Annual report Clariant 2011

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Profitable Growth under WayAnnual Report 2011

Key FIguReS 2011 2010

CHF m CHF m

Sales 7 370 7 120

EBITDA before exceptionals 975 901

EBITDA margin before exceptionals (%) 13.2 12.7

Net income 251 191

Basic earnings per share 0.86 0.81

Operating cash flow 206 642

Investment in property, plant and equipment 370 224

Research & development costs 176 135

Total assets 9 081 5 921

Total equity 3 026 1 806

Equity ratio (%) 33.3 30.5

Net financial debt 1 740 126

Gearing1 ratio (%) 58 7

Employees 22 149 16 176

1 Net financial debt to equity

Financial Summary

SaLeS by buSIneSS unIt

CHF m

Total 2011: 7 370

Industrial & Consumer Specialties 1 473 20 %

Masterbatches 1 124 15 %

Pigments 973 13 %

Textile Chemicals 675 9 %

Oil & Mining Services 620 8 %

Leather Services 265 4 %

Performance Chemicals1 1 293 18 %

Functional Materials2 456 6 %

Catalysis & Energy2 491 7 %

1 Performance Chemicals includes the Business Units Additives, Detergents & Intermediates, Emulsions, Paper Specialties.

2 May – December 2011

SaLeS by RegIon

CHF m

Total 2011: 7 370

Europe 3 029 41 %

Middle East & Africa 642 9 %

North America 958 13 %

Latin America 1 144 15 %

Asia/Pacific 1 597 22 %

Cover photoThe cover photo was taken at St. Jakob-Park in Basel, home of the 14-time Swiss football champions, FC Basel.Stadium seats can be made with products from three of Clariant´s Business Units: Additives, Masterbatches and Pigments. Their products provide, amongst other things, vibrant color; block light with their UV stabilizers; repel dust with their antistatics; and fight fire with their flame retardants.

Profi table Growth under WayAnnual Report 2011

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business units in 2011

Functional MaterialsKey FIguReS 20111

Sales (CHF m) 456

EBITDA before exceptional items

(CHF m)

59

Employees 2 829

Functional Materials has been part of the Clariant Group since the acquisi-tion of Süd-Chemie in 2011. This Business Unit is among the market leaders in specialty products and solutions for improving product and efficiency char-acteristics in various industries including adsorbents, solutions for protective packaging, and water treatment. www.functionalmaterials.clariant.com

Industrial & Consumer SpecialtiesKey FIguReS 2011

Sales (CHF m) 1 473


(CHF m)

251

Employees 1 801

The Industrial & Consumer Specialties Business Unit has the highest sales volume in the Clariant Group and is one of the largest providers of specialty chemicals and application solutions for consumer care and industrial markets such as the agricultural, metalworking, machine-building, and aircraft indus-tries. Its EcoTain® label exemplifies its uncompromising pursuit of the principle of environmental sustainability. www.ics.clariant.com

Catalysis & EnergyKey FIguReS 20111

Sales (CHF m) 491


(CHF m)

107

Employees 2 659

Catalysis & Energy has been part of the Clariant Group since the acquisition of Süd-Chemie in 2011. This Business Unit holds a leading position as a producer of catalysts for the chemical, petrochemical, polymer, refinery, and auto motive industries. It also supplies products into environmental markets and sells energy storage materials such as for lithium-ion batteries.www.catalysis-energy.clariant.com


AdditivesKey FIguReS 2011

See Performance Chemicals.

The Additives Business Unit is an important supplier of products with func-tional effects for plastics, coatings, and printing inks. The product range in-cludes flame retardants, waxes, and polymer additives for effects in plastics, varnishes, and other applications. www.additives.clariant.com

EmulsionsKey FIguReS 2011


The Emulsions Business Unit is one of the leading suppliers of latex/polymer dispersions for paints, coatings, adhesives, sealants, and for the textile, leath-er, and paper industries. These water-based and therefore environmentally compatible products give colors luminosity and durability. www.emulsions.clariant.com

Detergents & IntermediatesKey FIguReS 2011


Detergents & Intermediates is one of the most important producers of key raw materials for detergents and household cleaners. It is also an important sup-plier of chemical intermediates used specifically for producing agrochemicals and pharmaceuticals. www.detergents-intermediates.clariant.com

business units in 2011Leather ServicesKey FIguReS 2011

Sales (CHF m) 265


(CHF m)

26

Employees 595

Leather Services is a leading producer of chemicals and services to the leather in-dustry. The Business Unit offers chemical and technical solutions for the complete leather production process, from beamhouse to finishing. www.leather.clariant.com

Paper SpecialtiesKey FIguReS 2011


Paper Specialties is one of the largest manufacturers of products for optical bright-ness, color, coating, and thickness of paper and thus helps improve the optical and functional properties of all types of papers and board with its focused product of-fering. www.paper.clariant.com

MasterbatchesKey FIguReS 2011

Sales (CHF m) 1 124


(CHF m)

129

Employees 3 091

Clariant Masterbatches is a leading manufacturer of dye and additive concentrates and technical composites for the plastics industry, and supplies the packaging, con-sumer goods, medical, textile, and automotive industries. www.clariant.masterbatches.com

Oil & Mining ServicesKey FIguReS 2011

Sales (CHF m) 620


(CHF m)

72

Employees 1 000

The Oil & Mining Services Business Unit is one of the most significant provid-ers of products and services to the oil, refinery, and mining industries. The broad and diverse product range includes chemical solutions for deep wa-ter exploration to refining which help to reduce costs and improve production efficiency.www.oil.clariant.com or www.mining.clariant.com

PigmentsKey FIguReS 2011

Sales (CHF m) 973


(CHF m)

210

Employees 1 928

The Pigments Business Unit is a leading global provider of organic pigments, pig-ment preparations, and dyes, which are used for coatings, printing, plastics, and other special applications. These include high-performance pigments and dyes for ink jet and laser printers. www.pigments.clariant.com

Textile ChemicalsKey FIguReS 2011

Sales (CHF m) 675


(CHF m)

34

Employees 2 096

Clariant’s Textile Chemicals Business Unit supplies specialty chemicals for the pre-treatment, dyeing, printing, and finishing of textiles and improves the properties of garments and other textiles such as high fashion fabrics, home textiles, and special technical fabrics.www.textiles.clariant.com

Performance Chemicals includes the Business Units, Additives, Detergents & Inter-mediates, Emulsions, and Paper Specialties.

Performance ChemicalsKey FIguReS 2011

Sales (CHF m) 1 293

EBITDA before exceptional items (CHF m) 177

Employees 2 141

Index

Letter to Shareholders Page 02

Profitable growth under way Page 08

Drivers for profitable growth Page 36

36 Portfolio Management 42 Global Positioning 46 Innovation, Research & Development 52 Sustainability at Clariant 60 Clariant Excellence

Corporate Governance Page 70

Compensation Report Page 86

Consolidated Financial Statements of the Clariant Group Page 99

99 Consolidated balance sheets 100 Consolidated income statements 100 Consolidated statements of comprehensive income 101 Consolidated statements of changes in equity 102 Consolidated statements of cash flows 103 Notes to the consolidated financial statements 158 Report of the statutory auditor

Review of Trends 159 Five-year Group overview

Financial Statements of Clariant Ltd, Muttenz 160 Clariant Ltd balance sheets 161 Clariant Ltd income statements 162 Notes to the financial statements of Clariant Ltd 170 Appropriation of available earnings 171 Report of the statutory auditor 172 Forward-looking statements

Financial Review Page 14

15 Results of operations, financial position, and net assets 19 Segment analysis 26 Extract of cash flow statement 31 Outlook 33 The Executive Committee

1

Dear Shareholders,

2011 was an important year for Clariant in terms of our transformation from restructuring to sustainable profitable growth. Following the sometimes painful but necessary cutbacks in 2009 and 2010, when we were forced to over-come additional obstacles created by the financial crisis, we posted a successful performance in 2010, aided by a strong economic tailwind. We have made further progress in 2011. Despite the fact that the global financial crisis cooled industrial demand significantly in the second half of the year, Clariant reported another excellent year with sales increases of 16 percent in local currencies or 4 percent in Swiss francs and the best profitability in ten years. The strong growth was driven by price increases and by Süd-Chemie sales, which were consolidated for the eight-month period following the acquisition of the company in April 2011. Overall group sales reached CHF 7.37 billion and EBITDA margin before exceptional items increased to 13.2 percent versus 12.7 percent in 2010.

Profitable growth under wayWe will continue to gradually and systematically implement the efforts we began three years ago. We created the foundation for profitable growth in Phase 1 by executing the cash-generating, cost-cutting, and complexity-reducing measures as part of the Project Clariant program. At the end of 2009, Clariant entered Phase 2 with the launch of Clariant Excellence, the company-wide initiative that focuses on continuous improvement and value enhancement. We are now in the process of changing the philosophy that governs our day-to-day business activities and integrat-ing a culture of continuous improvement into all business units based on Operational Excellence, Commercial Excel-lence, Innovation Excellence, and People Excellence. After benefits at a total of CHF 63 million in 2009 and 2010, the company has been able to achieve further benefits of more than CHF 100 million in 2011 through a large number of projects at all levels. 2011 saw the focus shift for the first time to strengthening our Innovation Excellence and taking the first steps in People Excellence.

We will continue these efforts in 2012 in order to achieve new savings of more than CHF 60 million each year through Clariant Excellence. Further cost reductions totaling CHF 60 million are expected by mid-2013 after comple-tion of the production network optimization under the Global Asset Network Optimization (GANO) program as part of Project Clariant.

We entered Phase 3 of our strategy plan in 2011: Its goal being to sustainably increase value based on long-term profitable growth. The emphasis is on continually improving profitability in all business units, focusing on innova-tion, expanding our already strong competitive position in the growth markets of Asia and Latin America, and optimizing our company portfolio.

Letter to Shareholders

2 Clariant Annual Report 2011

Acquisition of Süd-Chemie – a great opportunity for ClariantThe takeover of Süd-Chemie in 2011 is of great significance in the transformation of the company. Through this transaction, we acquired two attractive high-margin businesses. Our newly acquired segments – Functional Materi-als and Catalysis & Energy – posted EBITDA returns of just under 13 and approximately 22 percent, respectively, in 2011. In view of the ongoing economically turbulent times, it is remarkable that Süd-Chemie was able to gener-ate a very stable margin even during the last global recession of 2008 – 2009. Süd-Chemie also has an excellent track record in future technologies and innovations. Overall, Clariant has increased Group sales and earnings by about one fifth through this acquisition. The integration of Süd-Chemie is progressing as planned. We project that integration-related synergies and Clariant Excellence initiatives from the integration will lead to an additional rise in EBITDA of CHF 90 to 115 million by 2013.

Solid balance sheet structureEven after this major acquisition, Clariant has a solid balance sheet structure that will enable us, to effectively increase our own investments in the future of the company in the coming years. The willingness of the capital market to participate in the financing package that Clariant put together in the course of the takeover was cru-cial in this regard. This was not a foregone conclusion since the deal involved a total financing volume of about CHF 2.5 billion. We strengthened our equity base through a capital increase that raised the equity ratio to 33.3 per-cent, slightly above the previous year’s 30.5 percent level. We also refinanced all our commitments with long-term financing at attractive conditions. We will work hard in 2012 and in subsequent years to reduce our net financial debt rapidly and substantially.

Our vision for 2015 Clariant has set ambitious goals for the years through to 2015 in expectation of a moderate upward trend in the global economy and stable exchange rates. By implementing the measures from the strategy initiatives Project Clariant and Clariant Excellence, we aim to improve the profitability of the company and all business units. We will also increase investments in the Group’s technology and innovation, as well as expand the innovation pipeline significantly by implementing Innovation Excellence. The focus will be on broader expansion into the fast-growing emerging market regions. The company will in particular increase its market share in China, India, and Brazil. The profitability of the current portfolio will be analyzed on a continuous basis. We will also make targeted acquisitions in the future to strengthen the product pipeline and the company’s regional presence, but we will also consider divestments.

By implementing these basic strategic goals for 2015, Clariant aims to increase Group sales to more than CHF 10 billion. The EBITDA margin before exceptional items is projected to rise to above 17 percent, and Return On Invested Capital (ROIC) is expected to be higher than the industry average.

3Letter to SharehoLderS

A challenging 2012The fiscal year 2012 will play a major role in these developments. An accurate forecast for this year is difficult to make, given the high level of economic uncertainty. We will monitor the conditions very closely and respond rapidly, where necessary. Should the expectations of most economic experts prove correct – namely, that the world economy, driven by impetus from the emerging markets, will return to solid growth in the course of the year – then Clariant is also confident that it will be able to increase sales and earnings for 2012. We are confident we will improve the performance of the company after a slow start in 2012, given the current economic slowdown. The integration of Süd-Chemie has increased the percentage of the Group’s less cyclical activities markedly to about 50 percent. This makes us stronger and more able to resist economic fluctuations.

A bitter note in 2011 was the performance of the Clariant share price, which was disappointing for us. After a sharp rise in 2010, the stock market still categorizes us as a highly cyclical company. We must address this issue in prov-ing the sustainability of our performance. We will continue focussing our efforts to increase the value of the Clariant Group. We would like to thank our shareholders for their trust, especially in these difficult times.

We would also like to express our gratitude to all employees of the Clariant Group around the world for their excellent work and high level of commitment. They have played a key role in getting our company back on track to success. 2012 will be another year full of challenges. We are well equipped and will step up our efforts to make Clariant a specialty chemicals company that is a global leader in innovation, productivity, and competitiveness.

Yours sincerely,

Jürg Witmer Hariolf KottmannChairman, Board of Directors Chief Executive Officer


Jürg WitmerChairman, board of Directors

Hariolf KottmannChief executive officer

5Letter to SharehoLderS


yolanda garcia, R&D Department Special Dyes

Using 92 percent less water and remarkably little energy to achieve a higher standard of quality in a vast array of colors. environmentally minded and fashion aware: thanks to advanced denim’s Pad/Sizing-ox dyeing process, an innovative solution of the textile Chemicals Business Unit, dyeing jeans has become far more environmentally compatible.

7

2011 objectives achieved despite difficult environmentClariant has made significant progress in 2011 in consistently pursu-ing its strategic goal of sustainable profitable growth as it expanded its EBITDA margin before exceptional items from 12.7 percent in 2010 to 13.2 percent in 2011. After adjustment for negative cur-rency effects, Group sales were up by 16 percent and EBITDA before exceptional items rose by 8 percent year on year. The significant cooling in industrial demand in the second half of the year due to the global financial crisis should, of course, be taken into account here. A crucial factor in this regard is that the company was able not only to safeguard the achievements of the tough restructuring process of 2009 to 2010 but also to expand them at almost all levels and in all Business Units. The efforts of the past few years have increasingly started to pay off. Savings resulting from optimization of the produc-tion network through Global Asset Network Optimization (GANO), for example, totaled about CHF 60 million up to 2011.

Operating margin development since 2000

This shows that none of the companies in the Clariant Group is rest-ing on its laurels; rather, all are working systematically to realize the long-term goal of sustainable profitable Group-wide growth. After all, the targets for the fiscal year 2015 are high: Group sales are ex-pected to increase to more than CHF 10 billion, assuming moderate economic growth and stable currencies, while the EBITDA margin (before exceptional items) is projected to climb to above 17 percent.

Profitable growth under way

Clariant was able to sustain the 2010 performance and to reap further rewards from the restructuring measures of recent years in 2011. However, increases in profitability and organic and external growth were slowed by a gloomy economic environment.

DISCIPLIneD anD FaSt StRategy exeCutIon IS StaRtIng to be ReFLeCteD In MaRgIn PRogReSS1

%

2011 9.7

2010 9.8

2009 4.1

2008 6.6

2007 6.3

2006 6.9

2005 6.3

2004 7.4

2003 7.2

2002 7.4

2001 6.4

2000 10.7

0 3 6 9 12

1EBIT margin before exceptional items


Efforts to establish stable cash generation also focus on the area of working capital management. The 19.6 percent ratio of net working capital to sales as of 31 December 2011 met the Group’s target of 20 percent. Return on invested capital (ROIC), another important Group indicator, was affected in 2011 by the consequences of the major ac-quisition of Süd-Chemie. The value at year-end of 13.1 percent was thus significantly below the previous record level of 18.1 percent from 2010, however still above long-term industry average.

Strategic Review

On a clearly defined growth path as plannedThe transformation process launched in 2008 is progressing as planned. This will take the Clariant Group from the restructuring initiatives of the past few years to a new level as a specialty chemi-cals company that is a global leader in innovation, productivity and competitiveness with sustainable profitable growth. The company is following a clearly defined three-phase strategy to this end.

A positive factor in the year just ended was that Clariant was able to pass on significantly higher raw material costs in their entirety. Clariant also made good on its promise to strengthen its portfolio and future potential through external growth by acquiring Süd- Chemie in April. The key operating data for the Süd-Chemie trans-action demonstrate that this acquisition will have a very positive effect on Clariant. The two newly acquired businesses, Functional Materials and Catalysis & Energy, posted in 2011 EBITDA returns of just under 13 and approximately 22 percent, respectively, which is already a very good sign. Clariant will benefit fully from this acquisition in 2012 since Süd-Chemie will then be consolidated for the first time on a full-year basis. Clariant also projects that inte-gration-related synergies and Functional Excellence initiatives from integration will lead to additional growth in EBITDA of CHF 90 to 115 million by 2013. The first significant effects are expected to emerge as early as the new fiscal year.

Focus on management of net working capitalClariant has also taken important steps in 2011 with regard to its balance sheet. It was possible to finance the Süd-Chemie takeover on the capital markets in a very short time, even given the total investment volume of about CHF 2.5 billion. This involved raising equity through a capital increase as well as bringing in outside capital. In this case, the maturity pattern of the loans was markedly improved by utilizing various financing instruments, such as issuing bonds or certificates of indebtedness, which also resulted in favor-able conditions for Clariant in an extremely volatile environment. The investor confidence indicated by this underlines the fact that the capital markets have fully acknowledged the company’s successes. Nonetheless, there is still work to be done. Although the equity ratio was solid at 33.3 percent at the end of 2011 and the gearing ratio of 58 percent was also respectable, Clariant will work hard in the com-ing years to reduce net financial debt, which has risen to CHF 1.7 billion as a result of the acquisition.

FIve-yeaR CoMPaRISon: tRenD In RatIo oF net woRKIng CaPItaL to SaLeS

%

2011 19.6

2010 15.9

2009 21.1

2008 23.8

2007 25.5

0 5 10 15 20 25 30

9ProfitaBLe growth Under way

Restructuring phase largely completedPhase 1 of the strategic realignment of the Clariant Group was car-ried out primarily in 2009 and 2010 and involved implementing an extensive restructuring program. Under the Project Clariant heading, a large number of steps were taken, focusing on cash generation, cost cutting and making Group structures leaner.

Solid success has been achieved, as indicated by the trend in the key company indicators:

Cash generation:› The ratio of net working capital to sales was reduced to 19.6 per-

cent by the end of 2011, down from 23.8 percent at the end of 2008. The internal long-term group target for this value was set at below 20 percent.

Cost cutting (excl. acquisition of Süd-Chemie):› The total number of employees in the Clariant Group was reduced

by about 20 percent. As part of Global Asset Network Optimization (GANO), the closure of 20 sites worldwide was announced and is scheduled to be fully implemented by mid-2012. Finalization of these measures will lead to further reductions in costs totaling CHF 60 million by mid-2013.

Reduction of complexity:› The number of Business Units was streamlined, and the global ser-

vice organization was consolidated at eight locations. › A decision was made to realign Research and Development (R&D)

with new research headquarters in Frankfurt and branches in core regions. This has already been implemented for the most part.

CLaRIant on the RoaD to SuStaInIng PRoFItabLe gRowth

Restructuring

Profitable growth

Result: establish a solid base for profitable growth

Result: growth of profitable business portfolio

› Cash generation› Cost cutting› Complexity reduction

Implementation of restructuring

› Improve profitability of existing portfolio› R&D and Innovation› Growth in emerging markets› Strengthen portfolio by selective acquisitions

Continuous improvement

Result: Sustainable productivity improvement

Clariant Excellence program› Operational Excellence › Commercial Excellence › People Excellence › Innovation Excellence

Cost focus Portfolio focus

Continue program/ Sustain achievements

2009 20112010 2012

CoMPLete


The restructuring phase is largely complete, although some of the announced efficiency improvements will take until 2012 to imple-ment.

Clariant Excellence – a culture of continuous improvementAt the end of 2009, Clariant signaled the start of Phase 2 by launch-ing the company-wide Clariant Excellence initiative. With LeanSig-ma processes at its core, Clariant Excellence is designed to enhance competitiveness by improving efficiency and creating value. The company is creating a culture of continuous improvement based on four pillars of Operational, Commercial, People, and Innovation Ex-cellence. Clariant has also put in place internal control mechanisms to maintain what has already been achieved. More than 3 000 em-ployees were designated as “belts”, i.e., project managers or project staff, trained specifically for tasks in connection with the Excellence Program, and entrusted with its implementation within the Group. Süd-Chemie employees will also be included in this process from 2012.

After saving a total of CHF 63 million in 2009 and 2010, the company has been able to achieve further benefits of more than CHF 100 mil-lion in 2011 through a large number of projects at all levels. In 2011, the focus was for the first time on strengthening our Innovation Ex-cellence and taking the first steps in People Excellence. The stated goal is to make Clariant a global innovation leader and to be able to rely on a well trained and coordinated team of employees.

In 2012 and the coming years, we will continue these efforts in or-der to achieve new savings of more than CHF 60 million each year through Clariant Excellence. These figures are specifically supported by a number of initiatives that have already been launched: For ex-ample, the Clariant Production System (CPS) was introduced in 2010 to achieve optimum productivity and financial performance in the production units of all Business Units. The goal is to achieve pro-ductivity increases ranging between 8 and 10 percent. The Clariant Commercial System (CCS) was also established in 2010. This is an initiative to optimize sales and marketing processes and is designed

to improve the operating margin by an additional one to two percent-age points. Finally, Clariant also launched the Clariant Supply Chain System (CSS) initiative in early 2011 to enhance customer service, cash and working capital along the entire value chain.

The sustainable value enhancement phase has begunWe entered Phase 3 of our strategy plan in 2011: sustainably in-creasing value based on long-term profitable growth. The focus is on four strategic pillars:› Ongoing improvement in the profitability in all Business Units › Focus on innovation › Expansion and exploitation of Clariant’s strong competitive position

in the Asian and Latin American growth markets › Optimization of the company portfolio.

CLaRIant exCeLLenCe

Innovation excellence:Promoting new ideas and solutions for profitable growth

Commercial excellence:Empowering sales and marketing to offer the best customer service

and value

operational excellence:Striving for optimum efficiency across all of our operating processes

People excellence:Enabling our people to achieve

a culture of continuous improvement

LeanSigma

11ProfitaBLe growth Under way

Christian Steib, technical Marketing Manager

Soccer is one of the most beautiful games in the world. and for most boys probably the universe. in its additives Business Unit, Clariant has developed licocene®, a poly-mer that has revolutionized the manufacture of artificial turf. the turf is fully recyclable and extremely hard wearing. Clariant donated the first artificial pitch with this technology in germany to the feuerbach children’s center in Stuttgart in 2011.


13

business performance review 2011

Summary statement for business year 2011For Clariant 2011 was marked by the acquisition of Süd-Chemie AG, the slowdown in economic growth over the course of the year, and highly negative currency effects. Group sales totaled CHF 7 370 million, slightly higher compared to 2010. After adjustment for acquisitions (particularly Süd-Chemie) and negative currency effects, the company has achieved an organic growth of 2 percent. Profitability as a percentage of the operating result (EBITDA) before exceptional items improved to 13.2 percent from 12.7 percent. These good results were achieved on the back of the success of the Project Clariant and Clariant Excellence initiatives that were launched in 2009. Clariant reached its goal of setting the company on a profitable growth path. It will continue to pursue this strategy systematically based on the sound operational and financial foundation already es-tablished in order to attain the ambitious objectives for 2015, which include increasing the EBITDA margin before exceptional items to about 17 percent, provided that there is a stable economic environ-ment. Clariant will take further important steps in this direction in 2012, although there are still uncertainties regarding precise fore-casts due to the effects of the global financial crisis on the world economy.

General conditions

Global economic growth slows significantly at end of 2011According to data from the International Monetary Fund (IMF), the global economy grew 4 percent in 2011, but was unable to sustain the dynamic growth of 2010. Moreover, economic growth weakened significantly in the second half of the year. The devel-opment of the global economy was driven primarily by the emerg-ing markets, while the industrial nations lost momentum. The gross domestic product of the emerging countries rose 6.4 percent in 2011, whereas the IMF reported growth of only 1.6 percent for the industrialized world. In the wake of the euro crisis, Europe (+ 1.6 percent) is wrestling with the unresolved problems of the debt-ridden southern European states. Impetus for growth was also lacking in the US economy (+ 1.5 percent) due to a high govern-ment deficit. The emerging markets were exposed to much lower economic risks. Although experiencing inflationary tendencies the emerging economies in Asia, in particular, continue to grow at a high rate. China’s economy experienced 9.5 percent growth in 2011, according to IMF figures, while India advanced by 7.8 percent. The economies of the two other BRIC countries – Russia (+ 4.3 per-cent) and Brazil (+ 3.8 percent) – also posted robust expansion.

The massive revaluation of the Swiss francs against major curren-cies was stopped with the intervention of the Swiss National Bank, which set a floor of the value of the Swiss franc at an exchange rate of at least CHF 1.20 per Euro. On a year on year comparison how-ever the Swiss currency has appreciated significantly compared with most local currencies that are crucial for Clariant.

