Clariant Earnings: EBITDA in Line With Vara Consensus Despite One-Off Hit

No-moat Clariant CLN reported first-quarter adjusted EBITDA of CHF 167 million, down 24% over 2022 and broadly in line with Vara consensus. The EBITDA margin stood at 13.9%, 70 basis points lower than Vara consensus estimates. Cost savings and pricing measures of 7% had a positive impact on profitability, however these actions were offset by 7% lower volumes and business mix, the negative effect of CHF 13 million from Sunliquid technology, and a one-time CHF 11 million adjustment of the Heubach Group share. The 2023 outlook remains unchanged, however the CHF 5 billion in sales are expected to include a net negative top-line impact of around CHF 130 million from divestments and a bolt-on acquisition. At the moment, we don’t expect to make a material change to our CHF 22 fair value estimate. At current levels, the shares look undervalued.

Each of the three business units experienced a decrease in EBITDA margin, largely due to raw material price volatility, lower volumes, and customer destocking. However, the specific factors hitting their profitability differed based on the nature of the respective businesses. The adsorbents and additives business faced softer volumes and continued customer destocking in additives, leading to lower operating leverage. In contrast, the catalysts business unit experienced volume growth that underpinned a slight operating leverage improvement, but also had first-of-a-kind technology called Sunliquid) that posed mechanical, chemical, and operational challenges during its ramp-up, hitting profitability. The care chemicals business faced notably lower volumes and customer destocking, especially in industrial end markets, but was supported by continued active price management.