How Plastics & Coatings Creates Value
Plastics & Coatings is comprised of three Business Units that serve markets ranging from packaging, consumer goods, medical and textile to transportation and agriculture. It serves multinationals, as well as regional and local customers. With such a broad scope, the overall growth potential of Plastics & Coatings is strongly linked to global gross domestic product growth.
1. North America and China drive growth
Additives is a major supplier of flame retardants, polymer additives, and waxes for functional effects, for example in plastics, coatings, printing inks, adhesives, textiles, and fibers, improving heat, light, and weather resistance, among other benefits. This Business Unit also offers innovative and sustainable products such as patented non-halogenated flame retardants, which provide environmental benefits for electrical and electronic equipment.
001 Main Applications
Masterbatches offers color and additive concentrates for a range of polymers as well as small-lot color compounding for engineering and high temperature resins, widely used in the plastics industry. The Business Line Healthcare Packaging offers controlled atmosphere-packaging solutions for the pharmaceutical industry to protect products from moisture and oxygen.
Pigments supplies organic pigments, pigment preparations, and dyes that meet the high standards for colors in industrial, decorative, and automotive coatings. It also provides solutions for the plastics industry and applications such as home and personal care, aluminum, seed treatment, and stationery. Solutions for traditional printing as well as inkjet and toner applications complete the portfolio of Pigments.
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Sales expanded by 5% in local currency in Plastics & Coatings.
Sales in Plastics & Coatings grew by 5% in local currency, driven by North America and Asia − particularly China − which have strongly contributed to growth. This was enabled by increased commercial and technical capabilities in these regions, as well as expanded capacities of existing sites and investments in new facilities in China.
2. Global megatrends and regulations impel business transformation
In 2017, global megatrends continued to increase demand for the plastics and coatings industry. Population growth and urbanization pose huge challenges for food security, increasing the need for more effective food preservation packaging solutions that deliver extended shelf life, and requiring new solutions for crop protecting plastic films. Clariant addresses these needs with its AddWorks® AGC portfolio of ready-to-use plastic additive solutions, which are based on Hostavin® NOW, an innovative light stabilizer technology. This enables agricultural film producers to develop products that offer extended film service life and don’t need to be replaced as often as conventional films, thereby reducing their environmental impact.
AddWorks® portfolio offers performance additives solutions designed to address specific needs of the plastics and coatings industry.
Changing lifestyles amplify connectivity and urge miniaturization of electronic devices, while sustainable mobility demands lightweight and low-emission technologies, as well as smart grids and traffic control systems. The mobility trend towards lower weight in cars increases the use of plastics and composite materials. Electric vehicles have new safety requirements. In addition, cars have an increasing amount of electronics on board for connectivity and convenience. In all these areas, polymer additives and flame retardants offer unique value contributions.
In 2017, Pigments developed Telasperse™ PVC, a new range of phthalate- and lead-free pigment preparations that allow the PVC processors to increase their productivity, while reducing the coloring costs in a more environmentally sustainable production process.
Stricter environmental regulations are driving innovation. For Additives, the increased awareness of fire safety in emerging economies is opening new opportunities for the development of safer flame retardants. Masterbatches is facing new customer requirements, given the intensified regulations on food packaging. Pigments is experiencing stricter regulations regarding the lead content in paints, particularly in Latin America, where the growth potential for lead-free organic pigments is estimated at approximately 10 %. Furthermore, more stringent enforcement of regulations regarding the emissions of Volatile Organic Compounds (VOC) is creating particular challenges in the coatings industry in China, requiring Clariant to create new sustainable solutions. (Chapter Driving Sustainability) In 2017, the new Hostatint™ UV range was launched, a complete color range of highperformance colorants for UV-cured wood coatings.
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Lead-free organic pigments present a huge growth potential of approximately 10%, especially in Latin America.
Idea to Market
2.1. Translating innovation capacity into high-performance products
In Plastics & Coatings, more than 100 innovation projects were active in 2017. Clariant’s sophisticated innovation infrastructure (chapter Idea to Market) enabled for example Additives to successfully launch renewable-based waxes under the brand Licocare® RBW in 2017. This diverse product portfolio offers high performance in various applications, including coatings and inks, polish and care, agricultural coatings, and plastics processing. Based on a secure supply of renewable, non-food source and with consistent quality and versatility, it presents a direct alternative to natural hard waxes and fossil-based waxes.