Chemical industry in 2011: Positive year with weaker finishThe chemical industry as a whole and specialty chemicals in particu-lar also exhibited positive growth trends, driven by a still positive economic environment. Global chemical production increased by

Financial Review

Given the challenging economic conditions the results achieved in 2011 are a good performance and reflect the sustainable profitability increase achieved by Clariant.


about the same magnitude, proportionately, as the global economy. Impetus for growth came primarily from the EMEA (Europe, Middle East & Africa) region, North America, and Asia. Growth was based in large part on the extremely dynamic development in some areas in the first six months of the year. In the second half of the year, however, the slowdown in industrial production across all regions triggered by economic conditions manifested itself in declining de-mand. Europe was affected and experienced stagnating growth as of the third quarter after a definite uptrend at the beginning of the year. Momentum in the emerging Asian markets also slowed. By the end of the year, Japan’s chemical industry reported definite signs of recovery after the sharp downturn caused in the aftermath of the tsunami in March.

The price levels for both raw materials and finished products also rose significantly, but stabilized after a peak in the mid of 2011. In the second half of 2011 a significant de-stocking could be observed in several industries (Leather, Plastics, Coatings). Because of the slowdown in industrial production, which was more pronounced to-ward year-end, the last six months of the year were characterized by stagnation in annualized chemical production.

Changes in the reporting structureOn 16 February 2011 Clariant AG announced a series of transac-tions, pursuant to which it acquired the specialty chemical company Süd-Chemie AG at an aggregate enterprise value of approximately CHF 2.5 billion. Süd-Chemie AG was acquired partially in exchange for cash and partially in exchange for newly issued Clariant shares. The last step in the acquisition of Süd-Chemie AG was concluded with the squeeze-out of the remaining Süd-Chemie AG minority shareholders, the successful completion of which was announced on 1 December 2011. Clariant now controls 100 percent of the shares in Süd-Chemie AG.

Since 1 May 2011, the sales and results of Süd-Chemie’s Catalyst business and its Adsorbent & Additive unit have been included in the Clariant Group’s consolidated financial statements. On 1 July 2011 these businesses were renamed Catalysis & Energy (catalysts) and Functional Materials (adsorbents and additives). Clariant therefore has twelve instead of ten Business Units, and Clariant’s external re-porting structure now includes nine segments instead of the seven that existed in 2010.

Results of operations, financial position, and net assets

Analysis of sales, margins, and costs

Key FIguReS

CHF m 2011 2010 Change in %

Sales 7 370 7 120 4

Gross profit on sales 1 968 1987 –

EBITDA before exceptional items 975 901 8

Margin (%) 13.2 12.7 –

EBIT before exceptional items 717 696 3

Margin (%) 9.7 9.8 –

EBIT 507 366 39

Financial result – 173 – 123 41

Income before taxes 334 243 37

Net income 251 191 31

Basic earnings per share 0.86 0.81 6

Earnings situation shaped by organic and external growth, efficiency increases, and currency translation charges After the dynamic growth of 2010, Clariant was still able to post a solid performance in 2011 despite differing demand in the indi-vidual Business Units. It is important to emphasize that the less cyclical Business Units – Catalysis & Energy, Functional Ma-terials, Oil & Mining Services, Industrial & Consumer Special-ties, and Additives – reported much stronger growth than Mas-terbatches, Pigments, Textile Chemicals, Leather Services and Paper Specialties, areas in which business is cyclical in nature. The last three segments were also negatively impacted by structural

“ Clariant was able to further improve its result and has established a sound financial foundation.”

PATRICk JANy, CHIEF FINANCIAL OFFICER

15finanCiaL review

problems. Due to the positive economic environment, especially in the first half of the year, the Clariant Group realized significant improvements in local currencies. In addition, the consolidation of the newly acquired businesses of Süd-Chemie translated into appre-ciable external growth. Thanks to their strong growth, the emerging markets generated additional momentum in the industrialized coun-tries, although the latter grew at a significantly lower rate. Profit-ability was further improved by the efficiency improvements initiated in the previous periods.

Sales in local currencies increased by 16 percent – organic growth at 2 percentGroup sales totaled CHF 7 370 million in 2011, slightly above the fig-ure reported for 2010. This represents a 4 percent increase over the previous year. In local currencies, much stronger Group sales growth of 16 percent has been achieved. The lower rise in sales in Swiss francs is the result of the substantial appreciation of the Swiss franc against the major world currencies. While sales volumes decreased below the prior-year level by the end of the year after a sharp rise in the first half, increases in selling prices had a positive effect on sales revenue. This made it possible to fully compensate the rise in raw material prices. External growth also played a very important role. It was driven primarily by the recently acquired activi-ties of Süd-Chemie AG, which contributed CHF 948 million in sales during the eight months of consolidation. Adjusted for this factor and for negative currency effects, Clariant would have posted an organic sales increase of 2 percent in local currencies.

The individual Business Units reported very different levels of de-mand for their products in 2011. The less cyclical Business Units – Catalysis & Energy, Functional Materials, Oil & Mining Services, Industrial & Consumer Specialties, and Additives – posted dynamic growth in local currencies in the low double-digit range. The more cyclical Business Units – Masterbatches, Leather Services, Textile Chemicals, Paper Specialties, and Pigments – experienced weaker year on year demand, even in local currencies. In Swiss francs there was a downward trend in all Business Units except for Oil & Mining Services.

SaLeS by RePoRtIng SegMent

CHF m

Industrial & Consumer

Specialties

2011 1 473

2010 1 526

Masterbatches2011 1 124

2010 1 260

Pigments2011 973

2010 1 168

Textile Chemicals2011 675

2010 821

Oil & Mining Services2011 620

2010 604

Leather Services2011 265

2010 326

Performance

Chemicals

2011 1 293

2010 1 415

Functional Materials12011 456

2010 –

Catalysis & Energy12011 491

2010 –


gRouP SaLeS – FIve-yeaR oveRvIew

CHF m

2011 7 370

2010 7 120

2009 6 614

2008 8 071

2007 8 533

0 2 000 4 000 6 000 8 000 10 000


Clariant was able to increase sales in local currencies in all key regions in 2011. North America posted especially strong increases and reported 27 percent growth. The EMEA (Europe, Middle East & Africa) region also reported positive results, selling 16 percent more than in the previous year. Sales revenues in the Asia/Pacific region climbed 16 percent, whereas the Clariant subsidiaries in Latin America – after significant growth the previous year – saw a comparatively moderate 9 percent rise in 2011. Overall, around 46 percent of Group sales were generated in the emerging and develop-ing markets, which are expected to have the strongest growth rates in the future. The regional sales distribution of businesses acquired from Süd-Chemie also had a positive impact in this regard.

SaLeS by RegIon

CHF m 2011 2010 Change in CHF

in %

Change in LC2

in %

EMEA1 3 671 3 529 4 16

North America 958 860 11 27

Latin America 1 144 1 199 – 5 9

Asia/Pacific 1 597 1 532 4 16

1 Europe, Middle East & Africa2 LC = Local Currencies

2011 SaLeS StRuCtuRe by CuRRenCy

%

Euro 44

US dollar 32

Japanese yen 4

Swiss franc 0

Emerging markets 20

2011 CoSt StRuCtuRe by CuRRenCy

%

Euro 49

US dollar 25

Japanese yen 2

Swiss franc 7

Emerging markets 17

2011 SaLeS by RePoRtIng SegMent

Local Currencies, Growth in %

Industrial & Consumer Specialties 10

Masterbatches 2

Pigments – 6

Textile Chemicals – 6

Oil & Mining Services 17

Leather Services – 6

Performance Chemicals 4

Functional Materials1 7

Catalysis & Energy1 17

1 January – December 2011

17finanCiaL review

Gross margin below prior year due to volume and currency effectsThe high level of demand in most industries brought about a capacity utilization of approximately 70 percent in 2011, as in 2010. Signifi-cant savings were realized as the result of the efficiency improve-ments successfully implemented in prior years – Project Clariant and Clariant Excellence. In the case of Clariant Excellence the savings totaled more than CHF 100 million compared with CHF 50 million in 2010. Nonetheless, these positive factors were not sufficient to compensate for negative currency and volume effects. Gross margin therefore declined overall from 27.9 percent in 2010 to 26.7 percent in 2011. Due to sluggish global economic growth, raw material pric-es stabilized in the course of the year but were still 13 percent higher than in 2010. The higher raw material costs were completely ab-sorbed, as planned, by an increase in sales prices. Price adjustments totaling 7.5 percent in local currencies were implemented in 2011.

Selling, general, and administrative expenses (SG&A costs) as a percentage of sales were lowered slightly to 15.9 percent (from 16.5 percent in 2010) as the result of high cost efficiency, despite increased project costs. In absolute figures, this corresponds to a change to CHF 1 176 million from CHF 1 177 million. This figure includes significant one-time project costs for the integration of ac-quired Business Units. The focus on innovations in conjunction with the Innovation Excellence initiative and the integration of Süd-Chemie led to a CHF 41 million increase in research and development costs to CHF 176 million. Given these changes and the impact of highly negative currency trends totaling CHF 41 million, the operat-ing result (EBITDA) before exceptional items increased slightly by 8.2 percent to CHF 975 million, compared with CHF 901 million in

2010. The EBITDA margin before exceptional items increased to 13.2 percent compared to the prior-year figure of 12.7 percent. Re-structuring costs and impairments were substantially reduced and amounted to CHF 161 million in 2011, down from CHF 331 million the year before. This reflects the sharply reduced costs for optimization of the global production network (Project GANO) and measures to integrate Süd-Chemie.

The financial result was adversely affected by the higher level of indebtedness resulting from the Süd-Chemie acquisition. On bal-ance the result was a decrease in the net financial result to CHF – 173 million from CHF – 123 million. Operating income before exceptional items at CHF 717 million is above the previous year (CHF 696 million) but was reduced by currency effects totaling CHF 170 million. Clariant posted pretax profit of CHF 334 mil-lion, compared with CHF 243 million in 2010. The tax rate rose to 24.9 percent from 21.4 percent the previous year. Profit after taxes accordingly increased to CHF 251 million from CHF 191 million.

This results in earnings per share of CHF 0.86 based on 264 586 754 shares, compared with CHF 0.81 in 2010.

Given the significant improvement of Clariant’s performance and the sustainability of its earnings, the Board of Directors proposes to repay 0.30 CHF of the nominal value of each registered share, as a result of a reduction of the nominal value from 4.00 CHF to 3.70 CHF per registered share. In 2010 there was no distribution due to the high restructuring expenditures. The motion will be subject to approval by the 17th Annual General Meeting on 27 March 2012.

ebItDa beFoRe exCePtIonaL IteMS – FIve-yeaR oveRvIew

CHF m

2011 975

2010 901

2009 495

2008 783

2007 812

0 250 500 750 1 000

ebItDa MaRgIn beFoRe exCePtIonaL IteMS – FIve-yeaR oveRvIew

%

2011 13.2

2010 12.7

2009 7.5

2008 9.7

2007 9.5

0 2 4 6 8 10 12 14


Segment analysis

Performance of the Business Units

Industrial & Consumer Specialties

Key FIguReS InDuStRIaL & ConSuMeR SPeCIaLtIeS

CHF m 2011 2010

Sales 1 473 1 526

EBITDA before exceptional items 251 243

Margin (%) 17.0 15.9

EBIT before exceptional items 215 206

Margin (%) 14.6 13.5

No. of employees 1 801 1 790

› Sales increase in local currencies of 10 percent › EBITDA margin further increased to 17 percent

The Industrial & Consumer Specialties (ICS) Business Unit reported an increase of 10 percent in sales in local currencies in 2011, but a decrease of 3 percent in Swiss francs compared with the prior-year period. Total sales in this segment reached CHF 1 473 million (2010: CHF 1 526 million). There was particularly high demand for chemicals for the construction industry and industrial lubricants. Significant growth again resulted from business in China, where ICS further solidified its market position by opening a new ethoxylation plant in Daya Bay (south of Guangzhou, China).

In the regional markets the Business Unit generated double-digit sales growth in Asia and North America as well as in Latin America, Middle East & Africa (MEA) region. Growth was somewhat weaker in Europe.

EBITDA before exceptional items increased by 3.3 percent to CHF 251 million. The Business Unit therefore increased the EBITDA mar-gin to 17 percent from the already high level of 15.9 percent a year earlier, despite negative currency effects. This rise was due to an

improved product mix, an optimized cost structure, and higher sell-ing prices, which fully compensated for the increased raw material costs.

ICS will continue to focus on innovative solutions and businesses that create a high level of added value. Of special interest is the Personal Care business, in which Clariant has introduced numerous innovations. ICS will strengthen its position in this market through an exclusive long-term partnership with KitoZyme, a leading manu-facturer of bio-polymers, which are tailored to the global needs of Personal Care customers requiring natural and sustainable skin and hair care substances. The takeover of Octagon Process LLC in mid-March 2011 significantly expanded ICS’ North American activities in the area of de-icing chemicals and generated additional growth potential.

Masterbatches

Key FIguReS MaSteRbatCheS

CHF m 2011 2010

Sales 1 124 1 260


Margin (%) 11.5 12.0


Margin (%) 9.1 9.5


› Adversely affected by currencies and cost effects› EBITDA margin of 11.5 percent nevertheless high› Focus on growth opportunities in emerging markets

Although the Business Unit was still able to achieve a sales increase at the beginning of the year, demand then weakened from Q2 on-wards. As a result, sales in local currencies only grew by 2 percent while sales in Swiss francs fell significantly, by 11 percent to CHF 1 124 million. The decline in demand, which was not noticeable until the second quarter, worsened steadily in the second half of the year as plastics processing companies responded to rising raw material costs and uncertain economic conditions by reducing or delaying orders.

19finanCiaL review

Sales growth was strongest in the Middle East region, especially in Saudi Arabia and Turkey. China and Indonesia also contributed posi-tively to growth in Asia. Sales only grew moderately in North Amer-ica and Latin America, and in Europe they fell below the year-earlier level, primarily due to weak economic growth in southern Europe.

The EBITDA margin in 2011 fell to 11.5 percent, down from 12 per-cent in 2010, since the increases in selling prices and productivity were not sufficient to absorb the negative currency effects and rising costs of underutilized capacities. The Business Unit’s raw material costs remained high but were fully compensated by higher selling prices. EBITDA before exceptional items totaled CHF 129 million and was below the high CHF 151 million level of the previous year.

The Business Unit is focusing on growth opportunities in emerging markets. It will benefit from expansion in the Middle East region with new production facilities in Turkey, for example, as well as from expansion of existing sites in Saudi Arabia and Pakistan. Additional capacities have also been created in China and Brazil in order to serve customers in the Asia/Pacific and Latin American regions.

The Business Unit’s focus in Europe is on expansion in Eastern Eu-rope and optimization of the existing production network in West-ern Europe. In North America two plants were combined in order to create a new state-of-the-art production facility in Chicago that produces both liquid and granular masterbatches. Pigments

Key FIguReS PIgMentS

CHF m 2011 2010

Sales 973 1 168


Margin (%) 21.6 20.2


Margin (%) 18.9 17.3


› Significant downturn in demand in second half of the year› EBITDA margin at 21.6 percent thanks to high cost efficiency

After a strong post-recession upsurge in demand was being felt in 2010, sales of the Pigments Business Unit declined 6 percent in local currencies in 2011. In Swiss francs the decrease was 17 percent, to CHF 973 million. There are three major reasons for this: Increased purchases in Q1 before price increases. De-stocking given the slow-down in the economy. Volumes were also reduced by the stronger focus on areas with high added value.

The lower demand was felt in most business sectors. The effects were especially pronounced in the printing industry, where the Business Unit increasingly refocused efforts away from low-margin products. In markets with high added value such as the non-impact printing market, customers reduced their inventories. Sales in mar-kets with high added value such as non-impact printing inks, paints, and coatings fell from a high level in 2010 as the result of customers re-adjusting their inventories.

Despite the significant market headwinds, EBITDA margin reached 21.6 percent, up from prior-year value of 20.2 percent thanks to the significantly improved cost structure resulting from the restructuring and efficiency improvement actions taken over the course of the pre-vious two years. EBITDA in absolute terms declined CHF 26 million from previous year due to lower sales volumes and unfavorable rate of exchange. It is expected that the benefits from the realized effi-ciency gains will continue in 2012 as the exits from the plants closed in 2010 and 2011 are largely completed, supported by ongoing effi-ciency and competitiveness improvements derived by implementing measures under the Clariant Excellence initiative.

The integration of the Italtinto business, specialized in supplying integrated tinting systems to the paint industry, is progressing ac-cording to plan, enabling Business Unit Pigments to execute its strat-egy of capturing value further down the value chain. Initial market responses and new orders were very promising, and customers are showing considerable interest in our tinting system technology.


Textile Chemicals

Key FIguReS textILe CheMICaLS

CHF m 2011 2010

Sales 675 821


Margin (%) 5.0 8.4


Margin (%) 1.9 5.6


› Massive currency effects depress performance › Accelerated relocation of production to Asia

Performance in the Textile Chemicals Business Unit differed greatly from one key region to the next in 2011. Sales growth in local cur-rencies reached a healthy level in North America and remained un-changed in Europe since there was still strong demand for technical textiles. In Latin America and China, on the other hand, sales expe-rienced a double-digit drop as demand continued to be weakened by strong fluctuations in cotton prices and flagging demand in the cloth-ing sector. Overall, the Business Unit reported a decrease of sales in local currencies in 2011 of – 6 percent. In Swiss francs, however, sales declined 18 percent. In the second half of the year the losses turned to the double-digit range.

Textile Chemicals, which still has an extensive production operation in Muttenz, Switzerland, was heavily impacted by the stronger Swiss franc. It therefore accelerated relocation of production to Asia. The headquarters of the Business Unit was moved to Singapore in Au-gust 2011. Production will now be transferred to China and India in early 2012, much earlier than originally planned, and this change will significantly increase the Business Unit’s competitiveness.

EBITDA before exceptional items dropped significantly by 51 percent to CHF 34 million since it was not possible to fully compensate for the massive currency effects and decline in volume through cost re-ductions. Higher raw material costs, however, were balanced out by higher selling prices. Corresponding the EBITDA margin fell consid-erably from 8.4 percent to 5.0 percent.

The Textile Chemicals Business Unit will continue to focus on products that create added value for its customers. More than 25 product, process, and effect innovations were recently presented at the industry’s leading trade show, ITMA 2011, in Barcelona. These included a new durable and more environmentally compatible flame-resistant finish for technical textiles and innovative acid dyes that do not contain heavy metals and have high light resistance, even in dark colors.

Oil & Mining Services

Key FIguReS oIL & MInIng SeRvICeS

CHF m 2011 2010

Sales 620 604


Margin (%) 11.6 12.6


Margin (%) 10.8 11.9

No. of employees 1 000 886

› Growing demand for oil services › High level of investment to ensure future growth

Buoyed by the rise in global oil production in line with general eco-nomic trends, sales in the Oil & Mining Services (OMS) Business Unit soared, increasing by 17 percent in local currencies and continu-ing to grow throughout the entire year. In Swiss francs, OMS posted 3 percent growth to CHF 620 million. Sales growth was strongest in the Middle East and in North America, where the acquisition of Prairie Petro-Chem had a positive impact. The rise in sales was also in the double-digit range in all other regions except Europe. The in-crease was especially strong in Latin America, where Brazil recov-ered from a weak phase in the second quarter.

Sales growth was driven by the Oil Services business, which ac-counts for about two-thirds of total sales. It experienced strong growth in most regions. In North America, Oil Services benefited from continuing investments in non-conventional oil and gas devel-

21finanCiaL review

opment projects. In LATAM, for example, the Business Unit signed an extensive new agreement, which will help it to expand its excel-lent market position in Brazil.

The Mining Services segment suffered from the weakening global demand for minerals. The Business Unit counteracted this effect by introducing new products and technologies in cooperation with min-ing companies.

The EBITDA margin before exceptional items was adversely affected by unfavorable currency effects and lies with 11.6 percent below the prior-year level of 12.6 percent. This was due primarily to the higher sales and administrative costs associated with massive in-vestments in the oil and mining businesses in an effort to promote future growth in these areas. The effects of higher raw material costs, on the other hand, were minimized by higher selling prices. EBITDA before exceptional items was accordingly CHF 72 million (2010: CHF 76 million).

Leather Services

Key FIguReS LeatheR SeRvICeS

CHF m 2011 2010

Sales 265 326


Margin (%) 9.8 13.2


Margin (%) 8.3 11.7

No. of employees 595 602

› High leather prices lead to decline in sales› Stronger focus on innovative, more environmentally friendly

products

Despite continuing strong demand from the automotive and luxury goods industries, sales in the Leather Services Business Unit de-creased by 6 percent in local currencies compared with 2010. Seg-ment sales in Swiss francs totaled CHF 265 million (– 19 percent). The upholstery segment was largely responsible for the weak de-mand. The trend toward the use of alternative materials in place of leather grew in that segment since prices for rawhide remained high in 2011.

From a regional perspective, sales growth in local currencies was slightly negative in Europe, while growth in the Americas slackened slightly despite the strong growth in Brazil, the main market. Sales in Asia declined since they continued to be affected by high prices for rawhide. In Japan, sales to tanneries that supply the automotive industry recovered in the second half of the year to almost the same level as before the earthquake.

Leather Services raised its selling prices and was thus able to com-pensate for higher raw material prices. However, the Business Unit also suffered from negative currency effects in addition to volume decreases due to high prices for rawhide. The EBITDA margin there-fore decreased to 9.8 percent from the prior-year level of 13.2 per-cent. In absolute figures, this is reflected in a 40 percent decline in EBITDA before exceptional items to CHF 26 million.

The Business Unit will continue to focus on segments with high add-ed value and on the introduction of new services and products that create added value such as the new chromium-free tanning technol-ogy (EasyWhite Tan). It will place special emphasis on innovation activities and expand its future product portfolio, especially in its line of more environmentally friendly products. Performance Chemicals

Key FIguReS PeRFoRManCe CheMICaLS

CHF m 2011 2010

Sales 1 293 1 415


Margin (%) 13.7 14.2


Margin (%) 10.9 11.4


› High growth momentum in Additives› EBITDA margin almost maintained at high level of 13.7 percent

Performance Chemicals comprises four smaller Business Units in the Clariant Group in terms of sales: Additives, Detergents & Intermedi-ates, Emulsions, and Paper Specialties. Driven by a significant boost


in demand in the Additives business, sales of Performance Chemi-cals in local currencies rose in 2011 by 4 percent. In Swiss francs, however, it posted a 9 percent decline to CHF 1 293 million. The local currencies growth momentum in Additives, which was in a double-digit percentage range, was based on the strong demand for non-ha-logenated flame retardants and waxes. Detergents & Intermediates and Emulsions saw single-digit sales growth, while sales in Paper Specialties were below the 2010 level. The Additives, Detergents & Intermediates, and Emulsions Business Units were able to raise their prices and fully compensate for higher raw material costs. The strong appreciation of the Swiss franc had a negative impact on the profitability of all four Business Units.

Additives posted good operating performance in all key regions, with especially strong growth in the Asia/Pacific region and in North America. Future demand will be met by a new plant that will go into operation in mid-2012. The Detergents & Intermediates Business Unit reported healthy demand for intermediates used in agrochemi-cal and pharmaceutical products, which balanced out the slight decrease in demand for household and cleaning products. Demand in Paper Specialties began to decline in the second quarter after customers curbed their production output due to lower paper con-sumption. Profitability was also reduced by the strong Swiss franc and the high cost basis in Switzerland. Relocation of production from Switzerland to Spain and the United States was therefore acceler-ated so that it could be completed by the end of 2011. The Emulsions Business Unit was able to compensate for high commodity prices. Latin America posted significant sales growth due to recovery in demand in Brazil, whereas demand in the Middle East weakened.

The Performance Chemicals EBITDA margin was slightly below the previous year at 13.7 percent due to negative currency effects. EBITDA before exceptional items was relatively stable at CHF 177 million.

Functional Materials

Key FIguReS FunCtIonaL MateRIaLS1

CHF m 2011

Sales 456

EBITDA before exceptional items 59

Margin (%) 12.9

EBIT before exceptional items 32

Margin (%) 7.0


1 May – December

› Reorganization completed by 1 July 2011› High level of sales growth and performance

Sales and results for the Functional Materials Business Unit have been included in the Clariant Group’s consolidated figures for eight months of 2011. Functional Materials – formerly the Adsorbents & Additives division of Süd-Chemie – initially included the following business lines: Adsorbents & Additives, Foundry Products & Spe-cial Resins, Protective Packaging, and Water Treatment. From 1 July 2011 the Functional Materials Business Unit was reorganized so that it now includes three business lines: Adsorbents, Performance Packaging, and Water Treatment. Comparison with 2010 figures is therefore only possible up to a point due to the reorganization of activities.

The Functional Materials Business Unit succeeded in improving sales in local currencies by 7.4 percent over the prior-year. In Swiss francs, sales amounted to CHF 456 million. The EBITDA margin be-fore exceptional items was 12.9 percent, maintaining the high level of the previous year. EBITDA before exceptional items grew to CHF 59 million in 2011.

Analysis of the individual businesses reveals differing growth trends. The Performance Packaging business line saw a rise in both sales and EBITDA, driven by the strong demand for packaging used

23finanCiaL review

for diagnostic and pharmaceutical products. The EBITDA margin in the Adsorbents business declined since it was not possible to com-pensate fully for the higher raw material prices and transport costs through higher selling prices. EBITDA also fell in the Water Treat-ment line due to the unfavorable business mix and the increase in the cost of raw materials. The Functional Materials Business Unit will focus to raise prices further, especially in the Adsorbents and Water Treatment segments, in order to absorb price-increase trends in raw materials and transport costs, and improve margins.

Catalysis & Energy

Key FIguReS CataLySIS & eneRgy1

CHF m 2011

Sales 491

EBITDA before exceptional items 107

Margin (%) 21.8

EBIT before exceptional items 67

Margin (%) 13.6


1 May – December

› Sales growth in all four operating areas› EBITDA margin significantly above 2010 margin

Sales and results for the Catalysis & Energy Business Unit have been included in the Clariant Group’s consolidated figures for the last eight months of the year under review. Catalysis & Energy – the former Catalyst division of Süd-Chemie – initially comprised the Catalyst Technology and Energy & Environment business lines. From 1 July 2011, Catalysis & Energy was reorganized into a primarily functional organization that comprises the business line Battery Ma-terials and the three functional areas: Sales & Key Account Manage-ment; Operations, and Research & Development.

