1.01 – General information

Clariant Ltd (the »Company«) and its consolidated subsidiaries (together the »Group«) are a global leader in the field of specialty chemicals. The Group develops, manufactures, distributes and sells a broad range of specialty chemicals which play a key role in its customers’ manufacturing and treatment processes or add value to their end products. The Group has manufacturing plants around the world and sells mainly in countries within Europe, the Americas and Asia.

Clariant Ltd is a limited liability company incorporated and domiciled in Switzerland. The address of its registered office is Rothausstrasse 61, CH-4132 Muttenz, Switzerland. The Company is listed on the SIX Swiss Exchange.

The Board of Directors approved the consolidated financial statements for issue on 9 February 2021. They will be subject to approval by the Annual General Meeting of Shareholders scheduled for 7 April 2021.

1.02 – Basis of preparation

The consolidated financial statements of the Clariant Group have been prepared in accordance with the International Financial Reporting Standards (IFRS) and the IFRIC interpretations applicable to companies reporting under IFRS, and with the significant accounting policies set out below.

The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial assets and liabilities (including derivative instruments) at fair value through profit or loss and other comprehensive income.

The preparation of financial statements in conformity with the IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of aplying the Group’s accounting policies.

These estimates and judgments affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period.

Although these are based on management’s best knowledge of current events and circumstances, actual outcomes may ultimately differ from those estimates. The areas involving a higher degree of judgment or complexity, or areas where estimates are significant to the consolidated financial statements, are disclosed under note 4.

1.03 – Disclosure of Business Units as discontinued operations in accordance with IFRS 5, Non-current Assets held for sale and Discontinued operations

Following the decision of the Board of Directors to dispose the Business Units Masterbatches (including Business Line Healthcare Packaging) and Pigments in June 2019 the two Business Units concerned were reclassified to discontinued operations in 2019 and therefore are presented separately in accordance with IFRS 5. Healthcare Packaging was sold in October 2019 and Masterbatches in July 2020. See also Note 25.

Assets and liabilities pertaining to the discontinued operations are presented as »assets held for sale« and as »liabilities directly associated with assets held for sale« respectively in the balance sheets of 2020 and 2019 as required by IFRS 5.

1.04 – Standards, interpretations and amendments effective in 2020

The Group has applied the following standards and amendments for the first time:

• Definition of Material – amendments to IAS 1 and IAS 8
• Definition of a Business – amendments to IFRS 3
• Interest Rate Benchmark Reform – amendments to IFRS 9, IAS 39 and IFRS 7
• Revised Conceptual Framework for Financial Reporting (revised 2018)

The amendments listed above did not have any impact on the amounts recognized in the reporting period and prior periods and are not expected to significantly affect future periods.

1.05 – Standards, interpretations and amendments not yet effective

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have not been early adopted by the group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

1.06 – Scope of consolidation

• Subsidiaries: Subsidiaries are those entities over which the Group has control. This is the case when it is exposed to, or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and they are deconsolidated from the date the control ceases.
• Associates: Associates are entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method.
• Joint arrangements: The Group applies IFRS 11, Joint Arrangements, to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. Clariant has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method.

All associates and joint ventures apply the same accounting principles as the Group.

1.07 – Principles and methods of consolidation

The annual closing date of the individual financial statements is 31 December. The consolidated financial statements are prepared applying uniform presentation and valuation principles.

The results of non-controlling interests are separately disclosed in the income statement and in the balance sheet.

1.08 – Recognition of revenue from contracts with customers

Sales of goods and services are recognized in line with the requirements of IFRS 15, Revenue from contracts with customers. Revenue is measured based on the consideration the Group expects to receive in exchange for the goods or services. Revenue from sales of goods is recognized in the income statement when control has been transferred to the buyer, which is usually upon delivery, at a fixed or determinable price, and when collectability is reasonably assured. Delivery is defined based on the terms of the sale contract.

Revenue from services is recognized when the respective services have been rendered.

Revenue is reported net of sales taxes, returns, discounts and rebates. Rebates to customers are provided for in the same period that the related sales are recorded based on the contract terms.

