments, which means as well between consumer care the one hand and industrial application on the other, but also within industry application, fairly broad between lubricants, paints and coatings and so on, quite a nice distribution of course there. So it speak more for a rather stable environment which we would right now anticipate to continue looking forward into the year.

And in the oil business, as you have seen the growth in natural resources is mainly driven by acquisitions. We would be at 1% growth without acquisition where we got for 16% acquisition effect which really then again brings us back to the pattern of last year with a growing functional minerals business.

Our bentonite business continues to grow and a slight contraction in the heritage oil business. Oil and mining business there, again, driven by the weakness in refinery more than by actually the weakness in the actual oil business where we seem to see a certain stabilization which reinforces our general guidance, I am not talking about Q2, but more about the second half of the year, we would expect that business to progressively see a higher growth as increased drilling and progressively increasing production levels should ensure a better growth dynamic in our oil business in the second half when compared to the first half or the previous year.

Now looking at the cash flow. Obviously we don't guide for cash flow or we don't report cash flow on a quarterly basis anymore, but I will just say, the main ingredient for cash is EBITDA and therefore, I would not be concerned and we maintain our guidance that we will increase cash flow this year which is, as you know, our main target indeed.

Now in terms of M&A policy. The M&A policy is unchanged.

We are always looking on smaller add-ons from the dimensioning between the couple of millions to $100 million, particularly in care chemicals and personal care, in particular in catalysis and in oil and this is unchanged. And I think that will be a continuous and unchanged development during the year.

Always trying to reinforce geographical or technological positions in specific markets.

Very helpful. Thanks Patrick.

Thank you.

Yes. Good afternoon Patrick.

Good afternoon Anja. Some questions, first of all, on catalysts.

BASF today mentioned that they already see a recovery of their refill business. Maybe you can elaborate do you already also see this recovery?

Previously you all said, you said you expect this to happen in second half. Secondly, on care chemicals, you said deicing was slightly down but agro strong.

What was the development at personal care? And in particular, the forecast on the glucamide product launch?

And then also the comment you made on the maintenance shutdowns in Q2, what kind of effect do you expect here? And then lastly, this more relatively occasional recovery in plastics and coatings business, in particular and the pigments business, maybe you can help us where the pigments volumes are in respect to 2009 levels?

And what are your thoughts on the operational leverage, if this business have to recover? Thanks.

Thank you Markus. So starting with catalysis.

I think it always depends on which reaction we are looking for in terms of refill, right. What we have seen certainly is the continuation, first of all, in the U.S.

with the reduced new investment and not a very strong refill type, in terms of petrochemicals, which is the known development, right So then it will change what has been slightly improving, as you have seen, Q4 last year is slightly China. We do have more growth now in China, which means that we probably really reached the bottom.

We indicated that in Q4 but Q1 now seems to be as we are in the right direction. So it's probably fair to say that we now have bottomed out.

And then the question is when does the pull stops? It looks slowly that things are progressing in China and that looks, therefore, quite good in terms of future growth particularly talking about 2018 an d 2019 as we usually do and for the actual rhythm of 2017, we will come back by midyear.

But I think we are still in the position that we would expect some growth in the business again. And now looking at care chemicals.

Indeed, the deicing was pretty weak. Agro was good.

Personal care and home care, if we packed in together, were actually pretty strong as well. So from that point of view, I think we are not far away from the total figure of care chemicals and therefore quite a good start in the year.

I think what was particularly strong in terms of rebound was more crop which is why we highlighted it. It has more of a positive dynamic in it while home care continues to hum at a good level, just as in previous quarters.

The maintenance we highlight for Q2 is certainly something which will cause us slight or have a slight impact on the figures, I would say very particularly more in the margins than specifically in sales because we will probably be able to cover most of the sales through preproduction before the maintenance. But then we will have certainly plant shutdowns, the main one being the one in the U.S.

now, Clear Lake plant which is not linked to our all operation, but to the ethylene oxide we get delivered there. The cracker there is being maintained and that will be dependent a little bit therefore on the actual outage.

It is not totally into our control and we will see therefore the impact how big it was at the end of the quarter. The maintenance itself takes place in the middle of the quarter.