The Catalysis & Energy Business Unit has been able to maintain the positive operating performance of 2010 without interruption. Sales in local currencies terms in 2011 increased by 17 percent compared to 2010. After conversion to Swiss francs, sales totaled CHF 491 mil-lion. As the result of stronger business activities, EBITDA in Swiss francs amounted to CHF 107 million. The start-up losses in the new Battery Materials business continued to have a negative effect on performance. The EBITDA margin was high at 21.8 percent.

After a mixed start in early 2011, the business in catalysts for the chemical and petrochemical industries picked up in the second quarter and improved continuously. The fourth quarter, as usual, was the year’s strongest in this segment. The Catalyst business ben-efited from continuing strong momentum in the sales of catalysts for air purification and for hydrogen production. Battery Materials also contributed to this healthy business growth. Four sub-licensing agreements for the highly innovative cathode material LFP (Lithium iron phosphate) were signed in order to bring more rapid market penetration. Preparations at the new LFP plant in Candiac, Canada, were already underway for the start of production, scheduled for 1 January 2012.


Condensed consolidated balance sheet

CHF m 31.12.2011 31.12.2010 Change in %

aSSetS

Non-current assets 5 178 2 416 114

Intangible assets 1 762 269 555

Property, plant, and equipment 2 494 1 669 49

Financial assets 28 18 55

Other non-current assets 702 341 106

Deferred income tax assets 192 119 61

Current assets 3 901 3 494 12

Inventories 1 151 800 44

Trade receivables 1 134 985 15

Other assets and receivables 417 993 – 58

Cash and cash equivalents 1 199 716 67

Non-current assets held for sale 2 11 – 82

total asset 9 081 5 921 53

equIty anD LIabILItIeS

Equity

Shareholders’ equity 2 933 1 759 67

Non-controlling interests 93 47 98

total equity 3 026 1 806 68

Liabilities

Non-current liabilities 2 904 2 153 35

Financial debts 1 835 1 305 41

Retirement benefit obligations 538 443 21

Deferred income tax liabilities 289 85 240

Provision for non-current liabilities 242 320 – 24

Current liabilities 3 151 1 962 61

Financial debts 1 139 240 374

Provision for current liabilities 364 310 17

Trade and other payables 1 325 1 170 13

Current income tax liabilities 323 242 33

total equity and liabilities 9 081 5 921 53

25finanCiaL review

Balance sheet structure changed significantly due to expansionAs of 31 December 2011, the Clariant Group’s total assets of CHF 9.081 billion were significantly higher than the value a year earlier of CHF 5.921 billion. The increase was based on first-time consolida-tion of the assets and goodwill of the companies acquired in 2011, namely Süd-Chemie, Prairie Petro-Chem, Octagon Process, and Ital-tinto. Exchange rate effects also resulted in significant changes in various balance sheet items.

Cash and cash equivalents totaled CHF 1.199 billion at the end of 2011, compared with CHF 716 million twelve months earlier. The change within the reporting period is based on the issue of two bonds totaling CHF 300 million in May and July 2011, the issue of two certificates of indebtedness totaling EUR 365 million and CHF 400 million from an acquisition bridge facility, as well as outflows of liquidity associated with the acquisitions mentioned above. By con-trast, the total cash position including near cash assets decreased to CHF 1.234 billion year on year, from CHF 1.419 billion, due to ac-quisitions.

Clariant Group's total equity increased to CHF 3 026 million at the end of 2011 mainly due to the capital increase totaling CHF 1 111 million required for the Süd-Chemie acquisition. The equity ratio of 33.3 percent was above the prior-year level of 30.5 percent.

The Süd-Chemie transaction was also responsible for most of the increase in net financial debt from CHF 126 million at the end of 2010 to CHF 1 740 million as of 31 December 2011. This item in-cludes current and non-current liabilities, cash and cash equivalents, and near cash assets. The gearing ratio, which compares the level of net financial debt to equity, therefore rose to 58 percent from 7 percent as of 31 December 2010.

Broadly based financingClariant also had a very sound financial basis as of the end of 2011. The company relies on different types of financing instruments. In May the company issued two bonds in the Swiss franc domestic bond market: one with a nominal value of CHF 150 million that was increased by CHF 50 million in July, with a coupon of 2.75 percent and a four-and-a-half-year maturity (2015); and the other with a nominal value of CHF 100 million, a coupon of 3.125 percent and a six-year maturity (2017). By issuing two certificates of indebtedness in October 2011 totaling EUR 365 million with maturities ranging be-tween three and four-and-a-half years, Clariant continued to improve the maturity profile of its borrowed funds.

Extract of cash flow statement

CHF m 2011 2010

Net income 251 191

Reversals of non-cash items 551 362

Cash flow before changes in net working capital and provisions 419 251

operating cash flow 206 642

Cash flow from investing activities – 741 – 961

Cash flow from financing activities 1 033 – 62

net change in cash and cash equivalents 483 – 424

Cash and cash equivalents at the beginning of the period 716 1 140

Cash and cash equivalents at the end of the period 1 199 716


Strong operating cash flow Despite the Group’s solid operational performance, cash flow from operating activities decreased in 2011 to CHF 206 million from CHF 642 million because of the pronounced increase in net working capi-tal. The ratio of net working capital to sales therefore increased to 19.6 percent from 15.9 percent, significantly undercutting the key target value of 20 percent. Investments in property, plant, and equipment rose markedly to CHF 370 million from CHF 224 million as investments were increased and included the new Süd-Chemie Business Units. The cash flow from investments totaling CHF – 741 million was influenced by CHF – 1 137 million spent on acquisitions of Süd-Chemie, Prairie Petro-Chem, Octagon Process, and Italtinto, while the cash flow from financing activities of CHF 1 033 million reflects the financing occured during 2011. Given these effects, the total cash balance (including near cash assets) of the Clariant Group on 31 December 2011 stood at CHF 1 234 million (2010: CHF 1 419 million).

Research & Development

A guarantor for profitable growthClariant has defined global technology and innovation leadership as an important strategic goal in its core activities. Research and development (R&D) is therefore a high priority in the Group. The de-velopment of a large number of new and advanced technologies puts Clariant in a position to find chemical solutions for many of their in-dustrial customers’ problems quickly and efficiently and to increase added value for the business partners and for Clariant. Through the realignment and concentration of R&D in 2010 and 2011, the com-pany has created the foundation for sustainable, profitable growth and for consolidating its technology leadership in important areas. Around 1 100 employees were working in this area in 2011, twice as many as in the previous year.

The acquisition of Süd-Chemie was a crucial factor in this substan-tial increase. Consolidation of the Süd-Chemie activities also result-ed in an increase in R&D expenditures in 2011 to CHF 176 million, up from CHF 135 million in 2010. The 2011 R&D expenditures represent 2.4 percent of Group sales, compared with 1.9 percent in 2010.

Innovation Excellence was launched in 2011 as part of the Clariant Excellence initiative. The first phase involves implementation of ef-ficient processes for quickly transforming ideas into innovative prod-ucts. Strategic innovation management will help Clariant enhance its position as an innovative solution provider and an attractive development partner. The company will benefit from the new struc-ture of R&D activities. Clariant’s global R&D network includes the following sites: Frankfurt (Germany), Gendorf (Germany), Lamotte (France), Reinach (Switzerland), and Suzano (Brazil). The importance of Frankfurt as a global R&D site is underscored by construction of the Clariant Innovation Center, which is scheduled to be completed in 2013. The Business Units also maintain around 40 technical cen-ters in Asia, Europe, Latin America, and North America so that the regions can be offered technical service and technical customer proj-ects can be supported. Süd-Chemie conducts R&D activities at 26 sites around the world.

Innovation focus on megatrendsClariant’s ability to align its businesses to even more rapidly chang-ing economic conditions and market requirements is crucial for its success, and this includes recognizing social and industrial devel-opments. By gearing development of new products to megatrends, Clariant focuses on the issues of sustainability and advanced ma-terials, with an emphasis on energy and water efficiency, renew-able raw materials, and nutrition. Newly launched products that contribute to energy and resource conservation and brands such as EcoTain® underline Clariant’s orientation to sustainable markets of the future.

27finanCiaL review

Slight decrease in headcount after adjustment for expansionAlthough the total number of employees has declined significantly in the last few years, it increased markedly by 5 973 from 16 176 in 2010 to 22 149 in 2011. While the increase was mainly driven by acquisitions which added more than 6 000 employees, the remaining Business Units reduced personnel in their ongoing efforts for pro-ductivity increases. This was associated with the implementation of measures of the remaining restructuring initiatives and natural fluctuation. The adjustments in headcount were made in close co-operation with local employee representatives and authorities. In contrast to past years, when situations such as these made it neces-sary to institute shorter working hours, this option no longer had to be used in 2011.

Emerging markets in Asia are becoming increasingly importantIn regional terms, the European workforce continued to be the larg-est at 45 percent of Group headcount. The second largest region based on number of employees is Asia with 25 percent, followed by Latin America with 14 percent, and North America with 9 percent. The increasing importance of the East Asia region is indicated by China, where the number of employees rose to 1 966. Clariant had 15 production sites there as of the end of 2011.

Employees

Key success factorMotivated and well trained employees are a key success factor in the Clariant Group’s prosperity. The qualifications, commitment and motivation of its staff are essential to the company’s competitive-ness going forward. Human resources management plays a key role in recruiting, promoting, and retaining the best employees for every position. To achieve these aims, Clariant pays performance-related compensation, provides ongoing training and pays due attention to helping its employees achieve their personal career goals. The na-ture of demand has made it necessary for the Group to increase its global focus, with production sites on all continents. Clariant there-fore has a broad, culturally diverse staff with a precise understand-ing of the different customer needs in the various regions. These needs are met consistently.

The biggest challenge for human resources management in 2011 was to integrate Süd-Chemie employees. As a result of the acquisi-tion, headcount of the Clariant Group increased by more than 6 000 or about 40 percent. Processes have to be aligned and adjusted, sites integrated, and functions harmonized. As a result of integration-based synergies and Clariant Excellence initiatives, Clariant plans to cut about 700 jobs at Süd-Chemie in the coming years, mainly administrative positions.

Another focus for the Group in 2011 – as in prior years, although to a lesser extent – was on further implementation of efficiency im-provements introduced as part of the Project Clariant strategy initia-tive.

tRenD In FteS1 (on 31 DeCeMbeR) – FIve-yeaR oveRvIew

2011 22 149

2010 16 176

2009 17 536

2008 20 102

2007 20 931

0 4 000 8 000 12 000 16 000 20 000 24 0001 FTE = Full-time employee


Among the Business Units, Masterbatches had the highest head-count with 14 percent of the Group’s total workforce. Other high-headcount Business Units included Pigments (9 percent), Textile Chemicals (9 percent), and Industrial & Consumer Specialties (8 percent). The two new Business Units that were added as a result of the Süd-Chemie acquisition – Functional Materials and Catalysis & Energy – accounted for 13 and 12 percent, respectively.

In 2011 the Clariant Group spent CHF 1 623 million on salaries, social welfare contributions, and exceptional personnel costs for its own employees. When costs for external or temporary personnel are included, personnel expenses in 2011 totaled CHF 1 679 million. The corresponding figure for 2010 was CHF 1 685 million (excluding Süd-Chemie).

Clariant stock

Year shaped by global financial crisisThe trend on the world’s stock markets in 2011 was shaped by the global financial crisis and the performance of the global economy. In view of positive economic data, the markets exhibited stable lat-eral movement into June, with relatively moderate fluctuations in the major indexes. In March the tsunami in Japan caused sharper price fluctuations for a brief period. By shortly before mid-year, the markets had calmed again. Thereafter, the dimensions of financial difficulties especially in the southern European EU countries became

more and more apparent, and led to discussions and speculation about the potential insolvency of some countries, or even the col-lapse of the European Monetary Union. This in turn led to massive unease in the financial markets due to the uncertainties about the future impact on the actual economy. By the end of June, this re-sulted in profit-taking and the first price declines, which in August became a massive stock market crash with key indexes plummeting more than 20 percent. Although the markets were somewhat calmer by the end of the year, the leading European markets lost value, e.g. the Euro STOXX 50 lost 17 percent of its value over the entire year.

Clariant shares under pressure due to economic uncertaintiesThe recent performance of Clariant stock reflects this general mar-ket trend. Clariant shares had also shown stable growth up to June based on positive operating figures. However, the acquisition of Süd-Chemie and the associated financing requirements, including a capital increase, caused the price to drop in the interim from more than CHF 18 at the beginning of the year to just over CHF 14. Follow-ing a rally, the price rose to its high for the year of nearly CHF 20 at the beginning of June. The subsequent slump on world markets also resulted in a significant plunge in the price of Clariant stock. Since, however, cyclical share values in particular were impacted by selling pressure due to economic uncertainties, the price decline in the sec-ond half of the year was therefore much more pronounced than that of the SMI, the leading Swiss index, which is comprised predominately of non-cyclical stocks. Compared to its European peers Clariant’s fi-nancial figures were impacted by an unprecedented appreciation of the Swiss franc that impacted both sales and operational margin. As a consequence the company had to adjust its full year guidance

eMPLoyeeS by RegIon 2011 In PeRCentage oF totaL eMPLoyeeS (InCLuDIng SüD-CheMIe)

%

Europe 45

Asia/Pacific 25

North America 9

Latin America 14

Middle East & Africa 7

29finanCiaL review

at the beginning of September which impacted the share price that hit its annual low of CHF 6.88 at this time. The general market re-covery and the solid operating figures caused the price to rise again after that. However, at the end of the year on 31 December 2011, Clariant shares were quoted at a price of CHF 9.27, which represents a 51 percent year-on-year decline. In 2010 the securities had posted a clearly above-average performance by increasing 55 percent in value.

Key FIguReS FoR the CLaRIant ShaRe

2011 2010

Closing rate (31 December) (CHF) 9.27 18.94

Peak price (CHF) 19.93 19.73

Lowest price (CHF) 6.88 10.85

Number of shares on 31 December (million shares) 295.75 230.16

In free float (%) 89.52 100

Average trading volume per day (SIX) 2 497 598 1 883 336

Market capitalization on 31 December (CHF m) 2 742 4 359

Earnings per share (CHF) 0.86 0.81

Dividend per share (CHF) 1 0.30 0.00

1 Payout by reduction of nominal value, subject to approval by the AGM.

You find more detailed information about Clariant on the company website at www.clariant.com.

Investor RelationsHardstrasse 61CH-4133 PrattelnSwitzerlandTel.: +41 61 469 6745Fax: +41 61 469 67 67

Risk managementFor financial risks refer to page 109 and following pages of the Financial Report.

Enterprise Risk Management (ERM). Identification, Assessment and Management. For detailed information please refer to pages 82 to 83 of the Corpo-rate Governance section.

Events subsequent to the balance sheet dateOn 17 January 2012, Clariant Finance (Luxembourg) S.A. issued an Eurobond in the amount of EUR 500 million, guaranteed by Clariant Ltd. The fixed rate notes with a minimum denomination of EUR 100 000 and a final coupon of 5.625 percent per annum will mature on 24 January 2017. The proceeds are to be used for general corporate purposes optimizing Clariant’s debt maturity profile. With value date January 30, 2012, the last drawn part of the syn-dicated bridge loan facility to acquire Süd Chemie (CHF 400 million as of 31 December 2011) has been repaid in full. All commitments under the facility have been cancelled by then. The facility therefore ceases to exist.


Outlook

Economic environment

Global growth in 2012 with increasing risksSince mid-2011, economic experts have become much more cau-tious in their forecasts for the global economy in 2012. According to the Organisation for Economic Cooperation and Development (OECD), the uncertainties resulting from the global financial crisis have had a huge impact on the real economy. The OECD is therefore only forecasting growth of 1.6 percent for the more than 30 OECD member states. The developing and emerging markets are again the driving force behind this growth. The experts are forecasting growth of 8.5 percent for China. By contrast, the industrial nations are clear-ly suffering the effects of the financial crisis. The eurozone economy is likely to post only marginal growth of 0.2 percent. A number of member states are even expected to see a fall in Gross Domestic Product. The United States is set to generate growth of 2.0 percent thanks to fiscal policy support in what is an election year. Following the collapse in its economy triggered by the disaster in 2011, Japan is also likely to post 2.0 percent growth in 2012. However, the OECD warns that the forecasts are subject to considerable uncertainty due to the numerous open issues relating to the euro crisis; it therefore does not rule out the possibility of a global recession if the economic environment worsens.

Cautious forecast for the chemical industry in 2012The performance of the chemical industry in 2012 will be closely tied to global economic growth. Economic experts are accordingly cautious in their forecasts. The upturn recorded in the chemical in-dustry in 2011 is expected to slow considerably in 2012. The German Chemical Industry Association (VCI) has significantly lowered its es-timates and expects only a slight increase in chemical production. Entrepreneurs and consumers appear increasingly unsettled by the unresolved issues of the global debt crisis, and their ordering prac-tices have become correspondingly more conservative. Experts are

therefore predicting no significant potential for price rises in 2012. The industry will, however, benefit on the cost side from more stable raw material prices. The moderate growth in the industry will be largely driven by continuing rising demand in the growth regions of Asia, Latin America, and Eastern Europe.

Outlook for 2012 involves major uncertaintiesAfter completion of restructuring in 2010, Clariant’s strategic focus in 2011 shifted to continuous improvement and profitable growth. In 2012, Clariant will continue to systematically implement the next steps in its transformational process with a focus on the integration of Süd-Chemie, on completing measures from restructuring initiated in 2009/10 and on portfolio management. In this context, Clariant is considering several strategic options for the Business Units Textile Chemicals, Paper Specialties, Emulsions, and Detergents & Interme-diates, with the goal to be realized in the mid- to long-term. An accurate forecast for 2012 is difficult given the high level of eco-nomic uncertainty. Clariant will monitor the developments closely and respond rapidly, where necessary. Raw material costs are ex-pected to rise in the low single-digit range while exchange rates should remain stable compared to the beginning of the year. In its base case scenario, Clariant expects that after a weak start into 2012, the global economy will progressively strengthen in the course of the year. Therefore, results for the first half-year are expected to be lower compared to the high base of the first half of 2011, with an improvement in the second half-year 2012. For the full-year 2012, Clariant expects further sales growth in local currencies and a sus-tained profitability.

31finanCiaL review

Further cost reductions through completion of Project ClariantFurther progress in sustaining the improved returns already realized in the Group will be achieved by systematically continuing to imple-ment the measures launched as part of Project Clariant. For example, additional cost savings totaling CHF 60 million are expected by mid-2013 after implementation of improvements in the production net-work under the Global Asset Network Optimization program (GANO) is completed in mid-2012. The smaller businesses acquired in 2011 have been successfully integrated and will continue to make a full contribution at operating level as of 2012.

Integration of Süd-Chemie is proceeding according to planThe integration of Süd-Chemie is progressing as planned, and all project teams are working hard to deliver to promise. Current know-ledge and experience confirms the forecast that integration by 2013 will result in a rise in EBITDA of CHF 90 to 115 million. Because of integration-related synergies and Clariant Excellence initiatives, around 700 jobs will probably be cut worldwide, especially admin-istrative positions. Production improvement measures should also contribute to these savings. Those measures are planned to be implemented from 2012 to 2014.

Foundation for sustainable, long-term profitable growth through 2015Clariant has set ambitious goals for the years through 2015 in ex-pectation of a moderate upward trend in the global economy and stable exchange rates. By continuing to systematically implement the strategy initiatives Project Clariant and Clariant Excellence, we intend to improve the profitability of the company and all Business Units. We will also increase investments in the Group’s research and development, and expand the innovation pipeline significantly by im-plementing Innovation Excellence. The focus, furthermore, will be on broader expansion into the fast-growing emerging market regions. The company will increase its market share particularly in China, India, and Brazil. The profitability of the current portfolio will be ana-lyzed on a continuous basis. We will also make targeted acquisitions in the future to strengthen the product pipeline and the company’s regional presence, but will also consider divestments, if necessary.

By implementing these basic strategic goals for 2015, Clariant intends to increase Group sales to more than CHF 10 billion and EBITDA before exceptional items to over CHF 1.7 billion, with an EBITDA margin before exceptional items of more than 17 percent a further target. ROIC should continue to be above the industry aver-age, based on these objectives.


Patrick Jany, CFO

Responsibilities: Group Finance, Group IR and Group IT .

Hariolf Kottmann, CEO

Responsibilities: Clariant Excellence,Group Legal & Compliance, Group HR, Group Communications and Corporate Development.

Christian Kohlpaintner

Responsibilities: Pigments, Masterbatches, Paper Specialties, Detergents & Intermediates, Additives and Emulsions Business Units, Group Technology, and ESHA.

Hans-Joachim Müller

Responsibilities: Catalysis & Energy,Functional Materials Business Units.

Mathias Lütgendorf

Responsibilities: Industrial & Consumer Specialties, Textile Chemicals, Oil & Mining Services and Leather Services Business Units, Group Procurement, and Supply Chain Management.

the executive Committee

33finanCiaL review


Muriel Rakotomalala, Flame Retardants

with the exolit® product range Clariant is setting new benchmarks for flame retardants. exolit® is used in cases requiring environmentally com-patible and highly effective fire protection, such as smartphones, notebooks and other high-tech devices, or textiles.

35

Clariant is a world leader in the field of specialty chemicals and supplies a broad range of products to many different industries. after undergoing major restructur-ing through 2010, Clariant experienced an active phase of external growth in 2011. this is reflected both in the takeover of the Süd-Chemie operations and in the ac-quisitions of several smaller and medium-sized companies in order to strengthen existing business operations. In this regard, active portfolio management also in-volves strategic exploitation of opportunities for expanding into future-oriented technologies, products, and regions with strong growth potential.

The current Executive Committee has re-sponded to this situation and has taken a number of measures since the end of 2008 to advance the restructuring and reorgani-zation of the Clariant Group at all levels. By clearly focusing on the core themes of cash generation, cost savings, and the re-duction of complexity, decisive steps have been taken to restore Clariant’s profitability and position it on a course toward profitable growth. The positive results of these efforts were already apparent in 2010 and were also acknowledged by the capital market.

The brief history of Clariant, which first went public under this name in 1995, has been characterized by a number of restruc-turing phases, which have had varying de-grees of success. They involved extensive reorganization and changes in the business portfolio. Despite all these portfolio adjust-ment and restructuring initiatives, many performance indicators lost ground against our competition for many years because of the strong squeeze on margins. These prob-lems were exacerbated, moreover, by the recent financial crisis.

Portfolio management until end of 2010 characterized by restructuring phasesThe first important milestone related to changes in the company portfolio was the purchase of the specialty chemicals busi-ness of Hoechst AG in 1997. In 2000 Clariant took over the activities of British company BTP, a specialist in life science chemicals. At that time Clariant had around 31 000 em-ployees – almost twice as many as it had prior to the acquisition of Süd-Chemie. The Group’s complexity quickly became problem-atic. High structural costs, Business Units that were not very profitable, and changing global operating conditions led the company into a severe crisis in 2003. The strategic focus during the period from 2001 to 2005 was on separation from numerous business sectors, as well as the creation of a com-prehensive program aimed at cutting costs, increasing efficiency, and the associated

PORTFOLIO MANAGEMENT


“ Active portfolio management is a key success factor in our profitable growth strategy.”

HARIOLF kOTTMANN, CHIEF EXECUTIvE OFFICER

OvERvIEW OF BUSINESS UNITS AT THE END OF 2011

additives: The Additives Business Unit is a leading provider of flame retardants, waxes, and polymer additives for effects in plastics, coatings, and other applications.

Catalysis & energy: This segment is a market leader in catalysts for the chemical, petrochemical, polymer, refinery, and auto-motive industries.

Detergents & Intermediates: Detergents & Intermediates is one of the most impor-tant producers of key raw materials for de-tergents and household cleaners as well as chemical intermediates.

emulsions: The Emulsions Business Unit is one of the most important suppliers of latex/polymer dispersions for paints, coatings,

PortfoLio management

adhesives, sealants, and for the textile, leather, and paper industries.

Functional Materials: Functional Materi-als is a leading manufacturer of specialty products and solutions for improving prod-uct and efficiency characteristics in various industries.

Industrial & Consumer Specialties: Industrial & Consumer Specialties is one of the most important providers of specialty chemicals and application solutions for con-sumer care and industrial markets.

Leather Services: Leather Services is a market leader in chemicals and services for the leather industry.

Masterbatches: Clariant Masterbatches is the world’s leading manufacturer of dye and additive concentrates and technical com-posites for the plastics industry.

oil & Mining Services: This Business Unit is a market leader in products and services for the oil, refinery, and mining industries.

Paper Specialties: Paper Specialties is among the largest providers of products for optical brightness, color, coating, and thick-ness of paper.

Pigments: This Business Unit is a global leader in organic pigments, pigment prepa-rations, and dyes, which are used for coat-ings, printing, plastics, and other special applications.

textile Chemicals: Clariant’s Textile Chemicals Business Unit is a market leader and supplies specialty chemicals for the pretreatment, dyeing, printing, and finishing of textiles.

Divestment of Electronic Materials

CLaRIant’S hIStoRy to 2010

Sandoz established

Clariant spin-off and IPO

Acquisition of Hoechst Specialty Chemicals

Acquisition of BTP

Divestment of European Emul-sion Business and Hydrosulfite North America

Divestment of Cellulose Ethers

Divestment of Acetyl Building Blocks

Divestment of Pharmaceutical Fine Chemicals

Acquisition of CIBA Master-batches

Divestment of Custom Manufacturing Restructuring

Acquisition of Rite Systems and Ricon Colors

1886 … 20021995 20031996 20041997 20051998 20061999 20072000 2001 20102008 2009

37driverS for ProfitaBLe growth

sharp reductions in headcount. The primary purpose of these transactions was to create more financial room to maneuver. However, costs could not be sufficiently reduced to compensate for the constant decline in profitability that the businesses were expe-riencing at the time.

