Clariant Revamps Again

Swiss specialty chemicals company Clariant has announced a new round of cost-cutting measures intended to sharpen its focus on profitability. Actions include shutting 10% of its production sites, primarily in Europe; slashing some 2,200 jobs, nearly 10% of total employment around the world; and shrinking its product line by 25%.

It's the latest in a series of efforts the company has launched over the past six years to reach sustainable profitability. And this time, analysts cautiously say, it might just work.

Over the next four years, the company will spend roughly $400 million on cost-saving initiatives, including the plant network reduction. Clariant says its four divisions-textile, leather, and paper chemicals; pigments and additives; masterbatches; and functional chemicals-will be supported by increasingly centralized group functions. The firm will also emphasize fast-growing markets, particularly China and India.

The new program follows a wide-ranging review led by CEO Jan Secher, who took over that job this past spring. "We found that the company is headed in the right direction in most areas," Secher says. "What is required now is developing the company to achieve world-class performance, reducing complexity where it is not required, and adopting stricter cost-cutting measures."

Over the next four years, the company will invest primarily in businesses that provide application and solution services, rather than straight products, Secher says. Clariant has also earmarked $80 million over the four years for early-stage "incubator" projects.

Clariant has long tried the patience of the financial community. In a research note published in August, Merrill Lynch analyst Robyn Coombs noted that the company's cost-cutting efforts "were not delivering."

This time around, however, according to another analyst who declined to be named, the outlook is "promising. It certainly looks achievable." The effort, he points out, is by a new chief executive who is focusing on delivery.

"One of the key things they hadn't done before was to have a global organization," the analyst continues. "Before, Clariant was essentially a collection of local businesses. They had duplication of facilities and duplication of pricing policies. It was a mess, really."