So a bit too early to really see whether it's all according to plan or whether it is one or two weeks longer, as it sometimes happens. Nevertheless, I would say that will probably slightly impact our Q2 care chemicals, but no reason to now change the yearly guidance or to have a significant impact on it.

It is just more a specific guidance on the Q2 dynamics. The market process is actually quite supportive.

From plastic and coatings, yes, we had actually a good quarter. You will remember that last year we had an excellent, somewhat surprising quarter in terms of sales growth and profitability.

Really the first quarter where we applied differentiated steering worked exceptionally well and we are very pleased to have been able to match this level, both in terms of growth and in terms of profitability. It is still reliant very much on an excellent additive business.

We highlighted here the flame retardants. You will probably remember that the flame retardant margins are pretty good and that certainly supported plastic and coatings along with a very strong masterbatch.

Pigments is doing well in the plastic area. I would say, we still need to see more of it on the coating side, which has been, it's a bit of a prolongation of the evolution of the last year as well.

So quite as strong and supportive plastic environment where we can also regain market share while the coating part needs a bit more time to reposition our products and regain market share. So we would expect in terms of capacity utilization and in leverage to your question that we certainly do have still potential for pigments, particularly as we go along the year later in the year to make a bigger difference on the coating area than it has up to today.

Perfect. Only the question on Glucamide, maybe you can shed some light on the product launch here?

Yes. The product launch is doing well.

I think we have received acceptance from quite a few now bigger customers. You may remember that we started with smaller ones last year.

Even though the part of being totally new from the chemical point of view, it requires quite a significant switching or reformulation of products at our customer end. This is now happening for a couple of bigger customers as well.

So we look forward to increased volumes this year. We will not reach full capacity with either but I think it will start to be more noticeable as we go along the year.

And therefore to reduce the year, idle facility cost, which is an integral part of our guidance that by the second half of the year it should start to recede as those volumes come as well.

Okay. Perfect.

Thanks so much.

Thank you.

Hi Patrick. Hi Anja.

Thanks for taking my questions. I have got two actually.

So the first is actually on the margin development in the catalysis division this quarter. You mentioned that there was some ramp-up cost factored in there.

Just wanted to get a sense how material that was and actually when we should think about that impact dissipating? The second is, actually it will be quite helpful if you could shed some light on your recent contract wins in catalysis and how we can think about the magnitude of growth when the growth in that division does come back?

One of your U.S. peers in that business has talked quite substantially about wanting to grow their share from the installed base of operating MTO units in China.

So do you think it's actually going to be much tougher now maintaining your market share when you do see the revenue cycles start to materially pick up? Thank you.

So starting with the margins of catalysis. Indeed we are starting to have some adversity costs that we had guided for the new polypropylene plant in the U.S.

This will certainly continue in Q2. For now we have the started preproduction.

We are optimizing the quality of the product. Actual sales with start now in Q2 with unchanged sales guidance for the year CHF30 million which is a good start for a new plant but not enough to really contribute significantly and intensify the margin.

So I will say, for the year we don't expect a significant impact on the margin from the plant itself and a slight negative impact now in Q1 and Q2. The impact itself, we haven't quantified, but it is certainly something which has turned, I would say, the margin we probably would have been above previous year in terms of margin if we hadn't those costs, yes.

Now in terms of growth. We don't really now going to, I would say, specific contracts.

However, I would say the pattern is confirmed, which means that China is slowly picking up. China is picking up because of methanol ammonia prices which make production more profitable at our customers and therefore generates high production and higher need for a refill for new catalysts.

We also have, I would say, two access of further demand in China. One is, as you mentioned, MTO which is certainly one area, of course, that we would expect to also benefit quite significantly from what we have seen in the pipeline in the next coming years.

And also I would say a trend that was multiple feedstock as crackers are retroactively, I would say, fitted to be able to work on the liquefied gas on coal tar naphtha. So that's quite a supportive dynamic which just really confirms our view that China growth will actually start this year to be good.

And then it will make the difference at catalysis level in 2018 and 2019. So it looks pretty good, unchanged and I think the market is turning to a growth market again.

Okay. Thank you very much.

You are welcome.

Hi. Good afternoon.

Actually a lot of question I had were answered. And just on oil and gas, if I do the math that you mentioned during the presentation, the contribution of your acquisitions is a bit more than CHF15 million for the quarter which is a very good.

Could you compare that just? And the underlying growth of those two acquisitions seem to be also pretty good.

