‘Layer By Layer’
Clariant’s Streamlining Bears First Fruits
Turning Point - Business is finally looking up for Clariant; the Swiss-based specialty chemicals company posted an 18% increase in sales in local currencies for Q2 2010 over 2009 and reported growth across all businesses and regions. However, this does not mean the company is in a festive mood - Clariant is in the midst of a sweeping restructuring and remains cautiously optimistic about the remainder of 2010.
The company has also announced a third round of sites that will be closed or consolidated under its Global Asset Network Optimization project (GANO). The pigments site in Tianjin, China, will be consolidated; activities from there will be moved to Clariant's largest pigments site in Hangzhou, China. Pigments production will be stopped altogether in Onsan, South Korea. Other sites that have been earmarked for closure or partial closure in previous announcements include locations in France; the UK; Mexico; Germany; Switzerland; Brazil; and India. Brandi Schuster spoke to Clariant Chief Financial Officer Patrick Jany about new developments within the company's restructuring strategy.
What was behind the decision to consolidate pigments activities in China and South Korea?
P. Jany: It is a part of our global review of our production sites. As far as pigments are concerned, it's not a question of geography, rather a question of productivity. We are concentrating our focus on our larger and more efficient production sites; Tianjin is one of our oldest units, and we will be transferring the production to our largest pigment site in Hangzhou, China.
How many job cuts will come with the relocation of the Tianjin site and the closure of the Onsan site in South Korea?
P. Jany: Between 200 and 300 positions will be eliminated in China, and about 130 in Onsan. We expect the consolidation to be wrapped up by the beginning of 2011.
These site closures don't mean that Clariant is decreasing its pigment capacity ...
P. Jany: In the end, we will be better utilizing our capacity. There will be no discontinuation of products - they will just be made at a different location.
Will the consolidation in China have any effect on Clariant's Frankfurt-Höchst site, the company's largest site worldwide?
P. Jany: Not specifically. It is a part of the total review of our sites. It's just another step, and we will be announcing the next step in our plant and site consolidations at the end of Q3 or early in Q4. That will be the final review of our production sites.
What regions will be affected?
P. Jany: It's too early to make any statements regarding regions or total number of jobs. However, the total dimension of this last review will not be as significant as the previous ones.
In what regions is Clariant looking to increase its capacity to make up for closures elsewhere?
P. Jany: In some areas, such as in textiles, we are definitely looking to move closer to the customer market in Asia. This was also reflected in the Swiss closures we announced in February; we will be transferring our textile dyes and the textile chemicals production from Muttenz to Asia. This translates into increasing capacity in India and China.
As far as our other business units are concerned, we are really focusing on the most productive sites. In general, it's clear that we are expanding new and existing capacities in places like India, China and Brazil, because we have to follow the local growth. And these are certainly the main areas of growth for the coming years.
These announcements under the GANO plan, is this a plan that has been evolving over time or is it something has been set in stone from the beginning?
P. Jany: It is absolutely an evolving model. We have always said that 2009 and 2010 would be restructuring years. The effort of reducing our selling, general and administrative costs is undergoing the same review as our production sites. Layer by layer, we have been reviewing the cost structure and determining where there is potential for optimization.
Where else will cuts be made?
P. Jany: The review of our costs will be going on until the end of the year. In the first six months of this year, we have reduced 268 jobs, and we will be below 17,000 by the end of the year. This is down from over 20,000 at the end of 2008 and over 17,500 at the end of 2009.
The cuts themselves will be made all around the world. There are some small and specific projects that are being done in every country; there is no single initiative. We are optimizing the processes and structures all around the world.
How far along is Clariant with the closures that were announced in November and in February?
P. Jany: Things are proceeding very well in determining product transfers and so on. It takes one to two years to close a site, and even up to three years for bigger site. Therefore, this effort has been booked into 2009/2010, but the actual closures will take place in 2011 and 2012 and possibly also in 2013. Over all, the restructuring is on track, and we are starting to see the lower cost base in our results.
What kind of company will Clariant be when all is said and done?
P. Jany: As of 2011 Clariant will move into profitable growth. We will be much more focused on sustaining our results, further improving processes, having our permanent improvement initiatives throughout the company to ensure that this base provides a solid platform for growth.
We have a good market position, we have good products and we plan on growing organically through business optimization.
P. Jany: We are also always considering small acquisitions - if they make sense in either a geographical or technical context.