As a result of the recent financial crisis in 2008, two initiatives were launched in 2008 and 2009 – Project Clariant and Clariant Excellence – that were designed to limit the impact of the crisis and optimize cost structures. This has been very successful, as indicated by the significant improve-ment in profitability in 2010. By the end of 2010 Clariant Group had a total of around 16 200 employees working in more than 100 companies worldwide, with Group head-quarters located in Muttenz, Switzerland. Clariant then comprised ten Business Units: Additives, Detergents & Intermediates, Emulsions, Industrial & Consumer Special-ties, Leather Services, Masterbatches, Oil & Mining Services, Paper Specialties, Pig-ments, and Textile Chemicals.

Two additional Business Units were added in 2011 as the result of the acquisition of Süd-Chemie: Functional Materials and Catalysis & Energy.

Strong external growth in 2011Once the restructuring phase was virtually completed in late 2010 and the company had a healthy balance sheet and solid fi-nancing structure, Clariant again began in 2011 to concentrate much more heavily on

strategic expansion of its portfolio. The fol-lowing criteria are paramount and must be met by any acquisition candidates:1. Sizeable future potential through expan-

sion of activities and/or the value chain of existing Business Units

2. Focus on innovative products with consid-erable potential in growth markets and industries, such as those with a strong orientation to future megatrends

3. Regional strengthening of the portfolio, especially in fast-growing emerging mar-kets

4. Improvement of profitability through al-ready proven margin strength and addi-tional potential through synergies based on combination with existing activities and quickly realizable turnaround potential.

Each takeover target undergoes a very de-tailed analysis process (due diligence) based on these criteria, followed by a company evaluation. The primary focus in the Clariant Group is on complementary acquisitions but can also lead to a major transformational acquisition, as in the case of Süd-Chemie.

Süd-Chemie satisfies all of Clariant’s success criteriaThe acquisition of Süd-Chemie AG, Clariant Group’s biggest takeover transaction in its recent history, was also completed on the basis of these criteria. With a total of around 6 500 employees, Süd-Chemie op-erates two stable and profitably growing Business Units that are among the global leaders in the areas of process catalysts and adsorbents. In addition, the company has a strong research and development pipeline for new business areas with significant growth potential. These involve innovative materials for key megatrends such as en-vironmental protection, energy efficiency, energy storage, and renewable energies. Examples include lithium-ion batteries and biotechnologies used to produce second-generation bioethanol.

The acquisition of Süd-Chemie will increase Group sales by about 20 percent. A com-parable improvement in earnings is also expected based on Süd-Chemie’s high level of profitability. The operating EBITDA mar-

was the percentage of Clariant Group sales generated by activities newly acquired in 2011 (basis: 12-month consolidation)

> 20 %

SüD-CheMIe: aCquISItIon CRIteRIa FuLLy Met

growth potential

strong growth in sales in both business areas; little cyclical variation

Innovationratio of R&D to sales > 5 percent; full innovation pipeline in megatrends

Regional expansion

high proportion of sales in fast-growing emerging markets

ProfitabilityEBITDA margin before exceptional items of 13.2 percent in 2011; improved return despite slowdown


Interview with hans-Joachim Müller, Member of the executive Committee, responsible for the Catalysis & energy and – till Dec. 2011 – Functional Materials business units

AS A MEMBER OF THE CLARIANT ExECUTIvE COMMITTEE, YOU ARE RESPONSIBLE FOR THE ACTIvITIES ACqUIRED FROM SüD-CHEMIE. WHAT ARE THE STRENGTHS OF THESE BUSINESS UNITS?

hans-Joachim Müller: Functional Materials and Catalysis & Energy fit Clariant’s product portfolio perfectly. Both Business Units have highly innovative products with great growth potential. The return is clearly above-average and will remain very stable, even in the event of a new economic crisis.

GIvEN THE HIGH LEvEL ALREADY ACHIEvED, HOW DO YOU AIM TO ADD TO THIS IN THE FUTURE?

hans-Joachim Müller: This is for sure a challenge, but we have always focused to a great degree on the future orientation of our products and applications. The high 5.4 percent ratio of R&D expen-diture to sales in 2011 is impressive proof of this approach. We have a large number of innovations for what are called the megatrends of the future: environmental protection, energy efficiency, renewable energies – to name just a few.

WHAT DOES THAT MEAN FOR YOUR PRODUCT PORTFOLIO IN CONCRETE TERMS?

hans-Joachim Müller: A look at our clean tech products shows how well we are positioned. Our catalysts prevent emissions and are often the factors that make efficient utilization of alternative en-ergy and raw material sources possible at all. Our adsorbents and additives help improve production processes: They clean food, treat water, protect pharmaceutical products, replace heavy metals, and so forth. And by supporting the growing lithium-ion technology, we are playing an important role in future energy storage.

…AND WHAT DOES THAT MEAN WITH REGARD TO YOUR MARGINS?

hans-Joachim Müller: On this point we are confident that we can both maintain high profitability and expand it. For one thing, we have a successful track record in this area. Süd-Chemie, for example, was able to increase the EBITDA return steadily, even during the last financial and economic crisis, from 13.9 percent in 2008 to over 16 percent in 2011. In addition, we see potential based on our inno-vative products and on integration into the Clariant Group. Integra-tion is proceeding very smoothly and we expect an additional rise in EBITDA of CHF 90 to 115 million by 2013 as the result of integration-related synergies and Clariant Excellence initiatives.

“the return is above-average.”



gin of the Functional Materials segment, for example, is just under 13 percent and that of Catalysis & Energy approximately 24 per-cent. It should also be emphasized that the Süd-Chemie activities are much less cycli-cal than most of Clariant’s other activities. They increase Clariant’s percentage of less cyclical business to significantly above 50 percent. During the last major recession of 2008 and 2009, Süd-Chemie was even able to achieve returns of 13.9 and 14.7 percent, respectively, and to increase its margin fur-ther to 16.8 percent by 2010, despite the crisis.

You can find additional information on Süd-Chemie at: www.sued-chemie.com

Several strategic expansion acquisitions in 2011In addition to the major acquisition of Süd-Chemie, which certainly outshone every-thing else in 2011, Clariant again also con-cluded several smaller but very attractive and future-oriented takeover transactions.

By acquiring the US company Octagon Pro-cess LLC in mid-March, Clariant significantly expanded its North American activities in the area of de-icing chemicals in the Indus-trial & Consumer Specialties Business Unit. Clariant is already a world leader in this sector, and Octagon strengthens its position further in the North American region. It can now guarantee its customers there an even

higher level of delivery reliability. This ac-quisition also generates additional growth potential since the company brings to the Group its innovative product range, particu-larly in the area of more environmentally friendly de-icing chemicals.

The Canadian company Prairie Petro-Chem was purchased in April as part of the Oil & Mining Services Business Unit. The com-pany, which is active in the petrochemical sector, is among the leading suppliers of specialty chemicals for oil and gas produc-tion in the Bakken Shale region of Canada, which is viewed by industry experts as one of the most promising regions in North America.

Additional information on the Oil & Min-ing Services Business Unit is available at: www.clariant.com under the “Businesses” heading.

Clariant also strengthened its Pigments Business Unit in April by acquiring the Ital-ian company Italtinto. This takeover makes a lot of sense strategically for two reasons. It allows Clariant to extend its value chain in the attractive market for color mixing systems and is the ideal complement to the Business Unit’s existing product range in a very healthy market with above-average growth rates. The integration of Italtinto also yields big synergy effects on the cost and customer side.

Lastly, Clariant took over Oberhausen Tech-nology Center GmbH (OTC) in October. This again strengthens Industrial & Consumer Specialties, specifically the Consumer Care area. OTC has unique formulation expertise that enables it to transform new sustain-able and innovative technologies into low-cost consumer products. The transaction is therefore a perfect fit for Clariant’s strategy of establishing strong positions in new fast-growing areas.

“ The purchase of Italtinto strengthens our product portfolio through forward integration in applications with high profitable growth potential.”

MARCO CENISIO, HEAD OF THE PIGMENTS BUSINESS UNIT

exPanSIon aCquISItIonS In 2011

Acquisition of Octagon Process LLC (USA)

Acquisition of Prairie Petro-Chem (Canada)

Takeover of Süd-Chemie AG (Germany)

Acquisition of Italtinto S.r.l. (Italy)

Takeover of all minority shares in Colex Spolka (Poland)

Purchase of Oberhausen Technology Center (Germany)

March april May June July august September october


Interview with Christopher oversby, head of the oil & Mining Services business unit

“In Prairie Petro-Chem we have acquired a real asset.”


Portfolio optimization also includes the sale of some operations At Clariant, portfolio management also means reviewing all existing activities with regard to profitability and future orientation within the Group. The analysis shows that

peripheral activities that are no longer part of the Business Units’ core areas would be in better hands in other companies. Clariant therefore sold several smaller operations in the course of 2011 such as its polysila-zane coatings business and Licomer brand floor polishes. These transactions highlight

Clariant’s continuous efforts to make the Group a world leader in the field of specialty chemicals with above-average profitable growth through strategic portfolio optimiza-tion.

WHAT IS SPECIAL ABOUT PRAIRIE PETRO-CHEM FROM CLARIANT’S PERSPECTIvE?

Christopher oversby: In Prairie Petro-Chem we have acquired a truly valuable asset. The company already supplies more than 7 000 oil and gas production sites and is established as a leader in the fast developing Saskatchewan region of Canada. The region, which includes the Bakken Shale formation, has some of the biggest hydrocarbon reserves in North America – positioning Prairie Petro-Chem for continued success for many years to come.

BUT WITH SALES OF ABOUT CAD 30 MILLION, THE COMPANY IS qUITE SMALL.

Christopher oversby: It might look like that at first glance, how-ever the company has a strong record of significant growth and is highly profitable. In addition to the immediate potential of the region, which is very impressive, we will use this acquisition as a spring board to accelerate the development of our shale business in other regions, both within North America and globally.


the ongoing process of globalization is forcing globally active companies to adapt their structures and strategies to ever more rapidly changing conditions. as a glob-al leader in specialty chemicals, Clariant has done its homework over recent years and consistently aligned its production structures with global economic trends. the company has production facilities on all continents and 152 production sites in 44 countries. the focus for the future, which is also reflected in the Clariant group’s growth strategy, is on expanding market share in high-growth emerging countries in asia and Latin america.

a relatively low 3.4 percent, but by 2011 it had risen to 6 percent. A corresponding decline occurred in sales from the tradi-tional industrial nations of North America and Europe. Having accounted for a total of 63.4 percent in 2005, they had fallen to 54.1 percent by 2011. It is important to note that some of these sales had been exported to the emerging nations mentioned above.

The integration of Süd-Chemie will provide a significant boost to Clariant’s growth. In 2011, Süd-Chemie generated more than 30 percent of its sales in Asia and the Mid-dle East (EUR 433 million).

The Clariant Group has seen a clear shift in regional sales shares in recent years. Dynamic economic growth in the emerging markets has driven a significant rise in the sales shares of these regions when mea-sured against Group sales. This increase was especially pronounced in the sales shares of Latin America and Asia/Pacific. Whereas Latin America generated only 13.0 percent and Asia/Pacific 17.1 percent of sales in 2005, by 2011 these figures had risen to 15.5 percent and 21.7 percent respectively. A particular highlight has been the dynamic growth in China’s sales share in proportion to Group sales. Six years ago this stood at

Location strategy follows global requirementsThe structural changes in global trade have also had a lasting effect on Clariant’s loca-tion strategy. 13 and 3 percent respectively of the company’s 152 production sites, are currently located in the emerging countries of Asia and Latin America. The measures taken to optimize the production network as part of the Global Asset Network Op-timization (GANO) program also contrib-uted to this shift in the regional balance of power at Clariant. By the time the mea-sures are completed at the end of 2013, 20 Clariant locations will have undergone restructuring. Fourteen are being or have already been closed completely, while a further six will see significant cost im-provements as a result of GANO. Clariant expects these measures to generate some CHF 60 million in cost savings by mid-2013.

GLOBAL POSITIONING


“ Companies which are too slow to adapt their structures to the challenges of globalization will stand very little chance in the future competitive business environment.”

MATHIAS LüTGENDORF, MEMBER OF THE EXECUTIvE COMMITTEE

gLoBaL PoSitioning

SaLeS ShaRe by RegIon – CoMPaRISon 2005 anD 2011

%

north america

europe

Latin america

Middle east & africa

asia/Pacific…

…whereof China20051: 48.720051: 14.7

20051: 13.0

2011: 41.12011: 13.0

2011: 15.5

2011: 8.7

2011: 21.7

2011: 6.0

totaL SaLeS by RegIonS

%

North America 13

Latin America 15

Europe 41


Asia/Pacific 22

whereof China 6

1 without Süd-Chemie

20051: 6.5

20051: 17.1

eMPLoyeeS by RegIon 2011 In PeRCentage oF totaL eMPLoyeeS (InCLuDIng SüD-CheMIe)

%

Europe 45

Asia/Pacific 25

North America 9

Latin America 14


20051: 3.4


of the Clariant Group’s workforce is already employed in the emerging nations of Asia and Latin America.

39 %

Textile chemicals closer to markets

When it opened the new headquarters for the South East Asia & Pacific region, Clariant also relocated the headquarters of the Textile Chemicals Business Unit from Europe to Asia, thereby underlining the key role of the textiles sector in Asia. More than 60 percent of global textiles produc-tion is based in the Asia/Pacific region, and Clariant already generates 43 percent of its textile chemicals sales in Asia. With the relocation from Switzerland now complete,

the new headquarters will accommodate the entire senior management of Textile Chemicals. The Business Unit has also set up a global textile application team and opened a state-of-the-art laboratory at the new location.

Clariant expertise for the Chinese market

In May 2011, Clariant commenced produc-tion at a new ethoxylation plant in China, which means it now has a global presence

in this segment. The plant marks another important investment in the country by the Industrial & Consumer Specialties (ICS) Business Unit. The new 80 000 square me-ter Dayabay plant situated in the South East of Guangdong Province is the unit’s largest plant in Asia/Pacific. The plant will have an initial production capacity of some 50 000 tons of surfactants per year. It is also equipped with an autoclave laboratory to al-low fast product development and custom-ization in accordance with local demands.

CLaRIant woRLDwIDe

Countries where Clariant is represented


The integration of Süd-Chemie will bring with it a further 51 new production sites, of which around 16 percent are situated in China, India and Brazil. The growing share of sales and locations accounted for by emerging nations also affects the staff members employed there. At the end of 2011, some 39 percent of full-time em-ployees at Clariant worked in Asia/Pacific and Latin America. The comparable figures were on a similar scale at Süd-Chemie, with a third of the workforce being employed in the Asia/Pacific region.

Clariant strengthens presence in asia in 2011Clariant continued to strengthen its pres-ence in Asia in the year under review, among other things by opening new headquarters for the South East Asia & Pacific region in November. The new regional headquarters in Singapore are the first that Clariant has used together with Süd-Chemie. The Singa-pore location currently has 200 employees, who are responsible for supporting custom-ers in the South East Asia & Pacific region.

This strengthening of Clariant’s presence shows that the company is systemati-cally pursuing its expansion strategy in the region.

Considerable growth potential in China and IndiaClariant has invested over CHF 200 million in China alone over the past five years, and had 15 production sites there at the end of 2011. From a historical perspective, production relocations to China primarily affected the mature Business Units Textile Chemicals, Leather Services and Pigments, as the majority of global production in these areas stemmed from Asia owing to the low personnel costs there. In recent years, however, improving standards of liv-ing and the rising demand for industrial and consumer goods in the region have led to a marked increase in activity and dynamic growth in Clariant’s other Business Units, in particular in the Industrial & Consumer Specialties, Masterbatches and Additives segments. The goal is to more than double the Clariant Group’s sales in China from CHF 424 million in 2010 to around CHF 1 billion by 2016/17. This will be achieved

by targeted expansion of production capaci-ties and a move into high-growth sectors in the region such as pigments and coatings for China’s automobile industry.

Clariant forecasts similarly large potential for the Indian market. The Group has main-tained a presence in the country for some 40 years and, with four production sites at present, has a well established and efficient organizational structure. Until now, around 70 percent of sales have been generated by the Textile Chemicals, Pigments and Leather Services segments. Improving living stan-dards and dynamic economic growth have benefited the company in India, too. As is the case in China, Clariant is focusing on supplying the Indian automotive sector as well as the biotechnology industry, which both are expanding rapidly in the region. The aim is to triple Clariant’s 2010 sales in India of approximately CHF 205 million by 2016/17. In addition to organic growth and the introduction of new, innovative prod-ucts, the company is also examining selec-tive acquisitions in India.

“ Clariant’s expansion in the fast-growing Asian region is a key pillar of our profitable growth strategy. It is also evidence of our considerable commitment to our customers and markets.”

HARIOLF kOTTMANN, CHIEF EXECUTIvE OFFICER

gLoBaL PoSitioning

CLaRIant’S SaLeS In ChIna

CHF m

2016 /17 ~ 1 000

2010 424

2005 273

0 250 500 750 1000


Innovation is a key driver of progress on the path to profitable growth at Clariant. In the face of stiff international competition, it is impossible to achieve lasting sales growth and generate added value without new, attractive products. a high level of commitment to Research & Development (R&D) is essential for a specialty chemi-cals company to position itself successfully in the global market on a long-term basis. only through creativity and a continuously high capacity for innovation can a company react quickly to customers’ changing requirements. thanks to a large number of innovations, Clariant has continued to be able to rise to the demands of the market and secure sustained development of both products and production processes. Innovations also ensure that the company establishes a presence at an early stage in attractive market sectors and lucrative niches.

ergy efficiency, resource management, and alternative energies as well as renewable raw materials.

Clariant publishes current examples of these innovations on a quarterly basis in a number of forms, including animations about innovative products and their ap-plications, on the company website under the title “Innovation Spotlight.” www.innovation.clariant.com

Increasing globalization and the ever more rapidly changing conditions mean that com-panies must have the ability to react quickly to the requirements of the market and cus-tomers. In addition to ensuring lean and efficient structures and the optimum use of resources, Clariant also concentrates on recognizing future requirements within the context of megatrends and developing its products accordingly. For this reason, one focus of the company’s R&D activities is on innovation in the future growth areas of en-

The acquisition of Süd-Chemie in the year under review led to another significant ex-pansion of Clariant’s technology platforms, which now include chemical technologies, biotechnology, catalysis, and process tech-nology. By doing this, the company is gener-ating further potential for the future so that it can continue pursuing its strategic goal of sustainable profitable growth, even in diffi-cult economic conditions.

From idea to market: Clariant’s innovation processInnovation comprises the entire complex process from the development of an idea through to the successful market launch of a new product. In order to implement this process effectively, Clariant has set up an in-novation management system which is firm-ly established throughout the entire Group and aligned the organizational structure of R&D accordingly. On this basis, efficient and targeted use is made of the available

INNOVATION, RESEARCH & DEVELOPMENT


innovation, reSearCh & deveLoPment

gLobaL InnovatIon netwoRK oF CLaRIant

australia Lara

belgium Louvain

brazil Jacarei Sao Paulo Resende Suzano

Canada St. Bruno

Chile Maipú

China Jinshan Tianjin Shanghai Taoyuan Guangzhou

France Cergy Choisy-le-Roi Lamotte

germany Ahrensburg Knapsack Oberhausen Wiesbaden Leinfelden Gersthofen

Bendorf Hilden Moosburg Unterneunkirchen Frankfurt-Höchst Gendorf Munich Heufeld Lahnstein

India Cochin Pune Baroda Kolshet Roha

Indonesia Cileungsi Tangerang

Italy Lomagna Palazzolo

Pogliano Novara Merate

Japan Shizuoka Toyama

Malaysia Port Klang Shah Alam

Mexico Puebla St. Clara

new Zealand Albany

Pakistan Karachi Korangi

Peru Lima

Russia St. Petersburg

Saudi arabia Riyadh

Singapore Singapore

South africa Chloorkop Johannesburg Randburg

South Korea Pohang

Spain El Prat Castellbisbal St. Andreu Yuncos

Switzerland Muttenz Reinach

thailand Phan Tong Bangpoo

turkey Gebze

united Kingdom Aberdeen

uSa Little Ferry Needham Palo Alto Belen Alfred Station Minneapolis Holden Chicago Winchester Houston Charlotte Louisville Mount Holly

Central functions:

R&D Center Chemistry and Process Technologies

R&D Center Biotechnology

R&D Center Catalysis & Energy

business unit functions:

Technical Centers (Application Development)


resources for developing new products and applications with great potential for the future. Realignment of the R&D organization to increase efficiencyThe R&D organization, which was already restructured in 2010 and consists of the Group Research & Development Centers for Colorants, Surfactants and Alkoxylates, Ef-fect Chemicals and Intermediates, Specialty Polymers, and Formulation Technology, has combined know-how and strengthened technology platforms. The work of the R&D Centers includes not only developing new molecules and polymers but also optimiz-ing formulations. The Intellectual Property Management Department develops pat-ent strategies together with the Business Units and thus secures Clariant’s know-how. These new solutions are then tested in the application development laboratories of the Business Units in order to assess their viability in practice. Before an R&D proj-ect is approved, the cost effectiveness of innovations is assessed by comparing the expenditure on research, production, and marketing with the expected returns.

The company’s research strengths – at Clariant mainly chemicals, and at the new subsidiary Süd-Chemie Catalysis and Bio-technology – will generate significant synergy effects. The combination of Süd-Chemie’s experience in catalysis, enzyme technologies, fermentation and materi-als separation with Clariant’s expertise in chemical modification of renewable raw materials and in polymer technology opens the way for the development of, for exam-ple, new surfactants, which have consider-able growth potential.

In addition to Group R&D, the Group Tech-nology Services function includes the orga-nizational units Group Process Development, Group Engineering, New Business Develop-ment, and Intellectual Property Manage-ment. Using innovative process technol-ogy, Group Process Development brings chemical processes to production scale and increases the efficiency of existing chemi-cal processes. New Business Development is responsible for developing new business outside of existing business activities.

Innovation excellence launched in 2011To make R&D even more efficient and effec-tive, Clariant has launched a new idea-to-market process within the Group in the form of the Clariant Innovation Excellence (CIX) initiative. CIX is the fourth pillar of Clariant Excellence and was introduced in July 2011. The idea-to-market process is implemented consistently throughout the Group and is designed to scout, scope, develop, and commercialize innovation ideas within the shortest possible time frame. Between the individual steps, the achievements are com-pared with the original goals and market requirements (stage gate) before the green light is given for the next stage.

R&D workforce moved to 1 100As a result of the consolidation of Süd-Che-mie, Clariant’s R&D workforce increased to 1 100 as of the end of 2011 – twice as many as in the previous year.

This led to an increase in R&D expendi-ture from CHF 135 million in 2010 to CHF 176 million in the year under review. As a proportion of Group sales, this corre-

was the amount spent by the Clariant Group in researching and developing innovative products in 2011.

ChF 176 m

exCeLLenCe In InnovatIon: the CLaRIant InnovatIon PRoCeSS – FRoM IDea to MaRKet

SCout SCoPe exeCute CoMMeRCIaLIZe

› Ideation

› Scouting

› Evaluation

› Deep Dive

› Proof of Concept

› Development

› Pilot

› Launch

› Monitor

› Close



Interview with Martin vollmer, Chief technology officer

WHAT IS THE IMPORTANCE OF INNOvATION FOR CLARIANT?

Martin vollmer: Innovation is the basis of our business success and enables us to achieve profitable growth. Innovation also means delivering new products and services to the market which are of value for our customers. Starting point is to understand the unmet needs of our customers and to translate these needs into the right product or service offering. Moreover, innovation is directly linked to sustainability. Clariant responds with the development of safe, re-source efficient and environmentally compatible chemical processes providing the basis for innovative performance products.

YOU ARE INvESTING CONSIDERABLE AMOUNTS IN BUILDING A GLOBAL RESEARCH & DEvELOPMENT CENTER. WHY IN FRANKFURT?

Martin vollmer: During a classical evaluation of various locations, Industry Park Höchst in Frankfurt emerged on top of the list. There are several reasons for this: Firstly, we already have a critical mass in Frankfurt. All of our Group R&D Centers run chemical laborato-

ries in Frankfurt. In addition, our Group Process Development team operates Clariant’s most versatile pilot plant there to speed up the development from lab to production. Many of our Business Units op-erate application development, testing and analytical laboratories in Frankfurt. Bundling of expertise under one roof in the new Innovation Center will foster collaboration and communication across organiza-tional boundaries and this will certainly be a source for innovation. We will even integrate our New Business Development team and our Patent Department in the new center. Secondly, there are several universities and research institutions in the Rhine-Main region of-fering collaboration opportunities for Clariant. And thirdly, Frankfurt as the global hub of Clariant’s R&D has an excellent infrastructure considering the proximity of the industry park to the international airport and the excellent train network.

HOW DO YOU SEE THE IMPORTANCE OF COLLABORATION WITH ExTERNAL PARTNERS SUCH AS UNIvERSITIES AND RESEARCH INSTITUTIONS?

Martin vollmer: This is of great importance for us. It can be con-sidered as technology push and will be beneficial to fill the research pipeline. Open Innovation in particular is becoming more and more important. Combining knowledge and capabilities from various part-ners leads to new ideas and creative product concepts. The role of the industry partner is to build the bridge to the market. Clariant is currently involved in more than 140 research projects with external partners world-wide. For example, in Germany, we intensively work with the Technical University of Munich in the field of catalysis. In Switzerland, we work with the ETH Zurich and sponsor a fellowship program for Ph.D. students. This gives us access to young talents who might join Clariant after finishing their education.

“ Innovation is the basis of our business success.”


sponds to an increase from 1.9 percent in 2010 to 2.4 percent. The main driver of this increase was Süd-Chemie’s tradition-ally high R&D expenditure. In the two new Clariant businesses, Functional Materials and Catalysis & energy, which were added as part of the acquisition, R&D ex-penditure was well over 5 percent (in terms of sales).

