How Natural Resources Creates Value
Natural Resources combines businesses that use minerals with those that enable the efficient extraction of minerals, oil, and gas. The fundamental trend driving growth for the segments in this Business Area is the increasing global consumption of oil, metals, and food, which is driven by growth in multiple industries.
1. Creating value through customized products and solutions
Functional Minerals and Oil & Mining Services form two complementary pillars of Natural Resources. Functional Minerals provides customers in the edible oil refining, metal casting, civil engineering, plastic processing, animal feed additive, and packaging industries with essential process additives and adsorbents mainly based on bentonite and synthetic minerals. Bentonites are naturally occurring clays with unique swelling, binding, and adsorption capacities, which are used in a wide range of applications.
001 Applications
Functional Minerals controls and continuously improves a fully integrated value chain, from the exploration and mining of the bentonites to the processing of the finished products to the application of associated technical know-how at the customer’s operations. This allows reliable fulfillment of individual customer needs with a range of customized products and solutions.
Oil & Mining Services provides innovative chemistry, technology, and service solutions that meet customer needs safely and in compliance with environmental regulations. Oil Services is active in the development, manufacturing, application, and supply of specialty chemicals and services across the entire value chain of oil production. Clariant Mining Solutions is a comprehensive supplier of specialty chemicals to the mining industry, with products ranging from explosive emulsifiers to reagents tailored for increasing the recovery and grade of copper, iron ore, phosphates, and other industrial minerals. Clariant Refinery Services’ additives boost lubricity, facilitate cold flow, prevent wax-settling, improve stability and make the heaviest products transportable through depressing pour points.
2. Asia and the Middle East drive demand
In 2017, the two Business Units were exposed to diverging economic trends. For Functional Minerals, Europe showed solid growth, driven by a recovering automotive industry and a stable demand for edible oils. In contrast, the market situation in the Americas was impaired by very good crop quality, which required lower amounts of purification products, and the recession in Brazil. The most dynamic growth occurred in Asia and the Middle East, driven by an increased demand for bleaching earth. Clariant took an important step to meet this demand by enhancing its capacity in the two regions. The new production site in Surabaya, Indonesia, manufactures goods for customers in the Asia-Pacific region and strengthens Clariant’s position in this region. The plant increases Clariant’s regional production capacity for bleaching earth by 35% and allows for the production of a broad portfolio of Tonsil® bleaching earths while cutting lead times, thanks to the sophisticated transport infrastructure. The capacity enhancement is part of a global expansion plan, which also included opening a production plant in Turkey in April 2017 and in Mexico in 2016.
Another business driver for Functional Minerals was the continuously growing demand for low-emission casting products, such as GEKO® LE and ECOSIL® LE. Both are EcoTain® labelled and address the pressing need for many foundry customers to comply with stricter environmental regulation. As the introduction of a modified binder system in a foundry requires a careful diagnosis of the current situation and an incremental change process, Clariant specialists assist customers in their transition to more environmentally friendly operations.
3. Achieving success in a challenging business environment
In 2017, Oil & Mining Services has outperformed its key competitors as the current downturn of the oil industry persists. Even though the oil price slightly recovered in the second half of 2017, it remains volatile. Oil companies have thus been very price conscious vis-à-vis their suppliers. Similarly, the commodity markets served by Clariant’s mining customers, such as copper, iron ore, and phosphates, have been under financial pressure, given these commodity prices are only slowly recovering. These challenges require Clariant to focus even more on operational and technological improvements that help customers enhance performance and minimize total cost of ownership. For example, VERITRAX™ Intelligent Chemical Management System addresses the customers’ growing need for accessing and visualizing real time information about their operations. Launched in 2017, VERITRAX™ helps customers optimize their chemical management process, which improves asset integrity and their chemical spend. (Chapter Idea to Market)
2 503
2 503 VERITRAX™ sensors operating in the oil fields.
The scrutiny on the use of Nonylphenol ethoxylates (NPEO) has increased, as they are increasingly considered to disrupt the natural balance of hormones. In Europe, they are already listed as substances of very high concern under the EU Regulation on the Registration, Evaluation, Authorization and Restriction of chemical substances (REACH ) with clear sunset dates having been established. Going beyond Europe in a proactive manner, Oil & Mining Services has begun to omit these substances and test alternatives in all relevant formulations globally. To secure a steady supply of alternatives, Oil & Mining Services partners with the Business Unit Industrial & Consumer Specialties, which has already successfully replaced NPEO in several applications.
