Research Gets A Reboot At Clariant

Speaking recently in the bright white atrium of a new innovation center in Frankfurt, Clariant’s chief executive officer, Hariolf Kottmann, said the restructuring of his company’s business portfolio from commodity to specialty chemicals is complete and that the firm is now in a new phase of building profitability through R&D. He wants innovative new products, together with business efficiency improvements, to raise the firm’s pretax earnings as a percentage of sales from a middling 14.1% in 2013 to a sector-leading 16 to 19% after 2015.

In addition to spending more on R&D, Clariant is also introducing a series of initiatives to ensure that its increased investment in R&D is effective, Kottmann said. Clariant’s challenge, analysts say, will be to get leading performance out of its research group after years of neglect.

The firm’s R&D spending dropped to a low of $145 million in 2010, or 1.9% of sales, a ratio commonly found at commodity chemical companies. Thanks largely to its 2011 acquisition of the research-intensive catalyst maker Süd-Chemie, Clariant increased its spending on R&D in 2013 to more than $220 million, equivalent to 3.3% of sales. Future R&D spending will continue at 3.3% of sales, Kottmann said.

“Innovation is the biggest tool we have to influence the future,” Kottmann told reporters at a briefing in the center, which opened late last year.

The $130 million Frankfurt innovation center is Clariant’s largest-ever capital investment in R&D. It is a statement of intent, Kottmann said. It brings 500 researchers—half of all those in the company—from multiple disciplines and buildings under one roof. It is also Clariant’s first open-plan research building, designed to encourage cross-fertilization.

Clariant’s R&D spending in mature markets such as Europe will be flat in the future, but the firm will expand it in developing regions, including a doubling of R&D activity in China, Kottmann said. The firm plans to open a catalyst R&D center in Shanghai by 2015, and in recent weeks, it opened an R&D and technical services facility in Mumbai.

The company now has eight R&D centers and 50 technical application labs worldwide. “We now have a very good infrastructure for trying to develop innovations,” Kottmann said.

Clariant is also testing models for accelerating innovation. One such model, in trials for the past couple of years, is the so-called project house, which draws together chemists and commercial executives from Clariant and beyond to identify and execute intensive product development. The firm’s first project house, which is in Italy, is for its masterbatches business, which supplies color and performance additive concentrates to plastics makers. The project house is still at the trial phase but is proving extremely beneficial, the company said.

Even in businesses without the project house structure, Clariant is seeking to closely link research with commercial activities, said Christian Kohlpaintner, Clariant’s board member responsible for R&D. This has been the case with the firm’s Synergen OS adjuvant, a blend of methylated seed oil and a polymeric surfactant. The product encourages sprayed-on pesticide to stick to plant leaves, leading to enhanced exposure to the active ingredients.

By linking the inventors of Synergen OS with business executives “at an early stage of the development process, we can calculate the cost saving for our customer, which means that we can ask for the optimum price,” said Ralf Zerrer, head of strategic marketing for Clariant’s industrial and consumer specialties business. Synergen OS is currently being tested by agrochemical firms, Zerrer added.

Another soon-to-be-commercialized Clariant technology is a family of sugar-derived surfactants called glucamides. It is one of Kottmann’s favorite research projects and one that occasionally draws him into the labs in Frankfurt to check its progress.

With novel performance profiles compared with other surfactants and a relatively small environmental footprint, glucamides are the type of product Clariant is keen to commercialize. The firm is investing in manufacturing capacity and expects to bring products to the market in 2015.

Clariant’s strongest research field may be in catalysts, where it has a full development pipeline inherited from Süd-Chemie, according to Jaideep Pandya, an analyst with the German investment bank Berenberg. For businesses that weren’t part of Süd-Chemie, however, innovation has not been a priority for almost a decade, Pandya said. Clariant is coming from a long way back compared with specialty chemical innovation leaders such as Croda and Johnson Matthey, he said. “But you have to start somewhere.”

When Clariant bought Süd-Chemie, few company watchers believed it was the innovation powerhouse it has proven to be, Kottmann recently told analysts. Now, he said in Frankfurt, few outsiders believe that the wider Clariant can also become an innovation powerhouse. But with the new R&D measures being put into place, Kottmann is confident that once more he can prove his doubters wrong.