Clariant, a Swiss speciality chemical group, on Wednesday tried to convince investors of the merits of its radical restructuring plan at its first investors’ day in four years.
New chief executive Jan Secher fleshed out the group’s attempt to distance itself from the sector’s woes by cutting 2,200 jobs – 10 per cent of the workforce – shutting a tenth of its plants and culling at least 25 per cent of its products.
Like its peers, Clariant has been squeezed by rising energy and raw materials costs, while showing only limited ability to pass on price increases to customers. But unlike some counterparts, it has failed until now fully to address its problems, which were prompted partly by big and expensive past acquisitions, leading to a de-centralised structure and a disparate portfolio.
Mr Secher, formerly a top ABB manager before running a small specialist Swiss company, admitted Clariant had suffered from an excessively complicated site structure, an over-complex product range and an inability to pass on price increases.
But he expressed confidence Clariant could raise its return on invested capital from 8 per cent – below the industry average – to about 10 per cent by the end of 2009 via stronger incentives for managers, lower working capital and stringent cost control, as well as more focus on services and transferring more work to Asia.
Analysts applauded Clariant’s most decisive attempt to bite the bullet in years of piecemeal job cuts and cost saving programmes.
But many questioned its ability to meet its sales targets. Investors also doubted that incentives and cost controls could generate the extra cash flow required to finance the SFr500m ($402m) closure programme.