So can you confirm for oil production, it confirms that what you were saying that that has not been too much affected or has it already starting to rebound? That's the first question.

Second question about working capital. So far, in the all the results, we have seen working capital was pretty high on the volumes.

Q1 is at the same case for you? So we should not be too worried even in H11 level that gross working capital is still pretty high compared to historical trend?

And I know that it's now your focus for Clariant but I understand the dynamics of volumes. Third question, is it fair to think that volume impact will really start in Q2?

And should we pencil the CHF10 million per quarter type of revenue? And last one, I promise, Stahl.

You are being diluted a bit, I guess, with BASF deal with Stahl. Can you shed light a little bit more because I am pretty sure you are being involved in the discussion, nevertheless.

How is the business doing overall, the legacy business? And whether you see the synergies from the integration of BASF business into Stahl benefiting your clients?

Thank you.

All right. Okay.

So I will go through your numerous remaining questions. First it would be, obviously the oil and mining.

I think just do to put numbers, the number is right. We get on 16% acquisition effect in natural resources on the quarter having sales of beyond CHF47 million that puts the acquisition affect of above CHF14 million, yes.

So that was slightly above that. So it is a good impact.

We are still ramping up on the acquisitions. You know that the running rate should be CHF50 million by quarter.

So we have the same dynamic there as in our, I would say, legacy oil business, you call it like this. But we expect the second half being stronger than the first half just by the mechanics of first drilling then pumping oil in the U.S.

So from that point of view, I think it is on plan. We are better than planned.

But we are on plan, right. It also means that for the U.S.

we have started to see a stabilization that was oil, yes. And we will have to see Q2 where we start to see a slight growth over there, we have to wait to Q3, but independently from that specific development by quarter, it just underlines and comforts us in our view that we should see a better dynamic in the second half when compared to the first half.

And that will be then applicable to both the acquired businesses but also to our legacy business. So it looks on plan.

Do you still have your target for, I think you mentioned, was it CHF200 million generation from the acquisition?

Correct. When we acquired the businesses we guided on yearly revenue of CHF200 million which was big for CHF50 million by quarter.

What I just indicated we expect to sort of ramping up to that rate just like it is in our beauty business as well where we expect a stronger second half compared to the first half.

Okay.

Okay. Now when you look at the working capital levels, they actually are very much in focus.

I think cash is, as in the last two years and for the coming year, is the absolute focus, more than the EBITDA or EBITDA margin. And it certainly is a constant focus on our businesses and I am very, very confident that working capital levels actually have been very much controlled in Q1 and therefore I would expect them as well to control working capital evolution in Q2 and towards the end of the year.

So I am confident on the cash flow generation as well, not only from the EBITDA but also from the working capital component.

Novolen?

Looking now at Novolen, we will probably see that the ramp-up effectively is starting in Q2 and more pronounced that was in Q3, Q4. As we are starting to deliver, we don't deliver really all the orders in a constant flow, you will also have to register the new products at customers.

So it has a slight ramp-up effect there, but I think it is on track there to ramp up. So therefore we can confirm our guidance of CHF30 million for the year.

When you look at different topics on Stahl to see acquiring the leather business of BASF, I think that certainly is a great move for Stahl. We are extremely happy with the development of the business.

I think the figures are published, right, on Stahl. So they have done an excellent EBITDA margin and they continue to grow.

I think the most valuable divestment we have ever made in terms of first value at sale and increased value for the participation. Through the bigger size, our participation gets reduced, I believe, to 19% but in terms of absolute contribution it should increase.

First of all, obviously the business is bigger and would have as well as synergies on the acquired businesses. Therefore the business case itself looks absolutely viable which is also why we absolutely support it.

Great. Thank you.

Hi. Good afternoon.

It's actually Stephanie Boswell from Bank of America Merrill Lynch. I had two short points of clarification.

Going back to the first question on pricing. So pricing across the board was flat in the first quarter.

We have obviously seen pretty significant raw material inflation. So my assumption would be that as the pricing side catches up, you should actually get a sequential progression in your margins going into Q2.

So if you wouldn't mind, could you give us the percentage in raw material price increases that you had on a group level and from a P&C basis in the quarter? And the second question was, I am sorry if I missed it earlier, but what was the absolute level of ramp-up cost that you incurred within the care chemicals division within the first quarter?