The R&D activities at the five R&D Centers mentioned above are located in Frankfurt/Höchst and Gendorf (Germany), Reinach (Switzerland), Lamotte (France), and Su-zano (Brazil). Another Research & Devel-opment Center is planned in Asia in the foreseeable future. After the completion of the Clariant Innovation Center in 2013, Clariant will have one of the most cutting-edge research centers in the world in Frank-furt/Höchst. All global R&D activities will be coordinated from this center.

The Business Units also maintain around 65 technical centers – in Asia, Europe, Latin America, and North America – so that the regions can be offered technical service and technical customer projects can be supported. The development of new and the optimization of existing production pro-cesses mainly takes place in three process development centers in Frankfurt/Höchst, Gendorf, and Lamotte. Süd-Chemie’s major R&D sites are in Germany (Munich, Heufeld, and Moosburg), USA (Louisville, Palo Alto), and Japan (Toyama).

Together with Süd-Chemie, Clariant holds over 9 500 patents and is involved in more than 140 scientific projects with external research partners. The Group’s research and development activities are thus com-plemented by an international network of universities, public research institutions, and partner companies, which strengthens its own R&D. Clariant sponsors young sci-entists by awarding scholarships to world-renowned universities, such as ETH Zurich.

The Project Center for Renewable Raw Ma-terials coordinates all of Clariant’s interna-tional research and development activities in this area as well as appropriate exter-nal collaborations. Clariant is investing at least CHF 10 million in this interdisciplinary research program initially scheduled to last three years. Key objective is the replace-ment of petrochemical raw materials with renewable ones. At the Advanced Materials Project Center, new materials such as ce-ramic fibers and composites are developed.

CLaRIant InnovatIon CenteR In FRanKFuRt

› Completion scheduled for 2013› Investment: CHF 125 million› Workforce of 500› Coordination of Clariant’s global R&D activities



ExAMPLES OF RECENT R&D PROJECTS AND PRODUCT INNOvATIONS

vitipuretM, ZenvivotM, velsan® – a unique range of chitosan-based biopoly-mers developed in collaboration with the company KitoZyme. It is used to make hair and skin cleansing products more moistur-izing, gentle and protective.

Clariant is already a global leader in non-halogenated flame retardants thanks to exolit®. Exolit® is used in particular in the electrical and electronics industries as well as in construction. A new concept has also been developed to improve fire protection of printed circuit boards in the electronics industry.

Under the name Synergen®, Clariant is developing new crop protection products based on renewable raw materials. The special feature of the Synergen® concept is that the raw material is taken from the plant species for which the crop protection prod-uct has been formulated. This enables an in-crease in crop yields without damaging the plants with artificial substances. As a con-sequence, this bio-based surfactant product meets the market demand for “green” crop protection.

Sunliquid® is an integrated process being developed by Clariant for manufacturing bioethanol from cellulose obtained from the leftover straw waste from food production. With this second generation bio fuel pro-cess applying enzyme technologies, Clariant is avoiding the conflict between food and fuel.

Süd-Chemie’s selective hydrogenation expertise was highlighted when the latest addition to the oleMax® series was short-listed for the ICIS Innovation Award in 2011. OleMax 207 offers a 35 percent selectiv-ity improvement in converting acetylene to ethylene in petrochemical operations of customers. The high conversion catalyst runs at lower temperatures and for longer cycles than competing materials, translating to EUR 1 million in annual savings for a mid-sized ethylene unit, and correspondingly less impact on the environment. Süd-Chemie began commercial production of its new battery material Life Power® P2 in December 2011. The new unit in Candiac, Canada, uses a proprietary wet process to make a high-performance cathode material based on lithium iron phosphate. Life Power P2 delivers high power, superior safety, and long cycle life to applications such as elec-tric and hybrid vehicles and home energy storage systems.


In addition to further strengthening its operational and technological basis for prof-itable growth in business year 2011, Clariant also focused this base rigorously on sustainability aspects, thereby taking into account both its corporate and social responsibility. From the business point of view, this is critically important in two ways. First, particularly in challenging times, companies that are sustainably man-aged and act responsibly are proven to be more successful in the long term. In addition, the wide range of innovations developed on the basis of sustainability generates added sales and earnings potential.

Global population growth, increasing stan-dards of living, and globalization have opened up many possibilities but at the same time, have brought many challenges: Ever scarcer raw materials and energy sources have to be spread over more and more people. Responsible and efficient use of the available resources is imperative for us, and all the more so for future gen-erations.

Sustainability-based management signifi-cantly increases the Group’s competitive-ness, generating value, which also address-es the capital markets’ requirements. This is a further reason why sustainability is firmly anchored in Clariant’s corporate strategy.

Long-term planning, not short-term thinking Clariant believes it has a duty to use re-sources sparingly and respect the environ-ment, from a pure business point of view apart from anything else. This also includes ensuring a sound and performance-enhanc-

ing working environment, guaranteeing mutual respect, and – where appropriate – participating in campaigns to improve the social climate.

Clariant has set itself the specific objectives of steadily reducing its relative consumption of water and energy, and generating less waste and pollutant emissions. In addition, plant safety is to be increased still further and products improved through ongoing re-search. By implementing its sustainability objectives, Clariant is assuming responsibil-ity for the environment, its employees, its customers, and society, particularly through intensive and transparent communication with the relevant stakeholders.

Clariant’s focus on innovation also strength-ens the company’s future economic viability. The company’s main opportunities here lie in the development of innovative prod-

SUSTAINABILITY AT CLARIANT


SUStainaBiLity at CLariant

Commitment & Clariant ExcellenceClariant commits itself to ethical and sus-tainable operation and development in all business activities according to Responsible Care® and Clariant’s own Code of Conduct. Clariant strives for a business culture of continuous improvement as well as for sustainable competitiveness and top perfor-mance in consideration of Clariant’s ethical standards.

ResponsibilityClariant bears an ethical responsibility for sustainable, economic and ecological, as well as fair, business practices. Corporate Social Responsibility is therefore an inte-gral component of our company's philoso-phy. All Clariant employees are educated and trained to assume responsibility in line with their function, level of authority, and qualification.

Clariant’s Management SystemClariant’s certified Management System ad-heres to all internal and external standards to which Clariant subscribes and forms the company’s documented structural frame-work as the basis for objectives and pro-

Risk and Emergency ManagementComprehensive assessment of risks related to our operations and products are prereq-uisite to our business processes. Local and global emergency organization is in place to ensure comprehensive emergency manage-ment and response.

Innovation and Product Stewardship We are convinced that it will be essential to understand our customers’ needs. Inno-vation and customer focus is the key to our business. We permanently develop better and new products and services to add value to our customers and to our environment. Concurrently we secure that our products can be used over their entire life cycle in a safe manner for employees, customers, the public and the environment.

Sustainable Operation and ProcessesWe take initiatives to reduce environmental, safety and health risks in production, stor-age, distribution and usage of our products and the disposal of waste. This includes the efficient use of energy and resources and the continuous improvement of our process-es to minimize the impact of our activities on the environment.

grams. The system complies with ISO 9001, ISO 14001, OHSAS 18001, and Responsible Care®. Achieving and maintaining a high level of quality across all aspects of our businesses, our ESH related activities, So-cial Responsibility and Responsible Care®, is our understanding of Corporate Sustain-ability.

ComplianceCompliance with laws, international stan-dards, internal regulations, and Clariant‘s Code of Conduct is a basic requirement for all our activities. Clariant appreciates volun-tary initiatives and provides adequate sup-port to develop effective and efficient safe-ty, health and environmental regulations.

Safety and EnvironmentOne of Clariant’s most important objectives is the safety of its worldwide activities and the protection of people and environment. We set protection goals which are valid throughout the entire group and monitor and evaluate all aspects of our activities.

CLARIANT SUSTAINABILITY POLICY

continued on page 54


continued from page 53

LIFe CyCLe thInKIng on PRoDuCt LeveL

1

4

2

3

Sustainable Design – already reflects the idea for more sustainability during the development phase of a new product. Goal is to invent safer products that are inspired by bio-based raw materials and designed to replace critical materials.

ecological Integration – refers to the environ-mental fate of a product after its use. It concentrates on the product’s environmental compatibility and ecological friendliness.

Responsible Production – focuses on sustain-ability initiatives during the manufacturing. Goal is to make chemical reactions happen more efficiently, thus conserving energy and water and reducing greenhouse gases, effluents, and waste.

Safe & efficient use – highlights the product benefits during handling, formulation, and application. It takes into account favorable product properties and performance benefits while assuring peoples’ safety.

Third Party ManagementOur aim is to establish mutually beneficial relationships with our third party suppli-ers and contractors in order to support our services on the basis of our internal ESHQ standards, which include Corporate Social Responsibility and Responsible Care®. We encourage our suppliers and service pro-viders to adopt standards comparable to Clariant’s policies.

CommunicationClariant fosters a culture of proactive and transparent communication as key to trust-ing and reliable relationships. All stakehold-ers are regularly informed about our activi-ties, our targets and our ESHQ performance. We identify the concerns and expectations of our stakeholders systematically.

Monitoring and ReviewWe monitor and review all business aspects and processes including Responsible Care® issues at regular intervals. Observing our quality and performance is an integral com-ponent of our business processes, our top priorities and our strategic planning.


ucts, including those based on renewable raw materials. Innovative products should, furthermore, minimize risks and waste in production. The optimization of internal pro-cesses is also in the interest of our custom-ers, who benefit from tailored solutions.

Sustainability is very important at Clariant. This is demonstrated by the publication of the company’s detailed Sustainability Re-port, which received the GRI Level “A” for standards of reporting on sustainability from the Global Reporting Initiative (GRI) in 2010. Through its product innovations

and commitment to sustainability, Clariant is also making a contribution to mastering the global challenges of our time in process management. These challenges include suf-ficient food, water, and energy; effective climate protection; and securing quality of life for an ever increasing global population. Newly launched products which help to save energy and resources, such as brands like EcoTain®, or the products made under the CleanTech® label by Süd-Chemie, high-light Clariant’s orientation toward sustain-able markets of the future.

You can find more detailed information on www.sustainability.clariant.com.

Sustainability made systematic, with detailed rulesOver the past years, Clariant has made con-siderable efforts to structure operational processes even more rigorously in line with sustainable management, align them with ambitious goals, and continuously optimize them. This is also reflected in the ESHA management system (environmental, Safety, and health affairs), which forms part of our Group-wide process and strategy planning.

The management system includes a pe-riodic compliance test of actual business performance and ongoing goal reviews. Clariant has a global and local emergency management system and can react to inci-dents immediately and with a high degree of effectiveness.

The Sustainability Council was imple-mented in business year 2011. It consists of representatives of the Business Units, Group functions, and business regions. The Council develops mid- to long-term goals and standards and evaluates the global challenges of sustainable development, in accordance with Clariant’s activities and product portfolio. This ensures that sustain-ability at Clariant is assessed and managed holistically.


“ A focus on sustainable management is firmly anchored in Clariant’s business strategy.”

CHRISTIAN kOHLPAINTNER, MEMBER OF THE EXECUTIvE COMMITTEE

the SIx MegatRenDS: ChaLLenge anD oPPoRtunIty

Society› Urbanization and social change

› New mobility concepts

technology› Convergence of technologies

› Increasing importance of bionics

Consumption› New consumer behavior

› Thriving health sector

globalization› Growth of trade flows

› Change in economic structures

Competitive situation

› Knowledge-based economy

› New needs in the modern world of employment

environment

› New thinking in use of energy and resources

› Climate change

› Environmental impacts


Interview with Joachim Krüger, vice President Corporate eSha

CLARIANT PURSUES A STRATEGY CALLED SUSTAINABILITY@CLARIANT. WHAT GOALS ARE YOU AIMING FOR WITH THIS STRATEGY?

Joachim Krüger: Sustainability@Clariant underpins our constant efforts to ensure sustainable chemicals production. Our aim is to produce chemicals by minimizing undesirable effects on the environ-ment. And we want to use as few materials and as little energy as possible in their production. Our main priority in doing so is finding the optimum balance in the triple-bottom-line approach for people, planet, and profitability, and to satisfy the customer needs.

WHAT AREAS DOES SUSTAINABILITY@CLARIANT COvER?

Joachim Krüger: All the relevant ones. That means we are not only dealing with environmental issues, but also with safety in the pro-duction, transportation, and use of the products. We are also over-seeing aspects of health protection in both the production process and the handling by our customers.

SO SUSTAINABILITY@CLARIANT ALSO COvERS THE AREA OF PRODUCT RESPONSIBILITY?

Joachim Krüger: I would go so far as to say it is a specific focus. We want to handle chemicals and our products responsibly, on all levels: together with our suppliers, in our own production facilities, and with our customers. An intensive exchange of ideas and opin-ions takes place here regarding applications and possible risks; we will keep on reducing the latter.

DOES EvERY DEPARTMENT OR PRODUCTION FACILITY IMPLEMENT THIS PROGRAM ITSELF?

Joachim Krüger: Naturally, our employees on site have to imple-ment Sustainability@Clariant under their own authority. However, the guidelines and requirements, as well as the application rules, are standardized and trained throughout the Group. Our Sustain-ability Council sets rigorous specifications here and strictly monitors compliance. The Council works in this process with coordinators in the regions and countries, in the Business Units, and the various corporate functions. After all, Sustainability@Clariant is part of the global Clariant management system and the way we work.

“ Sustainability@Clariant underpins our constant efforts to ensure sustainable chemicals production.”


Increased sustainability through international standardsAs a leader in the specialty chemical in-dustry, Clariant goes beyond legal require-ments and participates in several voluntary sustainability programs, including voluntary commitments as part of Responsible Care® under the Global Responsible Care Charter and Global Product Strategy.

The guiding principle of these programs is continuous improvement of health, safety, and environmental protection as well as product quality from the point of view of sustainability. Accordingly, Clariant is cer-tified to ISO 9001, ISO 14001, and OHSAS 18001 all over the world. All production facilities have to adhere rigorously to the applicable rules on environmentally friendly and safe operations.

Life cycle thinking delivers far-reaching sustainabilityTo ensure sustainability from the initial product idea through production to the prod-uct’s application by the customer, Clariant has extended the life cycle concept to the entire process chain. At Clariant, environ-mental protection begins in product design and development. Taking both ecological and economic aspects into account, we examine raw materials and the manufac-ture, distribution, usage, and disposal of products, and take into account potential

criteria for eco-efficiency. This aims to make the manufacture and application of products safer from the point of view of health and the environment – particularly by replacing scarce resources with bio-based, renewable raw materials.

Clariant also pursues a clearly defined philosophy in resource management. In a subsequent stage, the energy required for production is determined by means of a de-tailed input-output analysis. In accordance with that analysis, operational excellence criteria, and optimization potential in the process or product itself, are established.

The same procedure is applied to air emis-sions and water contamination. Production does not start until the optimum balance of requirements feasible according to the state of the art is found. This approach has helped Clariant make measurable improvements in virtually all environmental areas in past years. Risks inherent in production facilities

are systematically ascertained and analyzed in order to determine and realize potential for improvement.

Clariant works very closely with its custom-ers to ensure safe and efficient product han-dling. Optimum applications and processes are discussed. Possible interactions with other chemicals used must be taken into ac-count since life cycle thinking also includes dealing with the environmental impact of a product manufactured by Clariant after it is used. To this end, environmental compat-ibility and recyclability of residual materials are investigated; the aim is to eliminate negative effects or at least reduce them to the greatest extent possible.

Respectable performance on environmental issuesClariant has made improvements according to key environmental indicators in the last few years, with the absolute consumption

was the reduction of relative carbon dioxide emissions within the Clariant Group over the last six years.

50 %1


CaRbon DIoxIDe eMISSIonS In ReLatIon to PRoDuCtIon voLuMe

kg/ t

250

200

150

100

50

0

2005 2006 2007 2008 2009 2010 2011 1

1 Preliminary

236 227202 197 184

< 120154


of energy, resources and emissions falling considerably in some areas. This can be at-tributed to Clariant’s deploying increasingly efficient production processes, but also to the fact that sales and therefore production fell sharply in 2008 and 2009.

The recovery of the global economy in 2010 and the first half of 2011 has seen Clariant’s manufacturing output rise substantially again, a fact inevitably reflected in absolute

terms in the relevant environmental indica-tors. However, relative consumption and relative pollution continued to fall. For ex-ample, carbon dioxide emissions per tonne of volume produced have fallen substan-tially – by approximately 50 percent – since 2005, to less than 120 kilograms in 2011.

All these efforts are aimed at enabling Clariant to pay shareholders a reasonable return on their invested capital over the long term. The Sustainability Report 2011 con-tains a detailed overview with many facts, figures, and product examples.

additional sales and earnings potential from sustainability focusThe strong commitment of everyone in the Clariant Group to manage sustainability and at the same time respond to customer needs generates a high level of additional sales and earnings potential. Many of the innovations the Group develops on the basis of sustainability address future megatrends such as environmental protection, energy efficiency, resource management and re-newable energy sources.

ExOLIT®

Exolit® OP is an innovative, patented organo-phosphorus (OP) flame retardant. It was developed by Clariant specifically for technical plastics in the electrical and electronics sector. It contains no halo-gen compounds, which have come under attack because of poten-tial damage to the environment and health. In the event of a fire, Exolit® OP suppresses the chemical reactions in the flame and forms a stable protective coating of carbonized material which keeps out oxygen and insulates against heat. All products in the Exolit® OP line have an excellent environmental and health profile.

gLobaL MaRKet FoR FLaMe RetaRDantS (FR) by vaLue

halogenated FR

high-performance FR > 8 USD/kg

technical FR4 – 8 USD/kg

Standard FR> 4 USD/kg

Latest market trends indicate a change of thinking in favor of non-halogenated products

0.1

0.9

1.6

0.2

0.6

0.8

The triangle area represents the market share value. All values are in USD billion.

non-halogenated FR



ADvANCED DENIM

Traditionally, denim is dyed with indigo in huge production lines that not only require vast quantities of water for the rinsing and purifica-tion processes but also consume large amounts of electricity. Apart from this, many conventional processes generate massive volumes of cotton waste and involve the use of chemicals such as hydrosulfites during dyeing and hypochlorite in the post-treatment and wash-down stages. Now the new Diresul Indicolor dyes from Clariant set a new benchmark in denim production that unites technological and ecological advantages.

EASYWHITE TAN PROCESS WITH GRANOFIN® EASY F-90

Apart from Granofin® Easy F-90, no other tanning agents are needed. One third fewer chemicals are therefore used, and the environmental impact caused by the production and transportation of these chemicals is reduced accordingly. The volume of effluents is halved – even more water can be saved by optimization measures, and the remaining ef-fluents are less polluted because chrome is completely eliminated. Salt pollution drops by 80 percent, which also benefits the environment.

envIRonMentaL anD PRoDuCtIon beneFItS

Production› Process simplification› Cost reduction› User friendliness› Less susceptible

to faults

environment› – 100 % chrome› – 80 % salt pollution› – 50 % effluents

envIRonMentaL beneFItS

› 92 % less water › Up to 87 % less waste cotton› 30 % less energy


Continuous improvement coupled with cultural change characterizes the Clariant excellence (CLnx) initiative launched in 2009. based on the well-known Lean-Sigma approach, this holistic method involves all business units and is primar-ily designed to improve competitiveness by increasing efficiency and generating added value for Clariant customers. after just three years, Clariant excellence has already become a successful model, and its implementation across all depart-ments and functions has produced significant results. For example, by the end of 2011, more than ChF 140 million in financial benefits had been achieved through more than 1 900 CLnx projects. the objective is to continue to expand this success story in the years to come.

as a method for increasing efficiency and managing quality based on the core ele-ments of description, measurement, analy-sis, improvement, and monitoring of busi-ness processes using statistical methods. Lean Management helps develop principles, methods, and procedures for efficiently structuring the entire industrial product value chain.

Clariant Excellence is based on four pillars: Operational Excellence, Commercial Excel-lence, People Excellence, and Innovation Excellence. Since the beginning of 2009,

As a holistic initiative, Clariant Excellence changes and improves the business culture and internal procedures for the long term in an ever-changing complex world and thus brings about regular annual benefits. CLNX is a combination of basic system approach-es tailored to specific areas and LeanSigma, a method for improving individual business processes. The LeanSigma approach was conceived at the beginning of the 21st century and combines Six Sigma and Lean Management. Six Sigma was developed in the late 1980s and is established worldwide

a total of more than 1 900 CLNX projects have been launched, including around 500 in 2011. Improvements worth more than CHF 160 million have been realized through these projects. The goal is to bring about further improvements totaling CHF 60 mil-lion per year in 2012 and subsequent years through the Clariant Excellence initiative. After all four pillars have been introduced in the form of individual improvement ini-tiatives, the defined objective is to achieve even more efficient value creation for the Clariant Group and its customers by net-working the four areas of excellence with one another.

More than 3 000 employees are already directly involved in Clariant excellenceClariant Excellence is being implemented by specially trained staff. The concept is based on defined roles modeled on rank designa-tions in the form of “belt colors” – as used in Asian martial arts. Within three years,

CLARIANT EXCELLENCE


Interview with bernd högemann and Michael Riedel. Michael Riedel was appointed head of Integration Süd-Chemie, effective 1 January 2012. he successfully led and developed the Clariant excellence Initiative since its start in 2009 till the end of 2011. bernd högemann took over responsibility for Clariant excellence in January 2012.

WHY DOES CLARIANT NEED AN ExCELLENCE INITIATIvE?

Michael Riedel: Clariant Excellence is a key building block for im-plementing our Group-wide strategy concept for generating sustain-able profitable growth. The initiative brings about a cultural change at Clariant. It puts us in a position to be able to respond flexibly to the dynamic changes in the globalized world. This helps us improve our competitiveness and generate added value for our customers.

“ the initiative Clariant excellence brings about a cultural change at Clariant.”

CLariant exCeLLenCe

WHAT HAS ACTUALLY CHANGED AT CLARIANT SINCE 2009?

Michael Riedel: We have successfully established the Clariant Excellence approach in the minds and conduct of our employees through more than 1 900 projects to date. More than 3 000 staff members have been trained as “belts”, who then manage or help implement the projects.

AND WHAT HAS THIS PRODUCED IN CONCRETE TERMS?

Michael Riedel: The improvements are quite impressive. In just three years, the financial benefits attributed directly and indirectly to Clariant Excellence projects totaled more than CHF 160 million. And this is by no means the end of our initiative.

WHAT ARE YOUR PLANS FOR THE NExT FEW YEARS?

bernd högemann: In the future we want to achieve additional average improvements of CHF 60 million per year through projects already introduced and projects still to be launched. And this does not even include the additional potential that we want to achieve by consequently implementing Clariant Excellence at Süd-Chemie as of 2012.


more than 3 000 of all Clariant employees have been specifically trained as “belts”, i.e. project managers or project staff, for tasks in connection with the Excellence Program, and entrusted with its implementation with-in the Group. Süd-Chemie employees will also be included in this process from 2012. Regular surveys are carried out in order to monitor the successes and to identify poten-tial improvements while introducing CLNX.

the four pillars of Clariant excellence

Operational Excellence focus on efficiency and productivity In 2009 and 2010 the emphasis of Clariant Excellence was on Operational Excellence and Commercial Excellence, and in 2011 at-tention was turned to Innovation Excellence and People Excellence. In 2010 the Clariant Production System (CPS) initiative was in-troduced as part of Operational Excellence, which focuses on efficiency improvements in all operating processes. The goal of the CPS program is to achieve optimum pro-ductivity and financial performance in the production units of all Business Units. Once

the foundation had been laid in 2010 by in-troducing CPS at pilot locations, the focus in 2011 was on company-wide implementa-tion. This will also be the main objective in 2012. The goal is to increase productivity by 3 – 5 percent per year by standardizing and continually improving processes.

Clariant also launched the Clariant Supply Chain System (CSS) initiative in early 2011. Under the initiative, the entire value chain from suppliers to customers is analyzed and scrutinized for optimization potential. This will result in further improvements in net working capital, cash management, and service quality. CSS plays a crucial role in meeting Group-wide targets. For Clariant Supply Chain Systems, the specific targets are: improvement in the punctuality of de-

liveries to significantly above 90 percent, reduction in the ratio of net working capital to sales to less than 20 percent, and a 10 to 15 percent reduction in supply chain-related costs. As part of Operational Excellence, Clariant will use CSS to develop a “best in class” supply chain.

Commercial Excellence – focus on sales and marketingThe kick-off for Clariant Commercial Excel-lence took place in 2010. Implementation of the Clariant Commercial System (CCS) laid important foundations within the Group for optimizing sales and marketing processes. This will allow Clariant to offer its custom-ers the best service and the most attractive price-performance ratio in the future. In this context, Clariant launched initial basic modules in the Business Units focusing on improving margins and operational effi-ciency, among other aims. In 2011 the CCS team concentrated primarily on the area of transactional pricing. By 2013 the focus will switch to customer and sales manage-ment, and value-oriented pricing and sales volume. These efforts will be closely net-worked with the other Clariant Excellence pillars – for example, through intensified innovation management via Innovation Excellence. The three modules will place

million Swiss francs is the value of financial improvements attributable to Clariant Excellence projects.

> 160

the FouR PILLaRS oF LeanSIgMa

LeanSigma

Innovation excellence:Enabling new ideas and solu-tions for profitable growth

Commercial excellence:Empowering sales and marketing to offer the best customer service and value

operational excellence:Striving for opti-mum efficiency across all of our operating processes

People excel-lence:Enabling our people to achieve a culture of continuous improvement

beneFItS aLReaDy ReaLIZeD thRough CLaRIant exCeLLenCe

CHF m

2012

2011 > 100

2010

2009

0 25 50 75 100


MASTER BLACK BELT

In addition to the yellow, green, and blackbelts, there are currently also 10 individualscalled “master black belts” who are drivingthe execution of LeanSigma projects in theirrespective regions. Sunil Joshi, Master Black Belt in the Asia/Pacific region, de-scribes his job as follows: “As master black belts, we primarily support our black and green belts in executing their improvement

projects which is quite a challenge consid-ering the size of the territory as well as the wide variety of different cultures. A key task

for the MBB’s is to identify and drive the implementation of Best Practices across the world. It is important to utilize Asia’s poten-tial for Clariant as efficiently as possible and to have the right products available locally at the right time and in the highest quality for our customers’ benefit. All employees in my region must be made aware of this objective and be trained accordingly to achieve sustainable improvements.”