Where third parties hold Clariant inventories on a consignment basis, revenue is recognized in the period that inventories are withdrawn from consignment and delivered to customers. Clariant periodically enters into prepayment contracts with customers whereby it receives contract liabilities for products to be delivered in a future period. These contract liabilities are recorded as liabilities and presented as part of Other liabilities. Advance payment liabilities are released and revenues associated with such advance payment transactions are recognized upon delivery of and transfer of title, ownership, and risk of loss of the related products to the customer. Cash rebates and discounts granted to customers are classified as a reduction of revenue.

1.09 – Recognition of revenues from interest and dividends

Interest income is recognized on a time proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity when it is determined that such income will accrue to the Group. Dividends are recognized when the right to receive the payment is established.

1.10 – Exchange rate differences

Exchange rate differences are recognized in line with the requirements of IAS 21, The Effect of Changes in Foreign Exchange Rates. The consolidated financial statements are presented in Swiss francs, which is the functional and presentation currency of the parent company.

Transactions and balances: Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognized in the line »Finance costs« in the income statement, except when deferred in »Other comprehensive income« as qualifying cash flow hedges and net investment hedges.

Translation differences on debt securities and on other monetary financial assets measured at fair value are included in foreign exchange gains and losses in the line »Finance costs« in the income statement.

Group companies: Income statements and cash flow statements of foreign entities are translated into the Group’s presentation currency at sales-weighted average exchange rates for the year and their balance sheets are translated at the exchange rates prevailing on 31 December.

All resulting exchange rate differences are recognized in Other comprehensive income in the line »Currency translation differences«. Exchange rate differences arising on the translation of the net investment in foreign entities and on borrowings and other currency instruments designated as hedges of such investments are recognized in »Other comprehensive income« in the line »Net investment hedge«. Net investments also include loans for which the settlement is neither planned nor likely to occur in the foreseeable future.

When a foreign operation is disposed of and as a consequence control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as a part of the gain or loss on disposal.

When the Group’s interest in a subsidiary that includes a foreign operation changes, while retaining control in the subsidiary, a proportionate part of the cumulative amount of the translation difference that was recognized in other comprehensive income is reclassified to non-controlling interests.

1.11 – Property, plant and equipment

Property, plant and equipment, except for the ones pertaining to mining activities, are valued at historical acquisition or production costs and depreciated on a straight-line basis to the income statement, using the following estimated useful lives in accordance with the Group guidelines:

• Buildings 15 to 40 years
• Machinery and equipment 10 to 16 years
• Furniture, vehicles, computer hardware 3 to 13 years
• Land is not depreciated

Property, plant and equipment pertaining to mining activities are valued at historical costs and depreciated over their useful lives to the income statement using the units of production method.

When the entity has a present legal or constructive obligation to dismantle an item of property, plant and equipment or restore a site, its initial costs include an estimate of the costs of dismantling and removing the item and restoring the site on which it is located. A corresponding provision is recorded for the amount of the asset component.

Financing costs directly associated with the acquisition, construction or production of qualifying property, plant and equipment are capitalized as a part of the costs of these assets. Investment property is valued at cost less depreciation. As all investment property held by Clariant consists of industrial and administrative sites which have been in use for several decades, there is no active market which would give information on possible market prices. The fair values of the investment properties are therefore determined by way of external appraisals and value-in-use calculations.

1.12 – Leases

Clariant accounts for lease contracts in accordance with IFRS 16, Leases.

At the inception of the lease a right-of-use asset and a lease liability are recognized in the balance sheet. The asset is initially measured at the amount of the lease liability plus any initial direct costs incurred.

The lease liability is initially measured at the present value of the lease payments payable over the lease term, including variable lease payments depending on an index at the commencement date and the exercise price of purchase options if it is reasonably certain that the option will be exercised. The lease liability is discounted at the rate implicit in the lease. If that rate cannot readily be determined the incremental borrowing rate is used. Lease liabilities are subsequently re-measured to reflect possible changes in the lease terms.

Right-of-use assets are depreciated over of the duration of the lease contract including contractually agreed optional extension periods, whose exercise are deemed to be reasonably certain. The depreciation is recognized in operating income.