Thank you.

Well, I am starting with the question in the order on the pricing topic. I think the pricing was slightly up as we mentioned earlier with a difference, quite a significant difference across the businesses.

I think what we have seen right now is not really yet a significant increase in raw materials. We anticipate that for Q2, Q3 but we do have a certain delay because of the pricing mechanism of our raw materials, the agreements we have.

So we don't have an immediate pass on. We typically have quarterly pricing and so on, in place for care chemicals in particular where raw materials tend to be more volatile in their evolution.

Therefore we haven't yet seen a very big impact of raw materials and we intend to offset whatever comes through in Q2, Q3 through progressive price increases, which are now in the market. And therefore I think we should not have elevation in margin, not on the negative side, but obviously not on the positive side.

It is something which should be fairly margin neutral by the end of the year, right, not excluding some of timing issues for specific business, specific quarter. But at group level, it shouldn't be material and should be fully offset by year end.

And plastic and coatings, in particular is actually quite far away from the typical oil derivates and what is the case for pigments and to the masterbatches as well. And when we do buy more oil related products, like for certain waxes or for polymers for masterbatches, we tend to price it on a very short notice.

So we do not have an exposure on raw material prices as such. So typically I would expect care chemicals to have a bit more of work to do in terms of pricing more than the other areas of the group.

But overall for now fairly neutral and we should have an increase pricing dynamics in Q2, Q3. The second question was about?

Absolute ramp-up cost?

Yes. The absolute ramp-up cost in care chemicals.

I think we are fairly in line with our guidance of 1% of sales there which has been offset by higher volumes now in the first quarter. And there was a, let's say, very nice evolution, but we would expect that, certainly those costs, until mid-year will be there until demand actually in those new products ramps up in the second half of the year.

So overall, we are fairly close with a 1% impact there of facility cost.

Okay. Thank you very much.

Hi. Good afternoon Patrick and Anja.

Well, I wanted to labor the points on pricing at group level which was slightly positive. Care chemicals was clearly up 1% or 2% or 3%, whatever it might be but the implication is that some other part of the business was negative.

Care chemicals was about 25% of group sales. So without asking you again to say which divisions have gone through a negative pricing which I understand you don't want to do.

Can you perhaps answer whether in natural resources, particularly oil and mining services, there is undue price pressure, capacity pressure, more capacity? The second thing is, the Indian joint venture consolidation, is that material?

Could you give a sense of indication of what the consolidation impact might be? And then finally, on care chemicals, I understand or I believe that the core care margin is slightly above it's divisional average which would be accretive to the divisional margin given the growth was clearly above the others.

If you could either confirm that or a few thoughts would be great. Thank you.

Well, going back on the pricing, I think there is now not real impact in Q1. So I know it's a topic but really for now it's not yet a topic.

I think that's why we have always, also when we were talking about a full year guidance for Q2, Q3 effect days of delay until raw material cost actually work their way through the P&L which gives us time to adapt pricing and therefore the only thing we have to look there is to be fast enough in increasing prices to offset the raw material cost when they actually are in the cost of goods sold that you have been selling. So from that of view, I think we are on time to compensate.

The dynamics is indeed in care chemicals as we mentioned earlier faster and we have already price increases there and then also raw material cost increases being felt by care chemicals. The rest is fairly neutral.

I want to say there is nobody with a real negative figure. It's more dilutional, the increase of the care chemicals number, which leads to the under 0.5 price increase and therefore, the rounding to zero, yes, to put it like this at group level.

In oil and mining, the pressure has probably been stronger back in 2015 when directly after the oil price came down, you had a massive reversal of all our customers wanting to offset their lower sales being directed into the oil price by reducing their cost. I think this is certainly something which will not go away.

But the actual pressure of our customers was more at that time than it is now. We have had time to reformulate to offer new solution where you actually consider the whole cost of treating, not the cost of the chemical.

But if you allow a customer to save a third or 50% of his water consumption to extract the same amount of oil to wash the same amount of oil, he saves much more than the cost of your chemical. So there are ways now to enter into a direct price discussion there, yes.

So from that point of view, not a specific, I would say, pricing subject now in Q1, not more than it was before and that will probably be continuing into the future, all right. Now looking at the Indian joint venture, which we now consolidate.

