34. Commitments and ContingenciesAudited information
Guarantees. No guarantees on behalf of third parties were issued in 2019 and 2018.
Purchase commitments. In the regular course of business, Clariant enters into relationships with suppliers whereby the Group commits itself to purchase certain minimum quantities of materials in order to benefit from better pricing conditions. These commitments are not in excess of current market prices and reflect normal business operations.
Clariant is engaged in contracts to buy a minimum quantity of ethylene for the next six years and in two contracts to buy a minimum quantity of propylenoxide in the year 2020, and other materials in 2020 and 2021. This implies a total purchase commitment of about CHF 0.90 billion (2018: CHF 1.20 billion).
Contingencies. Clariant operates in countries where political, economic, social, legal, and regulatory developments can have an impact on the operational activities. The effects of such risks on the company’s results, which arise during the normal course of business, are not foreseeable and are therefore not included in the accompanying financial statements.
In the aftermath of the procedure to acquire subsequent to the acquisition of Süd-Chemie, the 1.36% of shares still in possession of third parties (squeeze-out) at the time, several minority shareholders initiated appraisal proceedings to reassess the adequacy of the cash compensation paid to the minority shareholders. After a court decision the case was settled with payments in the total amount of CHF 1.6 million in 2019.
In the ordinary course of business, Clariant is involved in lawsuits, claims, investigations and proceedings, including product liability, intellectual property, commercial, environmental and health and safety matters. Although the outcome of any legal proceedings cannot be predicted with certainty management is of the opinion that, apart from those cases where a provision has already been recognized, there are no such matters pending which would likely have any material adverse effect in relation to its business, financial position or results of operations.
Environmental risks. Clariant is exposed to environmental liabilities and risks relating to its past operations, principally in respect of remediation costs. Provisions for non-recurring remediation costs are made when there is a legal or constructive obligation and the costs can be reliably estimated. It is difficult to estimate the action required by Clariant in the future to correct the effects on the environment of prior disposal or release of chemical substances by Clariant or other parties, and the associated costs, pursuant to environmental laws and regulations. The material components of the environmental provisions consist of costs to fully clean and refurbish contaminated sites and to treat and contain contamination at sites where the environmental exposure is less severe.