Clariant's plan to separate the largest of its four divisions from the rest of its chemicals operations could open up the low-margin business to external investors over time, its chief executive said.

The Swiss group unveiled plans at the end of July to shift the 2.6 billion Swiss franc ($2.7 billion) Plastics and Coatings unit, whose products include plastic colourings, additives and pigments, into a separate, wholly-owned subsidiary.

Speaking on the sidelines of an event in Frankfurt on Wednesday, Chief Executive Hariolf Kottmann reiterated that selling the business or taking on a joint-venture partner would not be on the agenda for the next three to five years.

Plastics and Coatings accounted for more than 40 percent of the group's total sales last year but had the lowest profitability of the company's four divisions.

Kottmann pointed to the dangers of trying to sell a business without first getting it into good shape.

The company in recent years sold smaller businesses including textile and paper chemicals without having prepared them internally for the move.

"This divestment process ran in parallel with the organisational carve out. But that puts the seller at an economic and strategic disadvantage," Kottmann said.

The overhaul of Plastics and Coatings would, however, make it simple to disconnect it from the rest of Clariant and potentially connect it to another entity, he said.

"You should have tents rather than palaces. You need an organisation where you can plug in and plug out," he said. "It makes sense to gain strategic flexibility by moving parts from the palace into a tent that you can pitch and take down."

Plastics and Coatings was well positioned but competing on price with rivals in China and other emerging markets by vying to come up with the cheapest production procedures, Kottmann said.

The other Clariant businesses such as catalysts were mainly seeking to win over clients with new product features, he added.

 

reuters.com

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