Idea to Market
3.1. Pooling knowledge to create game-changing solutions
By conducting thorough market analyses, engaging in ideation workshops with key customers, and working jointly with Clariant’s Group Technology & Innovation, Natural Resources can develop tailored solutions that meet the most pressing customer demands. For example, Functional Minerals has developed TONSIL® Supreme 178 FF, which rids palm oil of fatty acid esters more effectively than competing solutions, and allows processors to use palm oil in baby food and other highly sensitive products. The Business Unit also ran major scouting projects to identify new business opportunities for bentonite functionalities in the construction area and it developed high thermal stability foundry binders for the Brazilian and Asian markets. These binders suffer less deactivation during the contact with the hot metal, thus leading to lower binder consumption and significantly improving the customers’ cost performance.
20 – 25
Oil & Mining Services wants to annually generate 20 to 25% of total sales with innovation projects less than five years old.
In 2017, Oil & Mining Services launched SCAVINATOR™, a new water-soluble scavenger that controls hydrogen sulfide (H2S) and is an alternative to triazine. The product fills an important gap, as the industry has been trying to identify a cost-effective and performance-enhancing alternative to triazine scavengers for decades. A promising indication for the market potential of this new technology was given in the United States, where several customers requested the product for field trials. Another successful example of the innovation capability in Oil & Mining Services was the first field application of Clariant’s Enhanced Oil Recovery Service (EOR) Concept in the Los Angeles Basin. Clariant provided all the chemicals, equipment, and services for this field-wide EOR program, and managed to modestly increase oil production.
Given the challenging business environment, Oil & Mining Services is particularly focused on innovation. The goal is to annually generate 20 to 25% of total sales with innovation projects less than five years old. Thanks to a market leading technology roadmap and innovation strategy, this ambitious objective was reached in 2017. Oil & Mining Services has fully adopted Clariant’s Innovation Excellence methodology and uses the potential of digitalization to further strengthen innovation capabilities (chapter Idea to Market). By launching IdeaGen, a digital platform available via a smart phone app, Oil & Mining Services pools the knowledge and creativity of its employees to generate innovative ideas for products, services, processes, and business models.
Market to Customer
3.2. Investigating customer needs to spur growth
Natural Resources is highly focused on maintaining close relationships with customers in order to follow their performance and determine their current and future needs. In 2017, Functional Minerals participated in several trade shows and congresses across all regions. At these events, good practices were exchanged, and customer needs were actively investigated and addressed. For example, Functional Minerals responded to the demand for regionally produced bleaching earth for sunflower oil purification by developing quality products based on local clays and by enhancing the local production capacity with a new plant in Turkey.
Connecting the innovation and marketing processes more effectively was a major goal of Oil & Mining Services for 2017. To this end, the Business Unit formed a dedicated commercialization team in charge of coordinating and managing all aspects of the launch of the new SCAVINATOR™ product. Due to the high number of customer requests for field trials that was received in a comparably short period of time, the approach became a best practice and will similarly be applied to future product innovation launches.
35
The new production site in Surabaya, Indonesia, significantly enhanced regional production capacity for bleaching earths by 35%
Customer to cash
3.3. Optimizing operations along the value chain to improve cash flow
Effectively managing the supply chain from the suppliers to the customer is key to ensure customer satisfaction as well as profitability. In 2017, Functional Minerals implemented a range of measures to improve its operational efficiency and applied the Clariant Operational Excellence method to the exploration and mining of minerals. By enhancing production capacities in Turkey and Indonesia as well as establishing sun drying operations in Sardinia and China, it managed to optimize the entire value stream from the mine to the market. Lower energy and freight costs led to significant cost reductions, while improved forecasting and mineral inventories reduced working capital, contributing to an overall higher cash-flow. Furthermore, it installed a new global responsibility for operational excellence to combine the strengths of the regionally structured Business Unit by facilitating the exchange of knowledge and best practices.