The unwinding of the discounting effect is included in the financial expense. Lease payments are accounted for as a repayment of the lease liability.

Expenses for lease contracts for objects with a value of less than CHF 5 thousand and lease contracts with a duration of up to twelve months are recognized directly in the income statement.

1.13 – Intangible assets

Goodwill is recognized as per the requirements of IFRS 3, Business Combinations, IAS 38, Intangible Assets, and IFRS 11, Joint arrangements. Goodwill is not amortized, but tested annually for impairment as required by IAS 36, Impairment of Assets.

Trademarks and licenses are capitalized at historical costs and amortized on a straight-line basis to the income statement over their estimated useful lives, with a maximum of ten years.

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. They are amortized on a straight-line basis to the income statement over their estimated useful lives (three to five years).

Costs directly associated with the production of identifiable and unique software and other intangible products controlled by the Group, that will probably generate economic benefits beyond one year, are recognized as intangible assets and depreciated over their useful life of three years. Direct costs include software development costs, personnel costs and advisory costs directly related to the software or product development and an appropriate portion of the relevant overheads. Costs associated with developing and maintaining common software programs are recognized as an expense when incurred.

Intangibles acquired in a business combination with the exception of mining rights are amortized using a straight-line method over their remaining useful lives as follows:

• Technology 3 to 15 years
• Customer relationships 6 to 20 years
• Tradenames 10 years
• Order backlog 2 years

Mining rights are depreciated over their useful lives using the units of production method.

On 1 June 2007, a European Union regulation on chemicals and their safe use came into effect. It deals with the Registration, Evaluation, Authorization and Restriction of Chemical Substances (REACH). REACH applies to all substances manufactured, placed on the market and used in the European Union, either on their own, in mixtures or in products. REACH requires the registration of certain substances, with annual volumes exceeding a consumption of 1 000 metric tons, by 2010 and various other substances depending on their category by 2018.

As a company active in the chemical industry, Clariant has incurred costs in connection with REACH. Due to their nature, these costs are considered within the context of IAS 38, Intangible Assets, and those qualifying for capitalization are reported as intangible assets. As the initial two phases of the registration were completed in 2010 and 2013 respectively, the corresponding costs capitalized as intangible assets are amortized since 2011 for the first phase and since January 2014 for the second phase on a straight-line basis to the income statement over their estimated useful lives of twelve years.

1.14 – Impairment of assets

Impairment of assets is recognized and disclosed as per the requirements of IAS 36, Impairment of Assets.

1.15 – Non-current assets and disposal groups held for sale

Non-current assets and disposal groups are classified as held for sale when their carrying amount is to be recovered through a sale transaction and a sale is considered highly probable. They are stated at the lower of the carrying amount and fair value less costs of disposal, as per the requirements of IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

1.16 – Inventories

Purchased goods are valued at acquisition costs, while self-manufactured products are valued at manufacturing costs including related production overhead costs. Inventory held at the balance sheet date is primarily valued at standard costs, which approximates actual costs on a weighted average basis. This valuation method is also used for valuing the costs of goods sold in the income statement. Adjustments are made for inventories with a lower net realizable value. Unsaleable inventories are fully written off. These adjustments are recorded as valuation allowances, which are deducted directly from the inventory value in the balance sheet. The allowances are reversed when the inventories concerned are either sold or destroyed and as a consequence are removed from the balance sheet.

1.17 – Trade receivables

Trade receivables are amounts due from customers for goods sold or services rendered in the ordinary course of business and are recognized in accordance with IFRS 9, Financial Instruments. They are generally due within 40 days and therefore classified as current. Trade receivables are recognized initially at the amount of considerations that is unconditional. The Group holds trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortized cost. Details about the Group’s impairment policies and the calculation of the loss allowance are provided in note 12.

1.18 – Cash and cash equivalents, short-term deposits

Cash and cash equivalents comprise cash in hand, deposits and calls with banks, as well as short-term investment instruments with an initial lifetime of 90 days or less. Bank overdrafts are reported within financial debt in current liabilities on the balance sheet.

Short-term deposits are disclosed separately in the balance sheet if they have an original maturity between 90 and 365 days. They are valued at their nominal value, which is close to their fair market value.

