Clariant’s holistic approach to creating value for all stakeholders is underpinned by its overall objectives, financial targets, and five-pillar strategy. In 2018, Clariant announced a portfolio upgrade that enables the Group to realize a significant step change into higher value specialties.

1. Overall objectives underpin Clariant’s vision and mission

To advance into the top tier in specialty chemicals, Clariant focuses on overall objectives related to its different stakeholder groups. The company strives:

• to be a publicly listed company with a broad shareholder base, reliable long-term anchor shareholders, and a high reputation for above industry-average profitability, growth, and Total Return to Shareholders (TRS);
• to be known as a powerhouse for R&D and Innovation and to increase value by applying a forward-looking sustainability lens to operations and market offerings;
• to serve markets with future perspectives and strong growth rates and focus on businesses with competitive position, and
• to be a preferred employer.

In addition, Clariant has increased its financial targets based on the expected implementation of an updated strategy and significant portfolio upgrade, as summarized in Figure 004.

2. A five-pillar strategy provides guidance

Against the background of its qualitative objectives and financial targets, Clariant articulates its approach to long-term value creation for its stakeholders through its Group strategy, which has been further developed along five pillars: focusing on innovation and R&D; adding value with sustainability; repositioning the portfolio; intensifying growth; and increasing profitability. In 2018, a strategy update featured a major portfolio upgrade designed to capture a significant collaboration opportunity with SABIC in the area of high-performance materials. Figure 001

001 UPDATED GROUP STRATEGY WITH ENHANCED PRODUCT AND SOLUTION OFFERING

The strategic pillars are well aligned with the material topics deemed most relevant for Clariant and its stakeholders. Read more From the topics determined to be most material in the comprehensive materiality assessment conducted in 2017, Innovation and Technological Advances lies at the heart of the first strategic pillar; Product Stewardship and Sustainable Chemistry, as well as Environmental Protection and Resources, are essential aspects of the second strategic pillar, as is Occupational Health, Safety, and Well-being as part of the mitigation of risk; and Customer Relationships are an important foundation of the fourth and fifth strategic pillars, which together correspond to the most material topic of Growth and Profitability. All five strategic pillars are underpinned by Clariant’s People Excellence initiative, for which the most material topic of Talent Attraction and Development is an important aspect.

In 2018, the materiality matrix was reviewed and slightly refreshed with two new topics elevated into the group of most material topics: Digitalization and Circular Economy. Digitalization is now represented in the first strategic pillar by highlighting digital business model opportunities and in the fifth pillar by including digitally enabled operating models. Circular Economy is addressed in the second pillar, emphasizing the focus on products and partnerships.

3. Expected portfolio upgrade will strengthen growth and value creation

Clariant seeks opportunities to adapt its portfolio in areas that align well with its corporate strategy: increasing growth and profitability, differentiating through innovation and sustainability, serving industry-leading businesses driven by megatrends, enhancing customer experience, and fast reliable customer fulfilment. This will be supported by creating operational and business synergies that significantly contribute to value creation, and strengthening the company in terms of the capabilities and talent of the people acquired with the business.

Based on these criteria, the 2018 corporate strategy update was grounded in a detailed assessment of Clariant’s competitive environment and key developments in the specialty chemicals industry. It was determined that enhancing Clariant’s engagement in the highly specialized field of high-performance materials would create strategic advantage in the current business environment, where leading businesses, such as SABIC’s Specialties business with its promising positioning with respect to trends in transportation and consumer electronics, offer excellent innovation and investment opportunities. In line with this strategic priority, Clariant plans to combine its Additives and high-value Masterbatches activities (color, high-temperature resins, and healthcare) with complementary parts of SABIC’s Specialties business to create the new Business Area High Performance Materials. Clariant would hold the majority stake of the new merged Business Area, which is expected to be completed by the end of 2019 and launched by January 1, 2020.

Major areas of application of High Performance Materials are expected to include smart electronics, aerospace, automotive, and robotics, as well as healthcare, additive manufacturing, renewable energy, and e-mobility. These applications demand differentiated fulfillment of customer specifications that require exclusive technology and formulation know-how. In addition, Clariant expects to divest Pigments, standard Masterbatches, and Healthcare Packaging by 2020.

Combined with attractive prospects in Care Chemicals, Catalysis, and Natural Resources, this portfolio upgrade will allow Clariant to focus even more on customer-specific, technologically advanced applications with high growth and high value-creation potential.

4. Strategic Management Process ensures Corporate and Business Unit involvement

Clariant’s Strategic Management Process (SMP) ensures that the overall strategy development is conducted as an iterative process at the Group level as well as for each of the individual Business Units.

In the SMP process conducted during the course of 2018, each Business Unit in close cooperation with Corporate Planning & Strategy reviewed Cross-Business Unit topics both in regard to external trends (Future of Oil, Future of Transportation, Future of Plastics, Circular Economy) as well as regarding the five pillars of the Group strategy. For example, cross-Business Unit workshops regarding digital impact, innovation through R&D, and sustainability were conducted to identify priority areas. Each Business Unit selected specific topics for deep dives, and then substantiated these as core elements in their Business Plan, including must-win battles.

003 CONTENT DEEP DIVES TO THE BUSINESS UNIT STRATEGIES

Depending on the Business Unit in question, must-win battles can include specific regional growth targets, supply chain or marketing opportunities, or innovation areas that are especially relevant in further differentiating the Business Units’ product portfolio.

This process ensures that Business Unit strategies are developed with corporate guidance on aspects such as external trends or priorities of the five-pillar Group strategy, while also focusing on the specific opportunities and risks in the particular businesses. On the basis of these deliberations, the scope of the SMP discussions with each Business Unit included:

• marketing, innovation, sustainability, and operations strategy/roadmap, and growth and profitability targets at the segment level, and
• innovation focus fields, innovation growth targets, and core growth and profitability targets for the whole Business Unit.

The corresponding implementation plans feed into financial plans for each Business Unit that are developed and refined alongside the Group financial objectives. In the context of the enhanced growth profile of the Group related to the portfolio upgrade, Clariant expects to be able to reach sales growth of 5 – 6% annually and to increase EBITDA margin after exceptional items to approximately 20% by 2021. The combination of Clariant’s and SABIC’s offerings within Clariant is expected to result in significant synergies, with an anticipated annual run rate of CHF 100 million realized over three years from closing.

004 OBJECTIVES FOR FUTURE FINANCIAL GROWTH

Note: combines business foreign exchange rate assumption of 1.0 USD = 1.0 CHF; 2021E at stable 2018 FX rates

The mid-term financial objectives are discussed in the context of the »multicapital review«. Read more

5. Clariant Excellence supports value creation

Clariant Excellence (CLNX), the company’s Business Excellence program, supports the Business Units in their strategy execution. Along with People Excellence, the program comprises Innovation Excellence (CIX), Commercial Excellence (CCE), and Operational Excellence (COX). These linked initiatives for excellence in execution drive value from EBIT improvements and cash flow from additional growth.

In total, CLNX improvement projects delivered estimated net benefits of CHF 194 m in 2018, of which CHF 112 m were cost savings. CLNX supports systematic value creation along the entire value chain: from ideation for new products, services, or business models to defining commercial strategy to ultimately ensuring effective and efficient production and delivery of finished goods to Clariant’s customers. Read more

005 NET BENEFIT BY CLARIANT EXCELLENCE in CHF m