Clariant discloses problems with its books

The Swiss specialty chemical firm Clariant says it is investigating the possibility of financial improprieties related to the reporting of its 2020 and 2021 financial performance. Clariant executives say they first learned about the situation in September 2021 when they were alerted by whistleblowers within the company.

The company is reviewing whether some employees “incorrectly booked provisions and accruals with the aim of steering the company’s results to meet internal and external targets,” it says in a fact sheet about the investigation. The provisions and accruals include restructuring charges, indemnities, warranties, and environmental provisions.

“There are questions about IFRS compliance and correct timing of these bookings,” the fact sheet states, referring to International Financial Reporting Standards. Clariant says it has systematically analyzed a few hundred types of bookings. “Out of these, the vast majority of transactions was accounted for correctly, but a smaller number of transactions need further confirmation,” the company states.

Clariant has suspended at least one employee and says some other employees are no longer allowed to process bookings on their own.

Meanwhile, CEO Conrad Keijzer is trying to reassure the firm’s shareholders. “We are investigating this matter with utmost urgency and diligence,” he says in a press release. Nevertheless, the disclosure caused Clariant’s share price to fall about 15% on the day the company released it.

Clariant says it has not found any problems associated with the company’s reporting of sales. The firm published initial financial results for 2021 that show sales increased 15% in local currencies to about $4 billion.

Following the disclosure, analysts at the investment firm Jefferies downgraded their rating of Clariant shares from “buy” to “hold.” Jefferies expects earnings to be 4% lower than it had previously anticipated, as a result of potential improprieties. “Why has it taken five months for these issues to be made public and how are they still not resolved?” Jefferies asks in a note to investors.