»Deep dives into market needs with Marketing Excellence have provided valuable findings. Disciplined implementation of agreed-upon actions during the win phase ensures that we realize the identified growth opportunities.«
Stefan Dick Head of Sales EMEA, Business Unit Functional Minerals
Oil & Mining Services conducted multiple workshops in the core growth regions North America, Latin America, Europe and the Middle East. They allow gathering input from across the Business Unit to better understand key gaps that exist within the supply chain, such as demand planning and integrated processes and tools. As a result, a global supply chain organization with well-defined processes and standards was established. With the help of the newly introduced «Integrated Planning Landscape», this global supply chain team manages the complete end-to-end process from demand and inventory planning to sales and operational planning. It also fosters cross-business collaboration with the Business Unit Industrial & Consumer Specialties, with a goal of avoiding potential capacity constraints by integrating the sales and operational planning of both Business Units. To further tailor the supply chain to the customers’ needs, the global supply chain team improved the demand forecasting of both Clariant’s direct and indirect customers. By doing so, Oil & Mining Services will continue to improve its own supply capacities in a forward-looking manner and ensure its on-time, in-full performance into the future.
14
Sales in Natural Resources rose by 14%, mainly driven by Functional Minerals as well as by organic growth and acquisitions in Oil & Mining Services.
Targets
Growth potential per year
EBITDA target margin
Input
Performance
1.9 %
R&D spend of sales
414
Raw material procured in CHF m
> 90
Active innovation projects
36
Production sites
3 349
Number of raw materials procured
People
35 174
Training hours
1 737
Raw material suppliers
Planet
881
Energy consumption in m kWh
Output
Performance
1 357
Sales in CHF m
14 %
Growth in local currencies
3.11
Production volume in m t
People
3 454
Staff in FTE at year end (2016: 3 235)
Planet
103
Waste in thousand t
93
Greenhouse gas emissions in kg/t production
In 2013 Clariant adjusted its reporting segments and grouped its businesses with similar end-user markets and growth drivers into four distinct Business Areas: Care Chemicals, Catalysis, Natural Resources, and Plastics & Coatings. VIEW ENTIRE GLOSSARY
A substance added to products in small quantities to achieve certain properties or to improve a product (Clariant Business Unit Additives). VIEW ENTIRE GLOSSARY
Usually solid substances which are able to selectively accumulate certain substances from adjacent gaseous or liquid phases (Clariant Business Unit Functional Minerals). VIEW ENTIRE GLOSSARY
Compliance is a key element of Corporate Governance. It refers to compliance with the law and directives as well as with voluntary codes within the company. VIEW ENTIRE GLOSSARY
Economic indicator representing the operational net inflow of cash and cash equivalents during a given period. VIEW ENTIRE GLOSSARY
Earnings before interest, taxes, depreciation, and amortization. VIEW ENTIRE GLOSSARY
The EBITDA margin is calculated based on the ratio of EBITDA to sales and shows the return generated through operations from sales before depreciation and amortization. VIEW ENTIRE GLOSSARY
Exceptional items are defined as non-recurring costs or income that have a significant impact on the result, for example expenses related to restructuring measures. VIEW ENTIRE GLOSSARY
The pool of funds available to the company for use in the production of goods or the provision of services. This can include funds obtained through financing, such as debt, equity, or grants, and funds generated by the company, for example through sales or investments. VIEW ENTIRE GLOSSARY
Knowledge-based intangibles used and created by the company, often in collaboration with partners. This can include intellectual property, such as patents, trademarks, copyrights, software, rights, and licenses, and »organizational capital« such as tacit knowledge, systems, procedures, and protocols. VIEW ENTIRE GLOSSARY
Manufactured physical objects such as buildings, equipment, and products. These can include objects that are available to the company for use in the production of goods or the provision of services, or that the company produces for sale to customers or for its own use. VIEW ENTIRE GLOSSARY
The company’s staff and its composition, competencies, capabilities, experience, and motivation to innovate. This can include employees’ alignment with corporate values and their ability to understand and implement the company’s strategy. VIEW ENTIRE GLOSSARY
Key relationships including those with significant groups of stakeholders and other networks. This can include shared values, the trust and willingness to engage that the company has developed, and related intangibles associated with its brand and reputation. VIEW ENTIRE GLOSSARY
Renewable and nonrenewable environmental resources and processes that support the past, current, or future prosperity of the company or are affected by it. Examples can include resources related to air, water, and land that are utilized or impacted for example by emissions. VIEW ENTIRE GLOSSARY