CLariant exCeLLenCe

PeRCentageS oF eMPLoyeeS tRaIneD FoR CLaRIant exCeLLenCe (exCLuDIng SüD-CheMIe)1

noa

1 200 FTEs

5 BBs

88 (7.3 %) GBs

436 (36.3 %) YBs

world

16 194 FTEs

78 BBs

563 (3.5 %) GBs

2 435 (15.0%) YBs

euR

7 853 FTEs

48 BBs

243 (2.9 %) GBs

693 (7.1 %) YBs

Mea

920 FTEs

1 BBs

17 (1.8 %) GBs

26 (2.8 %) YBs

gCn

1 203 FTEs

6 BBs

37 (1.8 %) GBs

46 (2.2 %) YBs

InD

869 FTEs

4 BBs

29 (4.5 %) GBs

106 (12.1 %) YBs

JaP

165 FTEs

1 BBs

15 (4.4 %) GBs

49 (14.5 %) YBs

Sea

1 207 FTEs

2 BBs

35 (2.0 %) GBs

147 (8.3 %) YBs

Lat

2 777 FTEs

11 BBs

99 (3.6 %) GBs

932 (33.6 %) YBs

Full-time Employees (FTE)

Black Belt (BB): full-time lead project manager

Green Belt (GB): project team member or head of smaller projects

Yellow Belt (YB): member of team headed by Green Belt; no project management duties

1 Süd-Chemie has started to implement this initiative.


Example of Operational Excellence: The first successes at Latin American plants after just a short time

The Clariant Production System (CPS) was introduced in Latin America in June 2010 at the Masterbatches plant in Cota, Colom-bia. This was followed in January 2011 at the Business Unit’s Brazilian sites. The first

step in implementation of CPS is a detailed analysis. Bernd Hirschberg, Head of CPS for chemical sites, describes this process as follows: “The roll-out of CPS at every site follows a standardized process. First we analyze all areas and identify together with the employees the opportunities for produc-tivity improvements. These ideas are then worked out in detail and implemented un-der the direction of local management and with the support of the CPS team.” For the

Brazilian site in Suzano, for example, this means standardizing processes. In concrete terms, this is manifested in a significant re-duction in maintenance costs and increases in productivity. “The decisive success factor is that people experience the improvements and that they take ownership for the con-tinuous improvement of any implemented solution,” says Chris Hansen, Head of CPS for Masterbatches.

Example of Commercial Excellence:What does transactional pricing involve?

Transactional pricing is simply the basic module for Clariant Commercial Excellence. It involves, first of all, definition of customer groups, price-performance management, and a link-up with the pricing mechanisms already used in the operating areas. Spe-

cifically this means that internal price guidelines must be defined for each group of similar customers and previous prices adjusted accordingly. A second objective is to pass on raw material price changes to the customers. This requires raw mate-rial price planning that in turn defines future sales prices. And finally, other cost outflows must be reviewed and analyzed from a cost avoidance perspective. Price adjustment processes and tools that are clearly defined

and include deadlines are then developed on this basis. They are supported by key performance targets as part of a separate performance management process, and these targets are also reviewed regularly. The process of transactional pricing is rounded out by regular training sessions for sales personnel where negotiating strategy is practiced, thus fixing the Clariant Com-mercial Excellence philosophy firmly in the minds of the staff.


Clariant in a position to structure an inte-grated price adjustment process, improve the sales team’s effectiveness and focus more strongly on customer needs.

Innovation Excellence – focus on growth through innovationsA further strategic focus for 2011 was In-novation Excellence, with the objective of establishing Clariant as a global innovation leader in the area of specialty chemicals in the coming years. The focus is on develop-ing new products and services, finding and establishing new applications for existing products. Clariant will concentrate its re-search and development activities on future global megatrends such as environmental protection, raw material and energy ef-ficiency or alternative energies as well as food availability. Sustainability is an impor-tant part of Group strategy, with the focus on technologies for instance for the devel-opment of products based on renewable raw materials. At the same time, Clariant will work intensively on resource-conserv-ing processes.

Innovation Excellence, which was officially launched in July 2011, will be introduced in a multi-stage process:1. Definition of an innovation strategy: the

entire organization will be informed as to the strategic goals and the core areas that will be emphasized.

2. Establishment of innovation processes: with a focus on process management and guaranteeing efficient development of advancements that fit the innovation strategy.

3. Creation of an innovation culture: raising awareness among all employees about the need to look beyond the current prod-uct portfolio and to focus on continuous development of sales potential through development and promotion of new prod-uct ideas and technologies.

4. Training of relevant staff: systematic training and empowering of employees to recognize the needs of rapidly changing market environments, and to implement the necessary processes of improvement through innovation.

The implementation process across all Busi-ness Units is slated to begin in 2012. Once the four stages have been successfully im-plemented, Clariant will be able to advance the process of profitable growth by 1 – 2 percentage points per year – solely through Innovation Excellence. Clariant has also introduced the new “idea to market” con-cept throughout the Group; it is designed to discover, develop, implement, and commer-cialize innovation ideas within the shortest possible time frame.

In organizational terms, the realignment of R&D and the innovation chain in 2010 has already laid important foundations for leveraging considerable additional synergy potential while also increasing efficiency.

Further information on this topic can also be found in the separate section of this Annual Report entitled “Innovation and Research & Development.”

People Excellence – focus on continuing development of all employeesThe introduction of People Excellence will increasingly become the new focus of Clariant Excellence after 2011. A basic requirement for making Clariant a global leader in specialty chemicals is to be able to rely on a well trained and motivated team of employees. Clariant is therefore building on a strong organization that is oriented to the core elements of strategy, structures and processes, as well as values and conduct. The company dedicated itself to the first two elements primarily in 2009 and 2010. One of the first implementation steps of People Excellence was to define new corporate val-ues consisting of six basic principles:› Drive for Excellence › Disciplined Performance Management› Deliver to Promise› Courageous and decisive leadership› Lived appreciation› Corporate Responsibility

Sustainable value creation within the entire Clariant Group is not possible unless these values are implemented in everyday opera-tions.

was the amount by which productivity in individual plants wasincreased through systematic use ofthe Clariant Production System.

10 %

CLariant exCeLLenCe


Interview with Klementina Pejic, head of Senior Management Development

WHO WILL GO THROUGH LEADERSHIP TRAINING?

Klementina Pejic: All team leaders will complete the leadership training to increase proficiency in daily people management and to coach the organization for high performance. The regional and local leadership trainings will deepen the reflection of what Clariant’s new corporate values will require of Clariant leaders. This initiative is the key milestone to achieve People Excellence in Clariant.

HOW WAS THE ROLL-OUT ORGANIzED?

Klementina Pejic: BU and Functional senior managers from all regions have participated with much passion and enthusiasm in different pilot training programs and have supported the core team to elaborate the final training content. We started the roll-out on regional level in May 2011 and on Country level in October 2011. We aim to implement the trainings throughout the entire Clariant organization in 2012. The leadership trainings will be an ongoing curriculum on Clariant’s training landscape.

WHAT ARE THE NExT STEPS IN INTRODUCING PEOPLE ExCELLENCE?

Klementina Pejic: We laid the foundations by defining, communi-cating and training all employees on Clariant’s new corporate values. We explained and trained the application of corporate values in our leadership trainings. To ensure that our people live our corporate val-ues in their daily work and interaction with their colleagues we have introduced the 360 degrees feedback for our senior executives. All managers at the top four management levels will get general feed-back from their superiors, their colleagues and their teams on how they live corporate values. In addition, the evaluation of corporate values will be part of our annual performance dialogues throughout the organization.

WHAT IS THE 360 DEGREE FEEDBACK ABOUT?

Klementina Pejic: A 360 degree feedback provides each Manage-ment Level 1 – 4 position holder the opportunity to receive feedback from his or her supervisor, peers and subordinates. The focus-person does also a self-assessment. The 360 degree feedback allows each individual to understand how they are perceived living up to the Clariant Corporate Values and in particular to understand their strengths as well as potential development areas. We aim to en-courage our people to openly and constructively share their observa-tions and to support each other in personal development and growth through sincere feedback as well as recommendations for improve-ment. After all, living our values will help us to create and sustain a high performing organization.

“ all team leaders will complete the leadership training.”


atic performance and talent management and application of a 360 degree feedback process leading to qualification and perma-nent development monitoring of all regional and local managers. The pilot phase for the new Local Leadership Training program was launched in October in Frankfurt; between November and the end of 2012, it will be expanded to cover the entire Group.

Summary and outlookThe results of Clariant Excellence after three years are as follows:› We have succeeded in improving Clariant’s

performance sustainably; this is reflected in the improvements already achieved, which represent financial benefits of more than CHF 160 million.

› Clariant has created a solid platform for additional significant improvements by implementing a large number of projects and launching further initiatives.

› Clariant has redefined its corporate phi-losophy and reestablished employee focus on sustainable value creation.

› By doing so, Clariant has changed the way and culture of working in the Group.

All Business Units and Services are whole-heartedly committed to establish and expand the four pillars of Clariant Excel-lence and LeanSigma in their local and regional organizations. Based on the pro-cesses already launched and the upcoming initiatives, Clariant firmly believes that it can achieve additional sustainable improve-ments totaling more than CHF 60 million per year. This number is backed up by the fol-lowing targets: productivity in the Clariant Group as well as the operationg margin rel-ative to EBIT will be increased significantly through the disciplined implementation of Clariant Production System as well as through the Clariant Commercial System. In addition, net working capital, service quality and supply chain costs will be significantly improved by implementing and applying the Clariant Supply Chain System.

everyone must uphold corporate valuesThe corporate values have been supported in all Business Units of the Clariant Group since mid-2011 through regional workshops and executive training programs. The back-ground and consequences for daily opera-tions and the specific distinguishing charac-teristics of certain regions and activities are integrated into the process and developed further. A People Performance Cycle will be introduced in 2012. It will consist of system-

“ Innovation Excellence plays a key role in ensuring that our R&D expenditures of CHF 176 million are invested in the right projects and that these projects are implemented as quickly as possible.”

CHRISTIAN kOHLPAINTNER, MEMBER OF THE EXECUTIvE COMMITTEE

CLariant exCeLLenCe

CLaRIant’S CoRPoRate vaLueS

SuStaInabLe vaLue CReatIon

CoRPoRate ReSPonSIbILIty

LIveD aPPReCe-

atIon

CouRageouS anD DeCISIve LeaDeRShIP

DeLIveR to PRoMISe

DISCIPLIneD PeRFoRManCe ManageMent

DRIve FoR exCeLLenCe



helmut Müller, Project Manager Clariant Innovation Center

the new Clariant innovation Center at frankfurt-höchst will be completed by 2013. from here, all of the group’s research & development activities will be managed in future. in 2011 Clariant invested Chf 176 million in devel-oping innovations, the driving force for future growth.

69

Principles of Corporate governanceIn defining the management structure, organization, and processes of the Clariant Group, the corporate governance principles aim to provide stakeholder value and transparency to promote sustainable long-term success. The Group is committed to Swiss and interna-tional standards of corporate governance and follows the rules set out in the Swiss Code of Best Practice for Corporate Governance and by the SIX Swiss Exchange. The principles and regulations on corporate governance are described in the Swiss Code of Obliga-tions, the Articles of Association of Clariant Ltd, the Organizational Group Regulations of the Clariant Group, and the Clariant Code of Conduct. The Board of Directors adapts these documents regularly. The Articles of Association, Organizational Group Regulations of the Board of Directors, and Clariant Code of Conduct can be viewed on the Internet at www.governance.clariant.com.

group structure and shareholders

Group structureThe registered address of Clariant Ltd is Rothausstrasse 61, CH-4132 Muttenz, Switzerland. The company’s business operations are conducted through Clariant Group companies. Clariant Ltd, a holding company organized under Swiss law, directly or indirectly owns all Clariant Group companies worldwide. Except as described below, these companies’ shares are not publicly traded. The important sub-sidiaries of Clariant Ltd are listed in Note 34 of the “Notes to the consolidated financial statements of the Clariant Group” (pages 154 to 157). The Group conducts its business through twelve Business Units: Additives, Catalysis & Energy, Detergents & Intermediates, Emulsions, Functional Materials, Industrial & Consumer Specialties,

Leather Services, Masterbatches, Oil & Mining Services, Paper Spe-cialties, Pigments, and Textile Chemicals. Clariant owns 63.4 per-cent of the publicly traded company Clariant Chemicals (India) Ltd, based in Thane, India, and listed on the Bombay Stock Exchange (ISIN INE492A01029, symbol: CLARICHEM) and the National Stock Exchange of India (symbol: CLNINDIA). The company also owns 75 percent of Clariant (Pakistan) Ltd, based in Karachi, Pakistan, and listed on the Karachi Stock Exchange (ISIN PK007670101). In addi-tion, since the entry made on 1 December 2011 of the squeeze out accepted at the extraordinary general meeting of Süd-Chemie AG held on 22 November 2011, Clariant Ltd owns 100 percent of Süd-Chemie AG, which was acquired on 21 April 2011 and is based in Munich, Germany.

Significant shareholdings of 3 percent or more of total share capitalAt 31 December 2011 former shareholders of Süd-Chemie AG, who had swapped their shares against Clariant shares, were holding in total 15.127 percent of the share capital of Clariant. These sharehold-ers are affiliated with each other because of family or other reasons (especially the Wamsler, Winterstein, Schweighart, and Stockhausen families). In addition, the following shareholders held a participation of 3 percent or more of the total share capital: Fidelity Management & Research, Boston (United States), 5.23 percent (2010: 5.23 per-cent); Teachers Insurance and Annuity Association of America – Col-lege Retirement Equity Fund (TIAA-CREF), New York (United States), 3.097 percent (2010: < 3 percent); CS Asset Management Funds AG, Zürich (Switzerland), 3.0184 percent (2010: 3.04 percent). No other shareholder was registered as holding 3 percent or more of the total share capital. At 31 December 2010 the following shareholders held a participation of 3 percent or more of the total share capital: AXA, Paris (France), 5.09 percent; Amundi, Paris (France), 3.07 percent. No other shareholder was registered as holding 3 percent or more of the total share capital.

Corporate governance

Clariant is committed to international compliance standards, in order to ensure checks and balances between the Board and Management as well as a sustainable approach to value creation.


These percentage figures are based on information received from the respective shareholders.

Transactions notified to the Stock Exchange Disclosure Office pursu-ant to Art. 20 of the Stock Exchange Act can be seen on the SIX Swiss Exchange reporting platform: http://www.six-exchange-regu-lation.com/obligations/disclosure/major_shareholders_en.html

Cross-shareholdingsThere are no cross-shareholdings.

Capital structure

CapitalAs of 31 December 2011, the fully paid nominal share capital of Clariant Ltd totaled CHF 1 183 009 016 and was divided into 295 752 254 registered shares, each with a par value of CHF 4.00. Clariant shares have been listed on the SIX Swiss Exchange since 1995 (symbol CLN, ISIN no. CH0012142631). Clariant Ltd does not issue non-voting equity securities (Genussscheine). Based on the closing price of the Clariant share of CHF 9.27 on 31 December 2011, the company’s market capitalization at year end amounted to CHF 2 742 million.

Conditional capitalThe company’s share capital may be increased by a maximum of CHF 159 995 324 by issue of a corresponding maximum of 39 998 831 reg-istered shares with a par value of CHF 4.00 each. These shares must be paid up in cash, by the exercise of conversion or warrant rights granted to their holders in connection with bonds of the company or one of its subsidiaries. The details are set out in Article 5b of the Ar-ticles of Association. You can find the Articles of Association on our website at www.governance.clariant.com. On 31 December 2011, of these 39 998 831 shares, 35 086 549 are allocated to a CHF 300 million senior unsecured convertible bond issued on 2 July 2009, of which 1 169 shares were issued during 2011 upon a single exercise of the conversion right. The convertible bond maturing on 7 July 2014 has a conversion price of CHF 8.55 and a coupon of 3 percent per annum payable semi-annually in arrears.

Changes in capitalIn calendar year 2011 the share capital was increased by CHF 262 364 340 through a capital increase approved on 31 March 2011. A total of 65 591 085 new registered shares with a par value of CHF 4.00 each were issued, and a further 1 169 shares were created by a single exercise of the conversion right of the CHF 300 million con-vertible bond. A table with additional information on changes to the share capital can be found on page 126 (Note 15) of this Annual Report.

Transferability of sharesTransfer of registered shares requires the approval of the Board of Directors, which may delegate this function. Approval is granted if the acquirer discloses his/her identity and confirms that the shares have been acquired in his/her own name and for his/her own ac-count.

Nominee registration and voting rightsEach registered share entitles the holder to one vote at Annual Gen-eral Meetings. Voting rights at Clariant are limited to 10 percent of the share capital in accordance with Article 12, paragraph 1 of the Articles of Association. Special rules apply to nominees who fail to disclose the identity of the persons they represent and whose share-holding exceeds 2 percent.

Convertible bonds and optionsIn 2009, Clariant issued a convertible bond with a principal amount of CHF 300 million. After the Clariant option program for employees was discontinued for financial reasons in 2009, options were once again issued in 2010 and 2011. Details of the option program can be found on page 149 (Note 29, “Employee Participation Plans”).

Further information on the Clariant share can be found on page 29 of this Annual Report.

the board of DirectorsThe Board of Directors of Clariant Ltd comprises at least six and no more than twelve members. At the 16th Annual General Meet-ing held in Basel on 27 March 2011, the following individuals were

71CorPorate governanCe

Hariolf Kottmann (CEO)

reelected to the Board of Directors: Peter Isler, Rudolf Wehrli, Jürg Witmer, Hariolf Kottmann, Dominik Koechlin, and Carlo G. Soave. Dolf Stockhausen, Konstantin Winterstein, and Günter von Au were elected as new members of the Board of Directors. The term of office of each member elected is three years.

Members of the Board of Directors

Jürg Witmer, Swiss citizenFunction at Clariant: Chairman, non-executive member of the Board of Directors.

Professional career: Jürg Witmer currently serves as Chairman of the Board of Directors of Givaudan S.A. and Vice Chairman of the Board of Directors of Syngenta AG. From 1999 to 2005 he was CEO of the Givaudan Group. Prior to that, he held various senior management positions at Roche from 1978 to 1999, including General Manager of Roche Austria, Head of Corporate Communications and Public Af-fairs at Roche headquarters in Basel, Regional General Manager of Roche Far East in Hong Kong, and Assistant to the Chairman of the Board of Directors and CEO of the Roche Group. He has been Chair-man of Clariant Ltd since 2008.

Jürg Witmer has a doctorate in law from the University of Zurich and a degree in international studies from the University of Geneva.

Other activities: Board of Directors/Supervisory Board mandates: Givaudan S.A., Vernier/Geneva (Chairman); Syngenta AG, Basel (Vice Chairman). Activities on behalf of companies and representative functions: None.

Rudolf Wehrli, Swiss citizenFunction at Clariant: Vice Chairman, non-executive member of the Board of Directors.

Professional career: Following studies at the Universities of Zurich and Basel, where he earned doctorates in theology, philosophy, and German literature, Rudolf Wehrli began his career at McKinsey & Co in 1979. In 1984 he joined the Schweizerische Kreditanstalt (now Credit Suisse) as a member of the company’s Senior Manage-ment. In 1986 he became Marketing Manager and member of the

Executive Committee of the Silent Gliss Group. Five years later he took over the management of the Group’s German subsidiary. In 1995 he transferred to the Gurit-Heberlein Group as a member of the Ex-ecutive Committee and was promoted to Chief Operating Officer in 1998 and Chief Executive Officer in 2000. He remained in this posi-tion until the company split up in 2006. He has been Vice Chairman of Clariant Ltd since 2008.

Other activities: Board of Directors/Supervisory Board mandates: Berner Kantonalbank, Precious Woods AG; Kambly AG; Rheinische Kunststoff-Werke SE; Chairman of the Board of Directors of Sefar Holding AG. Activities on behalf of companies and representative functions: Member of the Executive Committee of economic umbrella organi-zation economiesuisse; member of the Board of Trustees of Avenir Suisse.

Hariolf Kottmann, German citizenFunction at Clariant: Chief Executive Officer (CEO) and executive member of the Board of Directors.

Professional career: Hariolf Kottmann earned his PhD in organic chemistry at the University of Stuttgart in 1984. In 1985 he launched his career at the former Hoechst AG in Frankfurt, where he held several key management positions across the company’s chemical divisions and functions. In 1996 he was appointed Deputy Head of the Basic Chemicals Division at Hoechst AG and took over respon-sibility for the Inorganic Chemicals BU. In 1998 he joined Celanese Ltd in New Jersey (United States) as a member of the Executive Committee and Head of the Organic Chemicals BU. In April 2001 he was appointed as a member of the Executive Committee of SGL Carbon AG, where he was responsible for the Advanced Materials Division and the Eastern Europe and Asia regions until 30 September 2008. He was also in charge of the SGL Excellence and Technol-ogy & Innovation corporate functions. He became CEO of Clariant on 1 October 2008.

Other activities: Board of Directors/Supervisory Board mandates: Plansee AG.Activities on behalf of companies and representative functions: Member of the Executive Committee of scienceindustries. Since 30 September 2011, member of the Board of CEFIC (European Chemical Industry Council).

Jürg Witmer (Chairman)Members of the Board of Directors:


Prof. Peter Chen, US citizenFunction at Clariant: Non-executive member of the Board of Direc-tors.

Professional career: Peter Chen studied chemistry at the University of Chicago and in 1987 received a doctorate from Yale University in New Haven, Connecticut. He then served as an assistant profes-sor (1988 to 1991) and as an associate professor (1991 to 1994) at Harvard University in Cambridge, Massachusetts. Since September 1994 he has been a full Professor of Physical-Organic Chemistry at ETH Zurich. From 2007 to 2009 he was Vice President of Research at ETH Zurich.

Other activities: Board of Directors/Supervisory Board mandates: None. Activities on behalf of companies and representative functions: Con-sultant at Givaudan; Gesellschaft zur Förderung von For schung und Ausbildung im Bereich der Chemie (Zurich); Member of the National Research Council of the Swiss National Science Foundation; Direc-tor of The Branco Weiss Fellowship.

Peter R. Isler, Swiss citizenFunction at Clariant: Non-executive member of the Board of Direc-tors.

Professional career: Peter R. Isler studied law at the University of Zurich, completing his studies with a doctorate. He then attended a masters program at Harvard Law School. From 1974 onward he worked for two Swiss law firms and in 1981 became a partner at the Zurich law firm Niederer Kraft & Frey AG. He has been a lecturer in corporate and commercial law at the University of Zurich since 1978 and a member of the Anwaltsprüfungskommission (bar examination commission) of the Canton of Zurich since 1984.

Other activities: Board of Directors mandates: Clariden Leu AG, Zurich; Clariden Leu Holding AG, Zurich; Schulthess Group AG, Bubikon; and other smaller companies. Activities on behalf of companies and representative functions: Anwaltsprüfungskommission (bar examination commission) of the Canton of Zurich.

Klaus Jenny, Swiss citizenFunction at Clariant: Non-executive member of the Board of Direc-tors.

Professional career: Klaus Jenny studied economics at the Univer-sity of St. Gallen, where he earned a doctorate. He went on to study law at the University of Zurich and later attended the Massachu-setts Institute of Technology (MIT). In 1972 Klaus Jenny joined the Schweizerische Kreditanstalt (now Credit Suisse), where he held various management positions. He was appointed a member of its Executive Board in 1987, and later a member of the Executive Com-mittee, CEO of Credit Suisse Private Banking, and finally a member of the Executive Board of the Credit Suisse Group. Since 1999 Klaus Jenny has been an independent financial consultant for companies and private individuals.

Other activities: Board of Directors/Supervisory Board mandates: Bâloise Holding; Edmond de Rothschild Holding S.A.; Banque Privée Edmond de Rothschild S.A.; Maus Frères S.A.; Téléverbier S.A.; and various foundations and smaller companies. Activities on behalf of companies and representative functions: None.

Dominik Koechlin, Swiss citizenFunction at Clariant: Non-executive member of the Board of Direc-tors.

Professional career: Dominik Koechlin earned his doctorate in law from the University of Berne and holds an MBA from INSEAD in Fontainebleau, France. He started his career in 1986 as a financial analyst at Bank Sarasin. In 1990 he founded Ellipson, a manage-ment consultancy firm. From 1996 to 2000 he was a member of the Executive Committee of Telecom PTT, which later became Swiss-com, where he was responsible for corporate strategy and inter-national operations. Since 2001 he has served as a board member of the listed companies EGL AG, Swissmetal AG, and Plant Health Care. He is Chairman of the Board of Sunrise AG as well as member of the boards of several privately held companies. In addition, he is a member of the University Council of the University of Basel.

Peter R. Isler Klaus JennyPeter ChenRudolf Wehrli (vice Chairman)


Other activities: Board of Directors/Supervisory Board mandates: Member of the Board of Trustees of LGT; member of the Board of Directors of EGL AG and Plant Health Care; Chairman of the Board of Sunrise AG; member of the boards of several privately held com-panies. Activities on behalf of companies and representative functions: Member of the University Council of the University of Basel.

Carlo G. Soave, British citizenFunction at Clariant: Non-executive member of the Board of Direc-tors.

Professional career: Carlo G. Soave studied languages and econom-ics at Heriot-Watt University in Edinburgh, Scotland. He launched his career in 1982 at Oerlikon-Bührle in Switzerland, moving to Procter & Gamble in 1984. There he held various senior management posi-tions, including Vice President of Global Purchasing for the Fabric and Home Care Division. In 2004 he founded Soave & Associates, a consulting company based in Brussels, Belgium. He is a board member of MonoSol LLC, a company incorporated in Delaware (United States) and operating in the state of Indiana (United States).