1.19 – Derivative financial instruments and hedging

Derivative financial instruments and hedges are recognized in accordance with IFRS 9, Financial Instruments. Qualifying hedge instruments are derivatives and non-derivative financial assets and liabilities that are fully measured at fair value through profit and loss. Hedged items are assets or liabilities, unrecognized firm commitments, forecast transactions or net investments in foreign entities. They are reliably measurable and if not recognized they are highly probable. The hedges are accounted for either as fair value hedges in the case of exposures in fair value of recognized assets and liabilities or unrecognized firm commitments, as cash flow hedges in the case of exposures in cash flows arising from recognized assets or liabilities or forecast transactions that could affect profit or loss, or as hedges of a net investment in a foreign entity.

1.20 – Current income tax

The taxable profits (losses) of Group companies are calculated in acordance with the rules established by the taxation authorities of the countries in which they operate. They are the basis for the determination of income tax payments (reimbursements) for the reporting period in accordance with the prevailing local income tax rates. Current income tax is accounted for in accordance with the requirements of IAS 12, Income Taxes.

1.21 – Deferred income tax

Deferred income tax is calculated using the comprehensive liability method as per the requirements of IAS 12, Income Taxes.

No deferred income tax is calculated for the temporary differences on investments in Group companies, provided that the investor (parent company) is able to control the timing of the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized on tax losses incurred, if based on the business plans of the respective subsidiaries it is deemed probable that the tax losses are recoverable in the foreseeable future. The recoverability of these tax losses is assessed by Management on a regular basis.

1.22 – Employee benefits

Group companies operate various post-employment schemes, including both defined benefit and defined contribution pension plans, post-employment health care plans and other benefits. Obligations for employee benefits are determined and recorded in line with the requirements of IAS 19, Employee Benefits.

Defined contribution plans: Contributions to defined contribution plans are recorded in the income statement in the period to which they relate.

Defined benefit plans: For defined benefit plans, the amount to be recognized in the provision is determined using the Projected Unit Credit method. Independent actuaries perform the actuarial valuations for the defined benefit plans on a regular basis. For the larger plans these valuations take place annually. For the smaller ones valuations are performed at least every three years, with systematic roll-forwards in the years in between.

The retirement benefit obligations recognized in the balance sheet represent the present value of the obligations at the end of the reporting period less the fair value of the plan assets.

The prepaid pension assets recognized in the balance sheet are capitalized only to the extent of their recoverability, that is when a cash refund or a reduction in the future payments is available. The return on plan assets, except for amounts reflected in net interest income, are reported under other comprehensive income.

Actuarial gains and losses are charged or credited to equity in other comprehensive income in the period in which they arise. Past service costs are recognized immediately in the income statement.

Some Group companies provide post-employment health care benefits to their retirees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting method similar to that for the defined benefit pension plans. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

The charges for defined benefit plans, defined contribution plans and termination benefits are included in personnel expenses and reported in the income statement under the corresponding functions of the related employees.

Other long-term employee benefits are employee benefits (other than post-employment benefits and termination benefits) which do not fall wholly due within twelve months after the end of the period in which the employees render the related service.

These include long-term compensated absences such as long-service or sabbatical leave and jubilee or other long-service benefits. The accounting policy for other long-term employee benefits is equal to that for post-employment benefits, with the exception that actuarial gains and losses are recognized immediately in the income statement.

Short-term employee benefits are employee benefits (other than termination benefits) which fall due wholly within twelve months after the end of the period in which the employees render the related service.

1.23 – Provisions

Provisions are recognized as per the requirements of IAS 37, Provisions, Contingent Liabilities and Contingent Assets.

1.24 – Research and development

Development expenses are capitalized to the extent that the recognition criteria set up by IAS 38, Intangible Assets, are met.

Considering the uncertainties inherent to the development of new key products, Clariant does not capitalize the associated development costs. Experience has proven that the structure of research and development in the industries that Clariant engages in makes it difficult to demonstrate how single intangible assets (patents) will generate probable future economic benefits.