100
Plastics & Coatings ran more than 100 active innovation projects in 2017.
In 2017, Masterbatches focused on accelerating innovation projects at the Project House facility, a global masterbatches focused innovation facility located in the Milan area, and in its global network of application centers. For example, Project House has made significant progress in the field of food preservation solutions that Clariant intends to commercialize soon. Using the strong experience and know-how in the laboratory in Ahrensburg, Germany along with a market leadership position on chemical foaming agents for specialized applications, Masterbatches developed a breakthrough chemical foaming solution that is used in extrusion blow molding for bottles. This technology enables weight reduction of bottles, translating into significant savings of material usage and costs.
After implementing a new innovation strategy in 2016, Pigments focused on further adapting the innovation governance by adopting a stringent stage-gate process in 2017. Stage-gate meetings are now held monthly, which allows for a prompt presentation and evaluation of new business opportunities, ensures a regular project status review, allows early escalation of hurdles and leads to an overall accelerated time-to-market. An example of the successful innovation capability of Pigments is the launch of a new, chlorine-free magenta pigment for digital printing (Toner Magenta F9B). The new pigment’s color shade is significantly closer to the desired magenta than competing products, avoiding the need for expensive mixing.
»Our Idea to Market process is crucial to value-driven growth. Ideation and expertise to translate this into products and solutions are essential for sustaining our business and profitability.«
Mayendran Pillay Head of Global Marketing & Innovation, Business Unit Masterbatches
Market to Customer
2.2. Creating value for stakeholders through collaboration
With the objective of further improving customer centricity, Plastics & Coatings emphasizes close customer interaction, joint project work, and collaboration along the value chain. Additives conducted regular ideation workshops with both direct and indirect customers to generate a better understanding of unmet needs and identify innovation potential. For example, the technological transition to non-halogenated flame retardants required close collaboration between multiple manufacturers and flame retardants users. Clariant was a driving force in this industry transformation. Clariant is also a founding member of the Association for Phosphorus, Inorganic and Nitrogen Flame Retardants (pinfa) in Europe and North America and helped establish pinfa in China, the world’s largest flame retardant-producing country and end-use market.
Pigments also embraces collaboration to strengthen its customer focus. In response to the increased food safety requirements related to food contact packaging, the Business Unit engaged in workshops with companies along the value chain. By understanding the needs of brand owners for food packaging colorants, Clariant can enhance its value-based selling activities. This enables Pigments to develop differentiated solutions that help counteract the commoditization trap of the market.
Masterbatches focused on streamlining the Market to Customer process to simplify customer interaction and increase customer retention rates, by analyzing the factors influencing individual retention rates in each country and following-up with adequate measures to improve them. In 2017, Masterbatches concentrated mainly on growth in the engineering and high-temperature resins business, the solution-oriented additives business, and the healthcare sector. It launched PLASTIWARD™, a new plastic-based brand-protection system that serves the pharmaceutical industry by improving the anti-counterfeiting efforts for high-value drugs, which was developed in collaboration with Swiss security ink producer SICPA. PLASTIWARD™ is also being expanded into other markets.
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The portfolio of Plastics & Coatings includes 65 EcoTain® labeled products.
As Clariant’s largest Business Area primarily operating in saturated markets, Plastics & Coatings has been steered toward higher absolute EBITDA and cash generation since 2016. This successful path continued in 2017. Differentiated steering enabled the three Business Units to focus on expanding their reach to markets and customers. Additives aligned its Business Lines and regional sales units along focus segments within Plastics, Coatings, and Consumer Markets to achieve a stronger customer and growth focus. The product portfolio of EcoTain® labeled sustainable additives for plastic and coating applications were expanded. Pigments fostered cross-functional collaboration between the sales, supply chain, and operations departments, and developed a product calculator to easily determine the product prices that optimize profit margins. Masterbatches continues to focus on higher sales growth to optimize revenues and plant utilization rates across the world.