Other activities: Board of Directors/Supervisory Board mandates: MonoSol LLC, United States. Activities on behalf of companies and representative functions: None.

Dolf Stockhausen, Austrian citizenFunction at Clariant: Non-executive member of the Board of Direc-tors.

Professional career: Dolf Stockhausen studied business, economics, and law at the Universities of Freiburg and Münster, before gaining his doctorate in economics from the University of Münster. He began his career at Bayer AG and a number of its foreign subsidiaries. He then held various positions at Chemische Fabrik Stockhausen GmbH

in Krefeld, Germany, where he was ultimately Managing Director and CEO. From 1996 to 2011 he was member of the Supervisory Board of Süd-Chemie and most recently Vice Chairman of the Su-pervisory Board. He is also Chairman of the Management Commit-tee of EAT GmbH and until mid-February 2012 he was CEO of Dr. Dolf Stockhausen Beteiligungsgesellschaft mbH (as of 22 December 2011 “Dr. Dolf Stockhausen Beteiligungs s.à.r.l.“).

Other activities: Board of Directors/Supervisory Board mandates: None.

Günter von Au1, German citizenFunction at Clariant: Non-executive member of the Board of Direc-tors.

After studying textile and polymer chemistry at Reutlingen Univer-sity and chemistry at the University of Tübingen, where he obtained a doctorate, Günter von Au began his career in 1980 in Burghausen at Wacker-Chemie AG. He held a number of different management positions at the company through 2001 in Germany, Brazil, and the United States – most recently as Head of Wacker’s division for poly-mers, specialty chemistry, and basic chemistry in Munich. He was also CEO of Wacker Polymer Systems GmbH & Co. KG in Burghau-sen, Germany. He joined Süd-Chemie in 2001 as President and CEO of Süd-Chemie Inc. In early 2004 Günter von Au was appointed mem-ber of the Management Board of Süd-Chemie AG in Munich, and in 2004 he became CEO, a position he will be holding until 31 March 2012.

Other activities: member of the Supervisory Board of E.ON Bayern AG; member of the Advisory Committee of Gebr. Röchling KG; Chair-man of the Board of Directors of the local Bavarian section of the German Chemical Industry Association, Munich; member of the Senate of the Fraunhofer Society, Munich; member of the Board of Directors and Vice-President of the Cologne Institute of Economic Research.

Dominik Koechlin Dolf StockhausenCarlo G. Soave Günter von Au

1 Günter von Au was elected to the Board of Directors at the 16th Annual General Meeting of Clariant Ltd. Assumption of his position as Director was subject to the condition that he resign as CEO of Süd-Chemie AG. Mr. von Au will resign from his position at Süd-Chemie AG on 31 March 2012 and take his seat on the Board of Directors of Clariant Ltd on 1 April 2012.


Konstantin Winterstein, German citizenFunction at Clariant: Non-executive member of the Board of Direc-tors.

Professional career: Konstantin Winterstein studied at the Technical Universities in Darmstadt and Berlin, where he completed a degree in production engineering. Since 1997 he has held various positions with the BMW Group, where he is currently Project Manager in the Supply Chain Division. In 2004 he received his MBA from INSEAD in Fontainebleau and Singapore. From 2006 to 2011 he served on the Supervisory Board of Süd-Chemie AG.

Other activities: Board of Directors/Supervisory Board mandates: None.

Cross-involvementThere are no cross-involvements.

Elections and terms of officeThe members of the Board of Directors are elected for terms of three years maximum. There are no Board members standing for reelec-tion at the Annual General Meeting on 27 March 2012.

board of Directors Year of birth First elected Elected until

Peter R. Isler 1946 2004 2014

Klaus Jenny 1942 2005 2012

Peter Chen 1960 2006 2013

Rudolf Wehrli 1949 2007 2014

Jürg Witmer 1948 2007 2014

Hariolf Kottmann 1955 2008 2014

Dominik Koechlin 1959 2008 2014

Carlo G. Soave 1960 2008 2014

Dolf Stockhausen 1945 2011 2014

Konstantin Winterstein 1969 2011 2014

Günter von Au1 1951 2011 2014

1 Günter von Au was elected to the Board of Directors at the 16th Annual General Meeting of Clariant Ltd. Assumption of his position as Director was subject to the condition that he resign as CEO of Süd-Chemie AG. Mr. von Au will resign from his position at Süd-Chemie AG on 31 March 2012 and take his seat on the Board of Directors of Clariant Ltd on 1 April 2012.

Internal organizational structure

The Board of Directors and its committeesThe Board of Directors consists of the Chairman, one or more Vice Chairmen, and the other members. No non-executive member of the Board of Directors held a senior management position at Clariant Ltd or any Clariant Group company between 2008 and 2011 or has any significant business relationship with Clariant Ltd or any other Clariant Group company. In accordance with the Articles of Asso-ciation, the number of members must be at least six and no more than twelve. The members of the Board of Directors constitute the following committees:› Chairman’s Committee› Compensation Committee› Audit Committee› Technology and Innovation Committee

boaRD oF DIReCtoRS – CoMMIttee ReSPonSIbILItIeS

Director Chairman’s Committee

Audit Committee

Compen-sation Committee

Technology and Innovation Committee

Jürg Witmer

Rudolf Wehrli

Peter Chen

Peter R. Isler

Klaus Jenny

Dominik Koechlin

Hariolf Kottmann

Carlo G. Soave

Dolf Stockhausen

Konstantin Winterstein

Chairman

Member

Konstantin Winterstein


The board of Directors appoints the Chairman, Vice Chairman/Chairmen, and members of the committees. The Board of Directors meets at least once a quarter. At the invitation of the Chairman, the CEO, CFO, and other members of the Executive Committee and/or other employees and third parties regularly attend the meetings of the Board of Directors for the purpose of reporting or imparting information. Each committee has a written charter outlining its du-ties and responsibilities. The committees’ charters are published on Clariant’s website (www.clariant.com/committees). The committees report on their activities and results to the Board of Directors. They prepare the business of the Board of Directors in their respective areas.

The Chairman’s Committee (CC) comprises the Chairman, the Vice Chairman, and a third member of the Board of Directors. The Committee prepares the meetings of the Board of Directors. The CC meets as needed and generally before each meeting of the Board of Directors. It makes decisions on financial and other matters delegat-ed by the Board of Directors in accordance with the Bylaws of the Board of Directors. In addition, the CC passes resolutions for which the Board of Directors is responsible when matters cannot be post-poned. The CC draws up principles for the selection of candidates for election and reelection to the Board of Directors and for the office of CEO, and prepares the corresponding recommendations. Further, the CC considers and submits to the Board of Directors the CEO’s proposals concerning candidates for Executive Committee positions.www.clariant.com/committees

The Compensation Committee (CoC) comprises three members of the Board of Directors. Its Chairman must be an independent, non-executive member of the Board of Directors. The CoC meets at least twice a year. It draws up the principles for compensation of members of the Board of Directors and submits them to the Board of Directors for approval. It also approves the employment contracts for the CEO and members of the Executive Committee. The CoC reviews bonus and share plans. Furthermore, the Committee reviews fringe benefit regulations, dismissal regulations, and contractual severance com-pensation packages with the CEO, members of the Executive Com-mittee, Heads of Global Functions, and Regional Presidents.www.clariant.com/committees

The audit Committee (AC) comprises four members of the Board of Directors. The Chairman must be an independent, non-executive member of the Board of Directors. A majority of the members of the AC must have financial and accounting experience. The AC reviews the activities of the external auditors, their collaboration with the internal auditors, and their organizational adequacy. It also reviews the performance, compensation, and independence of the external auditors as well as the performance of the internal auditors and re-ports back to the Board of Directors. Furthermore, the AC reviews the company’s internal control and risk management systems and reviews compliance with the law and internal regulations – in par-ticular, with the Code of Conduct. In collaboration with the Group’s external and internal auditors and financial and accounting man-agement, the AC reviews the appropriateness, effectiveness, and the compliance of accounting policies and financial controls with applicable accounting standards. The AC meets at least six times a year. The Committee reviews and recommends the Group’s financial statements for the first three quarters of each year and the release of the annual financial results to the Board of Directors for approval.www.clariant.com/committees

boaRD oF DIReCtoRS – CoMMItteeS

Number of meetings Duration/h CEO/CFO Other attendees

Board of Directors 11 6 – 8 yes Executive Committee

Chairman’s Committee 4 4 – 8 yes

Audit Committee 7 3 – 4 CFO Auditors, Risk Management, and General Counsel

Compensation Committee 3 2 – 3 no Head of Group Human Resources

Technology and Innovation Committee 2 3 CEO Head of Technology


The technology and Innovation Committee (TIC) comprises four members of the Board of Directors with experience in research, inno-vation management, and technology. The TIC usually meets at least twice a year. The tasks of the TIC include assessing the company’s innovative activities on behalf of the Board of Directors. The TIC also reviews measures to stimulate research and development and op-timize innovative potential, and submits appropriate recommenda-tions to the Board of Directors.www.clariant.com/committees

Definition of areas of responsibilityIn accordance with the law and the Articles of Association, the Board of Directors is the ultimate decision-making authority for Clariant Ltd in all matters except those decisions reserved by law or the Articles of Association for the shareholders. The Board of Direc-tors has sole authority, in particular for the following, in accordance with and supplementary to Article 716a of the Swiss Code of Obliga-tions (non-transferable and inalienable duties of the Board of Direc-tors) and Article 23 of the Articles of Association (www.governance. clariant.com):› Providing the strategic direction of the Group;› Approving the basic outline of the Group’s organization and its cor-

porate governance;› Supervising the overall business operations;› Evaluating the performance of the CEO and members of the Execu-

tive Committee;› Appointing and dismissing the CEO and members of the Executive

Committee, the Head of Internal Audit, and other key executives;› Approving the basic accounting system and financial planning and

control;› Approving the Group’s annual budget;› Reviewing and approving the quarterly financial statements and

results release for Clariant Ltd and the Group;› Approving the Group’s consolidated financial statements for issue

at the end of the fiscal year;› Approving major M&A transactions and financial transactions of

considerable scope or those involving special risks, in particular

capital market transactions and other financing transactions (e.g. large loans) as well as changes in conditions associated therewith;

› Ensuring a management and corporate culture that is appropriate for the company’s objectives;

› Ensuring an internal control system and adequate risk and compli-ance management, in particular on financial, corporate governance and citizenship, personnel, and environmental protection matters;

› Ensuring succession planning and management development;› Convening the Annual General Meeting (AGM), determining the

items on the agenda and the proposals to be made to the AGM, and approving the Annual Report including the annual financial state-ments of Clariant Ltd and the consolidated financial statements of the Group.

Working methodsIn 2011 the Board of Directors held seven meetings in person at the Corporate Center in Pratteln or at other locations, mainly in Switzer-land. It also held four meetings by phone. The company’s strategy is reviewed and further developed once a year during a two-day meet-ing. Members of the Executive Committee are invited to attend the meetings of the Board of Directors. For the October meeting, the Board of Directors visited the Gebze site in Istanbul, Turkey. On this occasion the Board also met with the local management team. The views of external and internal consultants are heard, if necessary, in the case of projects of considerable scope.

Management of the GroupThe Board of Directors has delegated the executive management of the Clariant Group to the CEO and the other members of the Execu-tive Committee. The Executive Committee is mainly responsible for implementing and monitoring Group strategy, for the financial and operational management of the Group, and for the efficiency of the Group’s structure and organization. The members of the Executive Committee are appointed by the Board of Directors on the recom-mendation of the Chairman’s Committee. Subject to the responsibil-ity of the Board of Directors and the Annual General Meeting, the CEO and, under his supervision, the Executive Committee is respon-sible for:


› Drawing up strategic plans and policies for approval by the Board of Directors;

› Implementing Group strategies and policies as well as strategies and action programs for individual Business Units and subsidiaries;

› Managing the Business Units and functions to ensure efficient op-erations including regularly assessing the achievement of goals;

› Regularly informing the Board of Directors and its committees of all matters of fundamental significance to the Group and its busi-nesses;

› Ensuring compliance with legal requirements and internal regula-tions;

› Establishing a management and corporate culture in line with the company’s objectives;

› Promoting an active internal and external communications policy;› Appointing and dismissing senior management, including appropri-

ate succession planning.

The Executive Committee is supported by a Corporate Center that defines Group-wide policies and guidelines. The twelve Business Units are the highest-level operating units within the Group. They have global responsibility for the activities assigned to them, in particular, sales, marketing, product management, and production. The Business Units also have global responsibility for short- and long-term revenue and earnings generated from the operations and assets assigned to them. This includes fully exploiting existing busi-ness potential, identifying new business opportunities, and pursuing the active management of their products and services portfolio. The Business Units’ activities are complemented and supported by global Group functions (e.g., Procurement, Finance, Information Technology, Legal, Human Resources, and Group Technology Services), which are organized as service centers.

Information and control instruments vis-à-vis the Executive CommitteeThe Board of Directors ensures that it receives sufficient informa-tion from the Executive Committee to perform its supervisory duties and make decisions that are reserved for the Board of Directors. The Board of Directors obtains the information required to perform its duties in various ways:› The CEO and the CFO inform all directors regularly about current

developments, including via the regular submission of written reports such as key performance indicators for each business;

› The minutes of committee meetings are made available to the directors;

› Informal meetings and teleconferences are held as required between the CEO and the members of the Chairman’s Committee;

› The members of the Executive Committee are invited to attend meetings of the Board of Directors to report on areas of business under their responsibility;

› Directors are entitled to request information from members of the Executive Committee or any other Clariant senior manager.

Board committeesThe Chairman’s Committee meets regularly with members of the Executive Committee and other members of senior management to review the business, better understand applicable laws and policies affecting the Group, and support the Executive Committee in meet-ing the requirements and expectations of stakeholders. The Tech-nology and Innovation Committee invites members of the Executive Committee and members of senior management as necessary to discuss selected aspects of innovative activities. The CFO and rep-resentatives of the external auditor are invited to Audit Committee meetings. Furthermore, the Heads of Internal Audit and Risk Man-agement and Clariant’s General Counsel report on a regular basis to the Audit Committee. The Audit Committee reviews the financial reporting processes on behalf of the Board of Directors. For each quarterly and annual release of financial information, an internal team reviews the release for accuracy and completeness of disclo-sures and reports to the Audit Committee before publication. The Compensation Committee generally meets three times per year to adjust the development of the compensation structures to changing


conditions, as necessary. In this context, the long-term incentive pro-gram for the Executive Committee and the senior management team is also aligned with current market and business developments and corresponding adjustments made, as required.

Internal auditInternal Audit carries out operational and system audits in accor-dance with an audit plan adopted by the Audit Committee and as-sists organizational units in the accomplishment of objectives by providing an independent approach to the evaluation, improvement, and effectiveness of the internal control framework. Internal Audit also prepares reports on the audits it has performed and reports actual or suspected irregularities to the Audit Committee and the Chairman of the Board of Directors. The Audit Committee regularly reviews the scope, plans, and results of Internal Audit. The Group pursues a risk-oriented approach to auditing and coordinates inter-nal audit activities with the external auditors on a regular basis. Detailed information on Clariant’s risk management system can be found on page 82 of this report.

the executive CommitteeThe Executive Committee consists of the CEO, the CFO, and three members. The Executive Committee regularly holds meetings at the Corporate Center in Pratteln or at other Clariant sites worldwide. It uses such external meetings to discuss business performance with the management of the local companies in person.

Members of the Executive CommitteeAt the end of 2011 the Executive Committee comprised the following members:

Hariolf Kottmann, German citizenChief Executive Officer (CEO)Hariolf Kottmann earned his PhD in organic chemistry at the Univer-sity of Stuttgart in 1984. In 1985 he launched his career at the former Hoechst AG in Frankfurt, where he held several key management positions across the company’s chemical divisions and functions. In 1996 he was appointed Deputy Head of the Basic Chemicals Division at Hoechst AG and took responsibility for the Inorganic Chemicals BU. In 1998 he joined Celanese Ltd in New Jersey (United States) as a member of the Executive Committee and Head of the Organic Chemicals BU. In April 2001 he was appointed as a member of the Executive Committee of SGL Carbon AG, where he was responsible for the Advanced Materials Division and the Eastern Europe and Asia regions until 30 September 2008. He was also in charge of the SGL Excellence and Technology & Innovation corporate functions. He became CEO of Clariant on 1 October 2008.

Patrick Jany, German citizenChief Financial Officer (CFO)Patrick Jany is an economist and has been Chief Financial Officer at Clariant since 1 January 2006. In 1990 he joined Sandoz, one of Clariant’s predecessor companies. He held various positions in financial and controlling at Sandoz and Clariant, including Chief Financial Officer for the ASEAN region and Head of Controlling for the Pigments & Additives Division. From 2003 to 2004 he was Head of Country Organization for Clariant in Mexico. Prior to his appoint-ment as CFO, he was Clariant’s Head of Corporate Development with responsibility for Group strategy and mergers and acquisitions.

Christian Kohlpaintner, German citizenChristian Kohlpaintner studied chemistry at the Technical University of Munich and completed his PhD in 1992. Between 1993 and 1997 he worked in various research departments of Hoechst AG in Ger-many and the United States. In 1997 he joined Celanese Ltd and


held a number of leadership roles at Celanese Chemicals Corpora-tion. In 2002 he became Vice President Innovation of Celanese Ltd and Executive Director of Celanese Ventures Corporation. From 2003 he was a member of the Executive Committee of Chemische Fabrik Budenheim. In 2005 he became CEO. On 1 October 2009, he was ap-pointed a member of the Executive Committee of Clariant.

Mathias Lütgendorf, German citizenMathias Lütgendorf studied chemistry at RWTH in Aachen, Ger-many, and earned his doctorate in 1984. In the same year, he joined the Research and Development department of the Fine Chemicals and Dyes Division of Hoechst AG. From 1990 he was responsible for various, mainly operational fields at Hoechst AG. From 1995 until 2008 he worked at DyStar, the textile dyes joint venture of Bayer and Hoechst. BASF also integrated its textile dyes business into Dystar in 2000, becoming the third equal partner in the venture. Mathias Lüt-gendorf led the global operations of the Disperse Dyes Business Unit and later also the Special Dyes Business Unit. From 2000 he was responsible for purchasing, production, and supply chain manage-ment at the company as Head of Global Operations. In 2004 he was appointed member of the management board. On 1 April 2009, he was appointed a member of the Executive Committee of Clariant.

Hans-Joachim Müller, German citizenAfter studying chemistry and obtaining his doctorate from the Ludwig-Maximilians-University, Munich, and holding a research fellowship at the University of California in Los Angeles (UCLA), Hans-Joachim Müller began his professional career at BASF AG in Ludwigshafen, Germany, as team leader research in product and catalyst development. After development of the hydrogenation tech-nologies area, he transferred in 1996 to Hong Kong, where he took over responsibility for the catalyst business for the Asia/Pacific re-gion. In 2001 he joined Süd-Chemie AG in Munich, where he headed up the Global Business Unit Catalytic Technologies, and in 2007 he was appointed to that company’s management board. In mid-2011 he also took over the international adsorbents business (Functional Materials BU) in addition to the catalytic technologies business (Ca-

talysis & Energy BU) and was thus in charge of all operations of the Süd-Chemie Group. He has been a member of Clariant’s Executive Committee since 1 July 2011.

Other activities and functionsThe members of the Executive Committee neither undertake other activities nor hold consultancy functions or other offices.

Management contracts with third partiesThere are no management contracts with third parties.

Contractual arrangements for members of the Executive CommitteeAll members of the Executive Committee hold employment contracts with Clariant International Ltd, the Clariant Group’s management company. The contractual provisions are governed exclusively by Swiss law. Contracts of the members of the Executive Committee are subject to a standard notice period of 12 months. This notice period is part of a detailed and exhaustive list of requirements as-sociated with severance. Specific change of control agreements are in place with the CEO and with members of the Executive Commit-tee. If Clariant were to serve notice on the CEO or a member of the Executive Committee under a change of ownership, the contractually extended notice period would be 18 months.

Compensation, shareholdings, and loansPlease refer to the Compensation Report and Note 11 to the Finan-cial Statements of Clariant Ltd.

Shareholders’ participation rightsEach registered share entitles the holder to one vote at the Annual General Meeting. Shareholders have the right to receive dividends and such other rights as are granted by the Swiss Code of Obliga-tions. However, only shareholders entered in the Clariant share reg-ister may exercise their voting rights.


voting rights and representationA registered shareholder may be represented at the Annual General Meeting by another shareholder with the right to vote, a legal rep-resentative, a representative of one of Clariant’s governing bodies (Organvertreter), an independent proxy (unabhängiger Stimmrechts-vertreter), or a custodian (Depotvertreter). The shares held by any one shareholder may be represented by only one representative. Voting rights at Clariant are limited to 10 percent of the share capital in accordance with Article 12, paragraph 1 of the Articles of Asso-ciation (www.governance.clariant.com). There are no special rules for waiving any voting rights restrictions laid down in the Articles of Association. The Articles of Association do not contain any rules on participation in the Annual General Meeting that differ from the standard terms proposed by law.

Statutory quorumsThe quorums laid down in the Articles of Association correspond to Article 704 of the Swiss Code of Obligations.

Convocation of the Annual General MeetingThe Articles of Association do not contain any rules that differ from the standard terms proposed by law.

Proposal of agenda items for the 2013 Annual General MeetingThe Articles of Association do not contain any rules that differ from the standard terms proposed by law. Shareholders representing shares with a total par value of CHF 1 million have the right to submit requests that an item be included on the agenda, in writing, at least 45 days prior to the Annual General Meeting. With regard to the business year 2012, items to be included on the agenda for the 18th Annual General Meeting on 26 March 2013 must be submitted not later than 9 February 2013. Such requests must specify the item(s) to be included on the agenda and must contain a proposal on which the shareholder requests a vote.

Entries in the share registerThere are no statutory rules concerning deadlines for entry in the share register. However, for practical reasons, the share register will be closed to entries several days before a shareholder meeting. With regard to the business year 2012, this applies as of Thursday,

21 March 2013. Shareholders who have been entered in the share register by Wednesday, 20 March 2013, may exercise their right to vote at the Annual General Meeting on Tuesday, 26 March 2013. There are no voting rights restrictions except those mentioned above.

Change of control and defense measuresThe limit, beyond which the duty to make an offer applies, is the same as the statutory minimum, 33 percent. There are no clauses on changes of control (except for the specific agreements for the CEO and the members of the Executive Committee, see page 80).

Information policyNotice are published in accordance with Article 29 of the Articles of Association, in the Swiss Official Gazette of Commerce, and in daily newspapers specified by the Board of Directors (Basler Zei-tung, Neue Zürcher Zeitung). Clariant releases its annual financial results in the form of an annual report. In addition, detailed busi-ness figures for the first, second, and third quarters are published in April/May, July/August, and October/November, respectively. The Annual Report and quarterly results are published in printed and electronic form and announced in a media conference. Current pub-lication dates can be found online in English on our website (www.clariant.com/media). All information and documents pertaining to media conferences, investor updates, and presentations at analyst and investor conferences can be obtained online (www.clariant.com) or from the following contact address:

Clariant International Ltd, Investor Relations, Hardstrasse 61, CH-4133 Pratteln, [email protected], tel. +41 61 469 67 66, fax +41 61 469 67 67.

Weblinks:

Clariant website:www.clariant.com

E-mail distribution list (push system):www.clariant.com/investors/services/subscription


Ad-hoc messages (pull system):www.clariant.com/investors/publications/mediareleases

Financial reports:www.clariant.com/investors/publications

Corporate calendar:www.clariant.com/investors/calendar

auditors

Duration of the mandate and term of office of the lead auditorPricewaterhouseCoopers (PwC) has held the mandate since Clariant Ltd was established in 1995. The principle of rotation applies to the lead auditor, Dr. Daniel Suter, who was appointed in March 2011. The Audit Committee ensures that the position of lead auditor is changed at least every seven years.

Auditing feesPwC received a fee of CHF 5.1 million for auditing the 2011 financial statements (2010: CHF 5.9 million).

Additional feesPwC received a total fee of CHF 4.2 million for additional services (2010: CHF 3.7 million). These services comprise audit-related ser-vices mainly with respect to accounting advice in the amount of CHF 0.6 million, tax services of CHF 2.9 million, and other services of CHF 0.7 million.

Supervisory and control instruments vis-à-vis the auditorsThe Audit Committee of the Board of Directors is responsible for overseeing and evaluating the performance of the external auditors on behalf of the Board of Directors and recommends to the Board of Directors whether PwC should be proposed to the Annual Gen-eral Meeting for reelection. Criteria applied for the performance

assessment of PwC include technical and operational competence, independent and objective view, employment of sufficient resources, focus on areas of significant risk to Clariant, ability to provide effec-tive and practical recommendations, and open and effective com-munication and coordination with the Audit Committee, Corporate Auditing, and management. In 2011 seven joint meetings were held with the external auditor’s representatives. These meetings lasted three to four hours on average and were in general attended by all members of the Audit Committee, the partner and senior manager of the audit firm, Clariant’s CFO and one additional member of the Exec-utive Committee, the Group Accountant, the Head of Internal Audit, and the General Counsel. Depending on the topics to be discussed, the meetings were also attended by the Group Risk Manager. The auditors communicate audit plans and findings to the Audit Commit-tee and issue reports to the Board of Directors in accordance with Article 728b of the Swiss Code of Obligations. The Audit Commit-tee’s approval is required for all services provided by PwC exceeding a fee volume of CHF 0.2 million. These services may include audit and audit-related services as well as tax and other services. PwC and the Executive Committee report to the Audit Committee on a regular basis regarding the extent of services provided in conjunc-tion with this approval.

enterprise Risk Management (eRM). Identification, assessment and management. Under the Group Risk Management Policy, based on the risk man-agement standard of the Institute of Risk Managers, a tool is used to prepare risk assessments every year with quarterly updates by Busi-ness Units, Business Services and Regions by assessing threats and opportunities that will impact the objectives set for Clariant overall. These objectives are a result of the overall strategy of the compa-ny as set by the Board of Directors (BoD) and implemented by the Executive Committee (EC).