Laboratory buildings and equipment included in property, plant and equipment are depreciated over their estimated useful lives in accordance with the Group guidelines of note 1.11.

1.25 – Segment reporting

Segment information is presented in the same manner as in the internal reporting to the chief operating decision maker. The chief operating decision maker, responsible for strategic decisions, for the assessment of the segments’ performance and for the allocation of resources to the segments, is the Executive Committee.

Clariant had seven Business Units (BU), two of which were reclassified to Discontinued Operations on 30 June 2019, as a result of the Group’s decision to dispose of the Business Units Masterbatches and Pigments. The Business Unit Masterbatches was sold on 1 July 2020. The sale of the Business Unit Pigments within the next twelve months is deemed highly probable. For external reporting purposes the remaining five Business Units are grouped into three Business Areas (BA) (reportable segments), in accordance with IFRS 8, Operating Segments:

• Care Chemicals (BU ICS)
• Catalysis (BU Catalysts)
• Natural Resources (BU Oil & Mining Services, BU Functional Minerals, BU Additives)

The five Business Units were grouped into Business Areas in a manner that they reflect, in Management’s opinion, the similar economic characteristics of certain BU’s and common traits regarding products, markets, technologies and cyclicality. These Business Areas have full responsibility for their operating results.

The Business Area Care Chemicals comprises the BU Industrial & Consumer Specialties (ICS), food additives as well as the future Industrial Biotechnology business. It demonstrates a clear focus on highly attractive, high-margin, and low-cyclicality segments. The BA follows a lifestyle-driven megatrend and strengthens Clariant’s image of being a supplier of green and sustainable products.

The Business Area Catalysis develops, manufactures, and sells a wide range of catalyst products for the chemical, fuel and automotive industries as well for the biofuel business. This BA is highly profitable with a cyclicality in line with the investment cycle of the petrochemical industry.

The Business Area Natural Resources comprising the BUs Oil & Mining Services, Functional Minerals and Additives is characterized by high growth and a low cyclicality as well as a strong megatrend orientation. Main drivers are the rising demand for high-value added specialty chemicals used in the oil, mining, food and packaging industries, the increased consumption of oil, gas and base metals and the increasing use of plastics with tailor-made properties in applications such as mobile phones, cars, construction, driven by the fast-growing economies.

Discontinued Operations comprise Business Units Masterbatches and Pigments

Corporate: Income and expenses relating to Corporate include the costs of the Corporate headquarters and some of the corporate coordination functions in major countries. In addition, Corporate includes certain items of income and expense, which are not directly attributable to specific Business Areas, like central R&D costs.

The Group’s Business Areas are segments offering a large variety of products. The segments are managed separately because they manufacture, distribute and sell distinct products, which require differing technologies and marketing strategies. These products are also subject to risks and returns that are different from those of other segments.

Segment sales are sales reported in the Group’s income statement directly attributable to a segment and the relevant portion of the company income that can be allocated on a reasonable basis to a segment, whether from sales to external customers or from transactions with other segments.

Segment operating expenses are expenses resulting from the operating activities of a segment directly attributable to the segment and the relevant portion of an expense that can be allocated on a reasonable basis, including expenses relating to sales to external customers and expenses relating to transactions with other segments. Inter-segment transactions are entered into under the normal circumstances and terms and conditions that would also be available to unrelated third parties.

The segment net assets consist of segment assets, primarily property, plant and equipment, intangible assets, inventories and receivables, less segment liabilities. Usually no allocation of Corporate items is made to the segments. Corporate assets and liabilities principally consist of net liquidity (cash, cash equivalents and other current financial assets less financial debts) and deferred and current income taxes.

The Executive Committee assesses the performance of the operating segments based on income statement parameters like third-party sales, EBITDA, operating result and cashflow. Interest income, interest expense and taxes are not allocated to the segments. The return on the capital invested in each segment is measured by the Return on Net Assets (RONA).

1.26 – Share capital and other reserves

All issued shares are ordinary shares and as such are classified as equity. Incremental costs, directly attributable to the issue of new shares or options, are shown in equity as a deduction, net of tax, from the proceeds.