Customer to cash
2.3. Improving supply chains to efficiently fulfill market demands
One major goal for Plastics & Coatings in 2017 was to further improve the product availability for customers while keeping inventories highly efficient. An important tool for aligning all the steps in the Customer to Cash process is the Integrated Planning Landscape (IPL), which was introduced in 2016 in the Business Units Additives and Pigments. The tool helped Additives consolidate all Business Lines and regional supply chain responsibilities in one professionalized supply chain management organization that enables transparent planning, faster responsiveness as well as higher efficiency and customer orientation. Pigments continued to develop its global IPL by implementing the SAP Advanced Planning & Organization software, which fully integrates supply chain flows from the procurement of raw materials to the customer demand. With the support of Clariant Operational Excellence, Masterbatches implemented the Inventory Health Check (IHC) methodology, which allows the local teams to optimize inventory levels based on elaborate data and market analyses. In 2017, it also implemented SAP in North America to streamline operations, supply chain management and drive optimized business processes that will lead to improved supply chain performance (chapter Building Connections). At the same time, Pigments was working on the adoption of the IHC methodology in Europe over the course of 2017.
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Additives announced three new production facilities in China.
To make sure the market demands for Plastics & Coatings products are efficiently fulfilled, the Business Area continued to expand capacity all over the world. Masterbatches invested in a new production site in Cuddalore, India to serve the healthcare packaging business line and ensure short lead times, competitive pricing, and a close relationship with the growing customer base on the subcontinent. Masterbatches implemented new production lines for engineering and high-temperature resin compounding in Europe, China, and the United States. A new line will also installed in Lewiston, Maine, USA dedicated to compounding for healthcare applications. The Business Unit also built new capacity for white masterbatch in Europe and opened a dedicated white masterbatch facility in Saudi Arabia in January 2018, both of which are already operational.
Additives announced three new production facilities in China, the biggest market for additives. Two production units will focus on offering performance additive solutions for packaging, agro-films, automotive applications, and micronized waxes for various coatings & inks applications. The third site, a joint venture between Clariant and Tiangang Auxiliary Co. Ltd., will come on stream in 2019 and manufacture process and light stabilizers for the growing local industries. The new sites will help Clariant serve the Chinese market faster and more flexibly. Expansions in Europe will enable faster growth out of Clariant’s existing plants. Pigments continued to optimize the product allocation within their production network. This led to higher production capacity and product availability, resulting in improved customer service.
Targets
Growth potential per year
Input
Performance
1.3 %
R&D spend of sales
1 068
Raw material procured in CHF m
> 100
Active innovation projects
60
Production sites
14 101
Number of raw materials procured
People
56 153
Training hours
4 632
Raw material suppliers
Planet
1 038
Energy consumption in m kWh
Output
Performance
2 678
Sales in CHF m
5 %
Growth in local currencies
0.46
Production volume in m t
People
6 759
Staff in FTE at year end (2016: 6737)
Planet
51
Waste in thousand t
697
Greenhouse gas emissions in kg/t production
A substance added to products in small quantities to achieve certain properties or to improve a product (Clariant Business Unit Additives). VIEW ENTIRE GLOSSARY
These are plastic additives in the form of granules with dyestuffs or other additives used to dye or alter the properties of natural plastic. VIEW ENTIRE GLOSSARY
Pigments are substances used for coloring; they are used in a technical manner, for example in the manufacture of dyes, varnishes, and plastics. VIEW ENTIRE GLOSSARY
Pigments are substances used for coloring; they are used in a technical manner, for example in the manufacture of dyes, varnishes, and plastics. 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
Core business activities that create additional value are structured into three value creation phases at Clariant. Idea to Market encompasses scouting global trends and ideas, scoping out customer needs, executing product development and commercializing, and monitoring product performance. VIEW ENTIRE GLOSSARY
The value chain describes the series of steps in the production process, from raw materials through the various intermediate stages to the finished end product. VIEW ENTIRE GLOSSARY
Market to Customer includes identifying market attractiveness, developing a clear value proposition and articulating it to the customers, and capturing the value created through relationship building and the sales process. VIEW ENTIRE GLOSSARY
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
Earnings before interest, taxes, depreciation, and amortization. VIEW ENTIRE GLOSSARY
Customer to Cash encompasses planning to balance demand and supply, optimizing sourcing for spend effectiveness, constantly monitoring production for high efficiency, and delivering finished goods on-time and in-full as required by the customer. VIEW ENTIRE GLOSSARY
Joint ventures are all activities in which Clariant is involved with another partner. The accounting method applied for joint ventures depends on the specific conditions of the participation. VIEW ENTIRE GLOSSARY
Economic indicator representing the operational net inflow of cash and cash equivalents during a given period. 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