I think we probably can guide on the rest of the year of nine months figure of around CHF30 million sales in terms of Swiss Francs. So around CHF10 million a quarter.

So it is at the size of catalysis quite significant and a good addition to the network that we have. And in terms of margin of care chemicals and crop impact in particular, crop indeed has higher margins a bit like personal care has.

And this is also why we were able to offset a bit, as previously mentioned in the question earlier, idle facility cost which we do have after having significantly increased our capacity last year and that certainly contributed to have enough increased margin intensity to offset this idle cost and at the end come out with a stable margin.

Okay. Thank you so much.

Just getting back on the Indian joint venture. Presumably that's equity accounted at the moment.

So the sales would be new, so to speak and there would already be some contribution, the net income contribution and EBITDA. Will that EBITDA contribution change meaningfully once you have consolidated?

It will be in the same range as our current profitability or profitability guidance for catalysis. So it won't be dilutive on being increasing either.

Okay. Thanks.

Thanks a lot.

You are welcome.

Hi guys. Thanks very much for taking my question.

Good afternoon, Patrick, Anja. Two quick ones, please.

Patrick, with your comments just around bolt-on M&A, should we put to bed now any thoughts of grander designs around portfolio reshaping, either disposals and/or acquisitions? Second question, in catalysis are you seeing signals yet that big CapEx is coming back into the system, so new contract wins or the radar screen of new contract wins is starting to pick up?

Thank you.

Right. Thank you Paul.

Coming back to your question on M&A, I think we just confirmed really our M&A strategy, which has been fairly consistent in last few years. I think we certainly are totally focused, first of all, on organic growth, innovation driven organic growth is where we make the difference.

And then additional add-ons allow us to position us better in geographies on specific market segments in the three areas we mentioned before. I think there is no idea to be put to rest, because it was never really up of bigger ideas.

Like, by you guys.

Yes. No comment from my side there.

But I would say, it is our strict focus to deliver on that. And obviously if there is anything which allows us to significantly create shareholder value, we will always look at it.

But it is not the priority new strategy. Now looking at in terms catalysts, yes -- the question was, Anja?

The big CapEx.

Yes. Exactly, on the order entry, really I want to start with.

The order entry is probably quite strong. Actually it is better than it was last year at the current time.

And therefore think we are confident that catalysis will actually grow this year as we have also guided for it, flat or slight growth. I think we can certainly see that happening this year.

We do have orders which are both for refill but also for new investment. So it is slowly turning green.

It is in line with our guidance, right, of saying that 2017 will not be tremendously growing here but it certainly won't be a year like 2016 where we were shrinking. It is decent stabilization.

In some areas we are actually growing. We mentioned China early on.

And that is also due to new contracts. So it is not all refill.

There is certainly investment activity going on. And if you look further ahead in 2018, 2019, as we already mentioned in the past, we look forward to a nice combination of new contracts because what you sign today is ready for delivery 2018, 2019 or even 2020 sometimes and the refill cycle which will was set up as well, particularly in China.

And embedded in that guidance, Patrick, around the catalysis business, like you said, we have got to view this business on a half year by half year basis. So we probably shouldn't be taking the Q1 growth rates and assuming you will do the same in Q2, more look at the average over the year.

Yes, absolutely. As you probably know that we look at catalysis business on a yearly basis not on a half yearly basis and to determine growth rate and trends in order book, we actually look at a multiyear view there, right.

Thank you.

All right. Thank you very much.

Thank you. Good afternoon.

Just a few follow-ups. First coming back to pricing and raw materials.

Is your assumption for raw material price inflation is still 2% to 3% for the year? Then secondly, two questions around growth.

First in care chemicals and the 9% in local currency was pretty good. You mentioned crop solutions but you also said crop solutions only growing high single digits.

So I am wondering which areas were growing double digits? And lastly, plastics and coatings also pretty solid volumes here in Q1, how much of that would you think was restocking across the value chain and/or potential working day impact?

Thank you.

Yes. So looking at the pricing in the raw material topic.

Indeed we confirm our guidance that our present view is 2% to 3% raw material increase for the year. There might be a peak in some and then coming down towards the end of the year.