Written put options, where Clariant Ltd shares are the underlying, are reported as obligations to purchase Clariant Ltd shares if the number of shares is fixed and physical settlement for a fixed amount of cash is required, in case the option is exercised.

At inception, the obligation is recorded at the present value of the settlement amount of the option and the corresponding effect is recognized in shareholders’ equity.

The liability is measured subsequently at amortized costs using the effective interest method. Upon settlement of such written put options, the liability is extinguished and the charge to equity is reclassified to the treasury shares.

Clariant Ltd shares, subject to such put options, are not considered to be outstanding for the purpose of basic earnings per share calculations, but are considered for the dilutive earnings per share calculations to the extent that they are dilutive.

Other reserves comprise the following items:

• Share premium: The share premium comprises the excess price paid over the par value of the share at the time of issuance of the share capital.
• Cumulative translation reserves: The translation reserves comprise the foreign exchange differences arising on the translation of the financial statements of the foreign subsidiaries stated in a currency other than the Group’s functional currency. In addition, the cumulative translation reserves comprise the foreign exchange differences arising on the translation of financial liabilities denominated in a currency other than the functional currency of the parent company Clariant Ltd, which are at the same time designated as a hedge of a net investment in a foreign entity.

1.27 – Treasury shares

Treasury shares are deducted from equity at their par value of CHF 3.70 per share. Differences between this amount and the amount paid for acquiring, or received for disposing of treasury shares are recorded in retained earnings.

1.28 – Financial debt

Financial debt is recognized based on the requirements of IFRS 9, Financial Instruments: Recognition and Measurement.

All financial liabilities are valued at amortized cost.

1.29 – Financial assets

Financial assets are classified, recognized, measured and if necessary, impaired based on the requirements of IFRS 9, Financial Instruments.

Financial assets are valued at amortized cost if there is the intention to hold them in order to collect the contractual cash flow and this cash flow is only for the principal and interest.

Financial assets are valued at fair value through Other comprehensive income when they are held with the intention of getting the contractual cash flow, but also with the intention of eventually selling the asset.

Equity investments are measured at fair value through Other comprehensive income based on the Group’s irrevocable election at initial recognition.

There are currently no financial assets at fair value though profit and loss.

Loss allowances are recognized for expected credit losses in line with the requirements of IFRS 9 Financial Instruments. Changes in the measurement of the loss allowance are recognized in profit and loss.

Purchases and sales of financial assets are recognized on settlement date, which is the date on which the Group receives or delivers the assets.

1.30 – Business combinations

The Group applies the acquisition method to account for business combinations in accordance with IFRS 3, Business Combinations, and recognizes any non-controlling interests in the acquiree at fair value (full goodwill method).

Acquisition-related costs are expensed as incurred.

1.31 – COVID-19

The outbreak of the COVID-19 pandemic has affected the world-economy deeply and, as a consequence also the environment of Clariant and the company itself. Clariant has early taken measures to minimize the COVID-19 impact by assuring people safety first while supporting its communities and concurrently running business continuity, cash and cost programs.

Business continuity could be preserved by stringent safety and contingency measures allowing very minimal disruption caused by temporary production site closures while cooperating closely with customers and suppliers along the value chains.

Given an overall decline in demand in various industries as a result of COVID-19 Clariant has suffered from slumps in sales to a degree varying between the Business Units. Generally, the largest dents in the sales development were registered in May.

Management together with the Business Units is continuously modeling and assessing the situation and executing stringent cash and cost programs.

These cash programs are centrally run and focus on optimizing net working capital efficiency, spend avoidance, cost cuts and operational flexibilization. Supply and production plans have been adjusted to assure efficient levels of inventories. The recoverability of inventories is also assessed to be unchanged compared to the time prior to the COVID-19 crisis due to tight inventory management. Debtors are prudently managed and so far, no increase in overdues or defaults was recorded.

The economic development is continuously monitored together with the Business Units and assessed for the need to adjust the business plans. For the year 2021 and later it is expected that the world economy will return to the growth path implied in the Group’s mid-term plans.

Despite an increased level of uncertainty under the given circumstances the balance sheet and liquidity of Clariant are strong based on a consistent and prudent financing policy with sufficient financial flexibility.