So it is a bit of typical volatile which is also part of our guidance, this volatility of raw materials which spike up and looks like it would increase much more, but by the end of the year should actually come back, right. So this is what the businesses have to deal with, really look at what is the real intrinsic raw material increase and the one spike for the one month and then it come down again.

So that is why we guide on a 2% to 3% which implies a 1.5% price increase over the year and that is also why we feel confident that we should be able to absorb that without impacting the margins over the year. Now looking at the growth in care chemicals.

We effectively highlighted crop protection because I think it's an important topic for us in terms of growth in the coming years. And we were only mid single digit growth last year which was a bit disappointing.

You may remember the last five years before that we had an average of 12% and we came down, it's still better than the sector, but still we came down in 2016 and it is nice to see that now with the new parts we have launched and the I would say, improving probably market size we can see it. In 2017, we look forward to a renewed growth and we are already now in the high single digits and the season is yet to start, right.

So that is a good sign for the future. That's why we highlighted that.

Indeed actually growth per se was pretty strong in most of the segment. The one negative was really the deicing which, as you know, can account for up to 20%, 16% to 20%, right, in one single quarter and therefore drags the total growth figure down which means that all the rest was actually pretty good and I indicated that or try to indicate that by talking about very strong demand in the industrial application segment as well.

Lubricants went well, plastic and coatings went well, construction did very well as well with partially double-digit figures there. So it was a very broad pattern of growth which you know, as you underlined, a certain solidity of the growth behind it, right.

Would you say you are then well on track to a higher than usual, so higher than 5% growth for care chemicals in 2017?

I think for now, we confirm our guidance which is 4% to 5% growth for care chemicals and then we will see how the year goes along, yes. For plastic and coatings and just one point as well for the whole sales figures, you do have the effect of Easter which we highlighted in an earlier question, which adds a couple of working days and particularly in care chemicals and plastic and coatings which are more daily invoicing businesses.

You do have an impact there, right. So that's why it's too early to extrapolate a higher growth guidance for the year.

But underlying demand is actually quite string indeed, yes. Therefore the plastic and coatings as well, benefit is certainly from I think two additional working days in Europe and one in the U.S.

certainly helped. But nevertheless we see very strong demand, particularly in the plastic chain, which means for additive business, particularly when you look at electronics, when you look at construction, so switches and so on, tubes which also affects positively our masterbatch business.

We continue to see good demand and to forecast good demand and therefore right now it is a bit difficult to see whether there was a huge effect of restocking or not. It is always easier to say it after it has happened than when it happens.

But we actually see quite a nice underlying demand. So I wouldn't exclude that you have one or two percentage points of restocking, but it would be pure speculation right now, which is also why, coming back to your previous question, we do not increase the guidance.

We feel comfortable to reach the guidance we have given for the group in terms of growth and we will see how to Q2, Q3 develops in terms of real underlying demand to really verify that what many distortion in the demand we have seen today. We have no indication for it but just as going to Q2, Q3 to see that.

Okay. Thank you.

All right. Thank you.

Yes, just a quick one. It has been now a few years where you talking about deicing being weaken and global warming.

Is there any reflection on how you can separate this business, may be putting in steering, the same steering type? Does it make sense at all for Clariant?

Or is it too integrated into care chemicals to carve out? Just your view on that.

Patrick, I think let's put things in place, it's a very, very interesting business which has tremendous profitability and allows us to use our principally manufacturing plant in Germany in winter, which will not have any use in winter anyway. So from that point of view, it helps to contribute cost and on top of that has an excellent margin.

So it is absolute justified business. Totally part of the portfolio and we see some nice development when airlines or airports go for higher quantity.

You do have a sustainability aspect which is also interesting for the future. But coming back to the main environment, it is absolutely certain and unfortunately a fact that winters are getting shorter, more erratic.

So you still have cold days, but it is not the long prolonged winter which used to be and it happens in the U.S. or North America to put it correctly or Europe but rarely in both cases at the same time.

And therefore growth is limited by the external weather environment. The business itself is absolutely fine, interesting and actually could not be separated from the rest anyway.

So we won't do it. Thank you.

We are happy to continue having the contribution.

Thanks Patrick.

Thank you.

Okay. Ladies and gentlemen, this then concludes today's conference.

Should you have any further questions, you can contact the Clariant Investor Relations team afterwards. So once again, thank you very much for joining the call today.

Have a good day and bye, bye.