The Investment Sub-Committee of the Executive Committee is re-sponsible for monitoring the risk management assessments for rel-evance and consistency.


Objective setting is finalized during the last quarter of the year. These objectives together with the threats and opportunities to these objectives are subject to scrutiny by the Executive Committee (EC) during meetings with each Business Unit (BU). Also reviewed and discussed are the measures proposed to maximize opportunities and reduce or contain threats.

The Group and the regions are also required to make risk assess-ments on the same criteria. All BU’s, functions, and business ser-vices are required to report significant changes to existing identified risks and new threats and opportunities as they arise.

Risk Registers are maintained using financial, operational, reputa-tional, and likelihood assessments to score and rank all identified risks. The assessment also addresses the measures in place to man-age the risk identified with dates for completion of the measures. Effectiveness of the measures is also assessed.

Threats and opportunities have been identified, quantified, and del-egated to responsible named individuals being required to deliver effective risk management. The nature of the risk classification re-quires different skills to be applied to risk management. The assess-ments are shared between the different BU’s, services, and individu-als and subject to reassessment on a quarterly basis.

Consolidated risk assessment is presented to the Audit Committee and Board of Directors. There is a process for accelerated reporting of new or changed risks.

Summaries of Business Units, regions and services risk assessments are shared within Clariant to deliver the group summary to all key senior managers.

To support functional responsibility, certain functions have access to risk assessments to support them in their roles. Examples are Environmental Safety & Health Affairs (ESHA) to identify key sites for their property risk survey programme, Internal Audit and Group Procurement.

The consolidated risk assessment is benchmarked against published surveys dealing with risk management. Surveys that are industry specific, business wide, and with broad economic coverage are also included in the benchmarking process.

Examples of identified risks included in the Risk Register:

Regulation & Compliance: Clariant is subject to many rules and regulations as well as compliance standards. These include chemi-cal industry, country, government, and customer requirements as well as the European Community’s (EU) Regulations on Registration, Evaluation, Authorisation and Restriction of Chemical substances (REACH) being a significant component. Group Responsible Care is responsible for this risk and certain specific tasks are delegated to HR, Legal, ESHA and Logistics functions.

Sites & Locations: This includes sites, plants, and equipment that are important for the production of Clariant products for sale to cus-tomers. Also addressed are country and culture issues that could create threats and opportunities to business objectives. The objec-tive is to maintain high quality production facilities in key locations. Risk management is delegated to ESHA and Regional Services.

Competitor activity: A number of identified risks including evaluat-ing the merger and acquisition activity that could affect the nature and extent of competition. Clariant is a leading participant in its in-dustrial sectors and each sector is monitored to identify changes and consider and plan to deal the consequences of changes to customers and competitors.


anaïs bialy, technical Marketing Decorative Coatings

innovative, easily dispersible pigments developed by the Pigments Business Unit make it possible to produce colors of greater intensity and brilliance than ever before – like the ones here in the stairwell of the museum of modern art in frankfurt.


85

Compensation frameworkThe purpose of this Compensation Report is to provide a holistic overview of Clariant’s Compensation Concept and Programs in gen-eral. In addition it includes the compensation levels of the Board of Directors and the Executive Committee, therefore some information from the Note 11, pages 165 to 168 of the Financial Statements of Clariant Ltd is repeated here.

1. Members and responsibilities of the Compensation Committee of the Board of DirectorsThe Compensation Committee (CoC) is currently made up of three non-executive members of the Board of Directors: Rudolf Wehrli (Chairman), Jürg Witmer and Klaus Jenny. The Secretary to the CoC is the Head of Corporate Human Resources. The Chair of the CoC may invite the CEO to discussions on individual agenda items, taking into account potential conflicts of interest which would oblige him to abstain.

The CoC establishes principles for compensation of members of the Board of Directors and submits them to the Board of Directors for approval. The Committee approves the employment contracts with the CEO and members of the Executive Committee (EC). Also, the Committee takes note of employment contracts for Heads of Global

Functions, Global Business Units and Regional Presidents, including the corresponding compensations. All appointments and dismissals that fall within the remit of the Board of Directors are submitted in advance to the CoC which makes, with regard to compensation aspects, a recommendation to the Board of Directors.

The CoC reviews the global bonus, option and share plans, and makes recommendations to the Board of Directors. Furthermore, the Committee reviews fringe benefit regulations, dismissal regulations, and contractual severance compensation with the CEO, members of the EC, Heads of Global Functions, Global Business Units and Re-gional Presidents.

As a rule the CoC holds at least three meetings per year: a) Spring: Discussion regarding the executive bonus plan allocation, determination of bonus payments for members of the EC. b) Summer: Fundamental matters concerning the Group’s HR priori-ties.c) Autumn: Preparation of the Annual Report and planning of com-pensation changes in the following year.

The CoC also meets as needed. In 2011, the CoC met three times and held several bilateral discussions and telephone conferences.

Compensation Report

The compensation philosophy of Clariant aims at promoting and reinforcing the quality and commitment of the employees.


b) The structure of the total remuneration should be highly perfor-mance- and success-oriented in order to ensure that shareholder and management interests are aligned. Success in terms of bo-nus payouts will be measured in general only in relevant financial Group Performance Indicators. Only if Clariant is successful we will share the profit with our employees. Details will be disclosed in chapter 3. Individual Performance will be reflected in the career development and the annual salary reviews. Thus each manager's or employee's performance will be reflected in the yearly discus-sions and will lead in accordance with other factors like e.g. in-ternal and external market conditions to transparent and consis-tent salary decisions. In general we apply a four-eyes-principles, e.g. line manager and next level supervisor as well as guidance through global or local HR processes.

c) The compensation components should be straightforward, trans-parent and focused, so as to guarantee all participants (sharehold-ers, members of the Board of Directors, the CEO, members of the EC and all global Management Levels (MLs)) the highest degree of clarity and objectives orientation.

In order to uphold these principles, the CoC analyzes and discusses market developments at regular intervals and considers the implica-tions of these developments for Clariant.

2. Compensation conceptClariant wishes to be an appealing employer with the ability to at-tract and retain qualified employees and experts throughout the world. In particular, Clariant’s compensation policy for management is based on the following main principles:a) The level of the total compensation should be competitive and

in line with market conditions and enable Clariant to recruit in-ternational, experienced managers and experts, and secure their longstanding commitment to the Group. Our understanding of competitiveness is defined in our Positioning Statement. We are aiming for a corridor between median and upper quartile of Total Compensation in the relevant local markets. Through this ongoing benchmarking, we are able to define local compensation struc-tures e.g. annual paybands, which will be applied as an important factor in all salary decisions. For the update and accuracy of mar-ket conditions we are participating in all major countries in local compensation benchmarks and align all activities through global contracts with Global Compensation Consultants Hay Group and Mercer. Mercer have in addition different other mandates for Clar-iant, e.g. in the Benefits area. In addition we encourage local HR Managers to participate in local compensation networks and Club Benchmarks inside the chemical industry, to ensure the access to relevant market information.

PoSItIonIng StateMent gLobaL Pay-MIx (ReLatIve StRuCtuRe)

benefits The benefits are aligned with local practices and present market practice.

Long-term Incentives (LtI) (only ML 1 – 4)

Investment reflects long-term-commitment and supports our strong dedication to sustainable performance orientation.

Short-term Incentives (StI)

The annual cash bonus targets aim to be more aggressive than the markets.

base Salary (bS) In general, we aim to be at median level in our respective markets and use different sources of compensation surveys (country-oriented, conducted by external consultants, including the relevant peer-companies of the chemical and/or industry area).

% of total compensation

ML4

ML3

ML2

ML1

EC

CEO

0 25 50 75 100

Base Salary Short-term Incentives Long-term Incentives

65

50

43

24

20

26 9

18 32

21 36

29 47

30 50

39 23 38

87ComPenSation rePort

3. Overview of existing bonus plans In the last two years all relevant bonus plans for Short-Term Incen-tives (STI) and Long-Term Incentives (LTI) have been reviewed and redesigned to ensure the transition of Project Clariant and to align with the new business model. The key principles have been to re-duce complexity, increase transparency and ensure an aligned and unified “One Clariant” approach through all employee groups and countries.

The following variable programs are currently in place for Clariant:

3.1. STI: Short-Term-Incentive Plans (Cash bonus)a) Group Management Bonus Plan (GMBP) – started in 2010b) Group Employee Bonus Plan (GEBP) – started in 2010/2011c) Global Sales Incentive Program (G-SIP) – started in 2011

3.2. LTI: Long-Term-Incentive Plans (Equity-Linked Bonus)a) Tradable Option Plan (TOP@Clariant) – started in 2008b) Group Senior Management – Long-Term-Incentive Plan (GSM-

LTIP or Matching Share Plan) – started in 2010

The Performance Cycle of Clariant is based on a 12-month revolv-ing cycle process which starts in November each year with objective discussions focusing on the next business year. Group Performance Indicators (GPI), Top Priorities and related projects are included and will focus the organization. In January, alignment meetings take place with key leaders of the company to cascade GPI objectives and priorities of the new year.

3.1. Short-Term Incentive Plans (Cash bonus)a) the group Management bonus Plan (gMbP) is embedded into the overall performance cycle of Clariant. This cycle ensures through intensive discussions and systematic alignment meetings, a business specific but challenging target agreement for each Busi-ness Unit (BU).

The individual amount of bonus payments generated in a year is de-termined by the achieved result of the Clariant Group against clear objectives. The achievement is measured by three elements: finan-cial result of Group, financial results of Business Units and defined Top Priorities (Group Performance Indicators and strategic projects).

Jan

Feb

Mar

apr

May

JunJul

aug

Sep

oct

nov

Dec

geneRIC PeRFoRManCe CyCLe oF CLaRIant

Business Review

Business Review

Objective Discussion

Alignment Meeting

Strategy Discussion

Business Review

Strategy Review

1Number of positions without Süd-Chemie2ML: Management-Level

bonuS LanDSCaPe

LtIStI

TOP@

Clariant

MatchingShare

GEBP & G-SIP

GMBP eC

ML2 1 –3

ML2 4

ML2 5

Local Managers,

Professionals, employees

~ 600 positions1

~ 15 300 positions1

~ 200 positions1

~ 100 positions1


As Clariant Performance Cycle agreements with each BU lead to business-specific but challenging target settings, and in order to exclude any “windfall profiting” or “hidden buffers”, the maximum bonus payout is explicitly capped at 100 percent (= target). As out-lined in our compensation concept, we aim for a more aggressive pay-mix than the international markets, therefore this 100 percent will ensure an adequate positioning against our competitors. As a consequence of this fixed cap at 100 percent, we increased – where necessary – the cash bonus element in the countries.

The bonus-relevant achievement for 2011:› Group Achievement: 60 percent› BU Achievements: 14 percent to 100 percent› Top Priorities: 60 percent to 100 percentThe corresponding bonus payout ranges between 44 percent and 90 percent.

As a principle only collective/management team-related target achievements can serve as the basis for individual bonus payouts. An employee’s individual performance will be honored in the an-nual review of total compensation and his/her career development. The annual evaluation of the achievement of objectives and alloca-tion of funds for the GMBP are conducted by the CoC in February following the financial year in question, and approved by the Board of Directors. This system ensures that the bonus payments made to em ployees are closely aligned with the Group’s overall result.

b) The cash bonus for non-management-levels: the group em-ployee bonus Plan (gebP) ensures further alignment and stan-dardization to all local bonus plans of legal entities around the world. In general (where legally possible and compliant) all legal entities will apply the global Group Achievement or a combination of Group result (75 percent) and local Top Priorities (25 percent) as the bonus payout.

c) For the Sales Force: The global Sales Incentive Plan (g-SIP) is aiming to establish dedicated and globally aligned lo-cal Sales Incentive Plans (SIPs) for all Sales Representatives, Sales Managers and Key Account Managers with clearly allocated annual sales budget and commercial responsibilities (ML 1 – 4 excluded). The G-SIP focus on the individual sales performance and underlying Key Performance Indicators are in the areas of Sales (40 percent), Margin (40 percent) and Trade Receivables (20 percent). As an exam-ple a Sales Representative will receive tailor-made individual objec-tives for his allocated set of clients, which means a concrete Sales target in local currencies, a “Deal Score” target as an important in-dicator to measure the margin, and Overdues and Receivables as an indicator for Trade Receivables. Each objective has a weighting and can be monitored out of the existing reporting systems. Therefore the direct impact of individual success and payout can be calculated easily. In 2011 the global roll-out was started with approximately 800 employees; Japan and LATAM will follow in 2012. Employees can participate only in one bonus plan (G-SIP or GMBP/GEBP).

gMbP 2011 – thRee PILLaRS to baLanCe bonuS PLan

group achievement

How do we as a company perform with regard to our targets?

+

business achievement What are the business results/contributions of my unit?

+

toP Priorities

Have we acted focused and aligned on our unit priorities?

ROIC 50 % EBIT BEI ROS% 50 % Mandatory Part:1) Improve Gross

Margin 2) Improve Productivity3) Improve NWC

Performance

Operating Cash flow 50 %

Cash flow BU 50 % BUs/Services Part*:4) Foster Clariant

Excellence5) Performance

towards customer6) Enhance EHS system

BUs: 25 %EC/Services: 60 %

BUs: 35 % EC/BUs/Services: 40 %

Measurement Percentage * Example: EC

glossary:ROIC = Return on invested capitalEBIT = Earning before interest and taxBEI = Before exceptional itemsROS % = Return on Sales in %NWC = Net working capitalEHS = Environment, Health, Safety


3.2. Long-Term Incentive Plans (Equity-Linked Bonus)Clariant uses equity-based income components for approximately 300 of its senior managers worldwide (EC and ML 1 – 4).

a) the tradable option Plan (“toP@Clariant”) was introduced in 2008 for all senior managers, to ensure a stronger focus on cre-ating additional shareholder value.

The term of Clariant’s Stock Option Plan is five years and membership is limited to the Executive Committee and selected senior managers of ML 1 – 4 (approximately 1.8 percent of employees). The Board of Directors will be included for the last time in 2011. The option term of five years is divided into a “Vesting Period” (first two years) and an “Exercise Period” (last three years). Eligible participants will receive a fixed number of options in accordance with an expected value point set by the Board of Directors. As a principle the strike price for the options is established by the Board of Directors at a level that is substantially higher than the market value of the Clariant shares at grant (“out of the money options”). Eligibility and endowment will be reviewed each year that the scheme is in operation. For 2011 it was decided in February to grant options for 2011. The strike price was settled at CHF 18 and with a fair value of CHF 4.15. The grant was endorsed on 31 March 2011.

If an employee should voluntarily leave Clariant before the waiting period (2 years) expires, all rights to shares and stock options which have not yet been transferred at this point in time become invalid. In case of retirement, employees will receive an immediate vesting according to the published regulations.

b) group Senior Management – Long-term Incentive Plan (gSM-LtIP) = Matching Share PlanThe Matching Share Plan requires a personal investment decision and fosters the commitment of key managers (approximately 100 positions; EC and ML 1 – 3) for the long-term success of Clariant. Under this plan key managers can invest significant amounts of their compensation into Clariant shares. Thus this plan supports senior managers in meeting their requirement to permanently hold at mini-mum 20 000 up to 100 000 shares (as of the end of calendar year 2013) depending on their management level. To support the invest-ment into Clariant shares 50 percent of their variable pay (out of the GMBP) is guaranteed – as long as they invest into Clariant shares according to the requirements of the Matching Share Plan.

Under the plan eligible senior managers are entitled to receive a cer-tain minimum percentage (minimum investment quota of 20 percent) of their annual cash bonus for the respective bonus year in the form of investment shares. They are additionally entitled to voluntarily in-crease the percentage to be paid in shares to a maximum of 40 per-cent (maximum investment quote). Title and ownership in the shares are transferred at allocation of the investment shares. These invest-ment shares will then be blocked and held in a custody account for a period of three years. At the end of the blocking period, the par-ticipant is entitled to obtain for each investment share an additional share free of charge (Matching Share). This matching is subject to the condition of a continued employment with Clariant throughout the blocking period. In case of termination of employment before the


end of the blocking period, the right for Matching Shares lapses and a cash amount will be paid instead equal to the pro rata temporis portion (considering employment during the blocking period).

The senior managers who do not participate in this plan or do not invest according the plan regulations, will forfeit 50 percent of their annual cash bonus and the eligibility to participate in any Long-Term-Incentive-Programs (including TOP@Clariant).

The decision to implement this plan was made to create a strong and sustainable link between the Clariant business cycle and the value development of the company. Senior managers therefore strengthen the entrepreneurial and value-creating spirit of the Clariant Group.

4. Structure of compensation for members of the Board of DirectorsThe compensation structure for members of the Board of Directors is following the outlined compensation concept and is decided for the performance year 2011.

According to the aforementioned Guidelines the remuneration of members of the Board of Directors is made up of the following com-ponents:a) Annual basic feeb) Committee membership feesc) Option based remuneration

For the Performance Year 2012 the Board of Directors has decided to abandon option based compensation for directors. It will be replaced by the grant of restricted stock to enable the board to participate in the long term value creation of the company.

The following graph illustrates the relative structure of the three components for 2011:

annuaL CoMPenSatIon oF the boaRD oF DIReCtoRS

CHF Chairman

of the Board

Member of the

Chairman's Committee

Member of the

Board of Directors

total

2011

Total

2010

Cash Compensation:

Honorarium* 500 000 250 000 100 000 1 475 000 1 400 000

Committee fee* Chair: 40 000/Member: 20 000 235 000 220 000

Social Contribution: According individual situation

options:

Number of options 60 241 30 120 24 096 216 865 222 400

Value (at grant) 250 000 125 000 100 000 900 000 700 000

* The fees are paid in cash in equal parts in March and September, due to new members starting mid of May 2011, there are pro rata temporis payments included.

ReLatIve StRuCtuRe oF totaL CoMPenSatIon (boaRD oF DIReCtoRS)

% of total compensation

Member of the Board of Directors

Member of the Chairman’s Committee

Chairman of the Board

0 10 20 30 40 50 60 70 80 90 100

Honorarium Committee Fee (activity based – minimum of 20 000 CHF used) Option (value at grant)

5

3

32

32

9 4546

63

65


In order to generate a transparent overview for the performance year, beside the usual IFRS view (allocation of expenses through the vesting period), the full fair values of shares and options granted are also disclosed in the following table.

annuaL CoMPenSatIon – eMoLuMentS to MeMbeRS oF the boaRD oF DIReCtoRS (IFRS)

CHF Jürg

Witmer

Rudolf

Wehrli

Peter

Isler

Peter

Chen

Klaus

Jenny

Dominik

Koechlin

Carlo G.

Soave

Hariolf

Kott-

mann1

Dolf

Stock-

hausen2

Konstantin

Winter-

stein

total

2011

Total

2010

Cash Compensation

Honorarium 500 000 250 000 100 000 100 000 250 000 100 000 100 000 0 37 500 37 500 1 475 000 1 400 000

Committee fee 20 000 40 000 20 000 40 000 60 000 20 000 20 000 0 7 500 7 500 235 000 220 000

Social Contribution 37 878 22 719 8 626 13 640 20 678 9 228 9 228 0 2 884 0 124 881 148 694

options

Number of options 60 241 30 120 24 096 24 096 30 120 24 096 24 096 0 0 0 216 865 222 400

Fair value (IFRS) 194 110 97 228 75 410 75 410 97 228 75 063 75 063 0 0 0 689 513 389 636

total 2011 (Fair

value allocation to

2011 accor. IFRS)

751 988

409 947

204 036

229 050

427 906

204 291

204 291

0

47 884

45 000

2 524 394

total 2010 (Fair

value allocation to

2010 accor. IFRS)

678 563

374 312

175 307

191 566

394 726

168 062

168 062

7 733

na

na

2 158 330

annuaL CoMPenSatIon – eMoLuMentS to MeMbeRS oF the boaRD oF DIReCtoRS (totaL FaIR vaLue at gRant)

CHF Jürg

Witmer

Rudolf

Wehrli

Peter

Isler

Peter

Chen

Klaus

Jenny

Dominik

Koechlin

Carlo G.

Soave

Hariolf

Kott-

mann1

Dolf

Stock-

hausen2

Konstantin

Winter-

stein

total

2011

Total

2010

total 2011 (Total

fair value at grant

date in 2011)

807 878

437 719

228 626

253 640

455 678

229 228

229 228

0

47 884

45 000

2 734 881

total 2010 (Total

fair value at grant

date in 2010)

767 784

416 491

208 971

225 230

436 211

207 283

207 283

0

na

na

2 469 254

1 After taking over the function as CEO, no further Board of Directors compensations are extended. Please refer to the Executive Committee table.2 Due to contractual agreement payout will take place in 2012.


Please find below the information about the actual share and option ownership of the Board of Directors.

The compensation for members of the Board of Directors is subject to the Swiss taxation and social security laws, with Clariant paying the employer contributions which are required. The members of the Board of Directors do not receive any lump-sum reimbursement of

entertainment expenses above and beyond actual expenditure on business trips. For detailed information on the compensation for the Board of Directors refer to Note 11 of the Notes to the Financial Report of Clariant Ltd on pages 165 to 168.

ShaReS heLD by MeMbeRS oF the boaRD oF DIReCtoRS

Number of shares

granted for 2011

Number of shares

granted for 2010

Number of shares

within vesting

period for 2011

Number of shares

within vesting

period for 2010

Number of

privately held

shares for 2011

Number of

privately held

shares for 2010

Jürg Witmer 0 0 0 1 323 137 628 61 305

Rudolf Wehrli 0 0 0 1 323 12 490 7 305

Peter Isler 0 0 0 1 323 29 554 16 908

Peter Chen 0 0 0 1 323 5 931 4 087

Klaus Jenny 0 0 0 1 323 77 019 41 422

Dominik Koechlin 0 0 0 0 11 100 10 100

Carlo G. Soave 0 0 0 0 15 100 15 100

Hariolf Kottmann –1 –1 –1 –1 –1 –1

Dolf Stockhausen 0 na 0 na 11 461 304 na

Konstantin Winterstein 0 na 0 na 5 000 na

total 0 0 0 6 615 11 755 126 156 227

oPtIonS heLD by MeMbeRS oF the boaRD oF DIReCtoRS

Number of options

granted for 2011

Number of options

granted for 2010

Number of options

within vesting

period for 2011

Number of options

within vesting

period for 2010

Number of

privately held

options for 2011

Number of

privately held

options for 2010

Jürg Witmer 60 241 63 500 123 741 63 500 80 000 80 000

Rudolf Wehrli 30 120 31 750 61 870 31 750 40 000 40 000

Peter Isler 24 096 23 850 47 946 23 850 20 000 20 000

Peter Chen 24 096 23 850 47 946 23 850 20 000 20 000

Klaus Jenny 30 120 31 750 61 870 31 750 40 000 40 000

Dominik Koechlin 24 096 23 850 47 946 23 850 20 000 20 000

Carlo G. Soave 24 096 23 850 47 946 23 850 20 000 20 000

Hariolf Kottmann –1 –1 –1 –1 –1 –1

Dolf Stockhausen 0 na 0 na 0 2 na

Konstantin Winterstein 0 na 0 na 0 na

total 216 865 222 400 439 265 222 400 240 000 240 000

1 See EC overview on page 95.2 Ownership of 20 700 options to sell.


5. Compensation of Members of the Executive CommitteeThe CoC regularly reviews the level and structure of the compensa-tion packages for members of the EC. In 2010/2011 we conducted selected market benchmarks regarding the chemical peers for the EC and the Board and enlarged our survey activities for all global positions around the world. In our Individualized Chemical Bench-mark analysis we focused on companies, which are comparable in size and complexity (Global Scope; average turnover: CHF 8 200 mil-lion (ranges between CHF 2 000 – 20 000 million); average number of employees: 17 600 (ranges between 4 000 and 55 000 employees)).

Key focus elements are:a) Comparison of management remuneration packages of European

chemical companies with global scope b) Comparison of management remuneration of Swiss-based multi-

national companies

The bonus amounts of the total compensation packages are paid out in relation to the achieved results for a particular financial year. The actual bonus amounts may vary between zero and target values in the financial year in question.

Base salary & variable remuneration It is important to highlight, that the Executive Committee partici-pates in the same bonus programs as the senior managers. There-fore they participate in the GMBP, TOP@Clariant and the GSM-LTIP.

As an outcome of the benchmarking exercise, the remuneration structure of the EC was adjusted to the following general structure:the CEO receives a Base Salary of CHF 1 000 000 and a Target Cash Bonus of CHF 2 500 000. A member of the Executive Committee re-ceives a Base Salary of CHF 700 000 and a Target Cash Bonus of CHF 1 400 000. These terms have been fixed for 2011 and 2012.

annuaL CoMPenSatIon to the MeMbeRS oF the exeCutIve CoMMIttee

Hariolf Kottmann Others5 total 2011 (CHF)

(fair value

allocation to 2011

accor. IFRS2)

total 2010 (CHF)

(fair value

allocation to 2010

accor. IFRS2)

total 2011 (CHF)

(Total fair value

at grant date

in 2011)

total 2010 (CHF)

(Total fair value

at grant date

in 2010)

base salary 1 000 000 2 450 000 3 450 000 3 100 000 3 450 000 3 100 000

Cash bonus1 1 020 150 2 094 708 3 114 858 4 092 000 3 114 858 4 092 000

Share-based bonus1

Number of investment shares 68 010 123 780 (191 790)

Number of matching shares 68 010 123 780 (191 790)

Number of additional shares2 – 125 000 (125 000)

Total number of shares 136 020 372 560 (508 580) 290 338 (correction

of 287 118)4

(508 580) 290 338 (correction

of 287 118)4

Fair value 1 279 209 2 345 756 3 624 965 3 309 822 (correction

of 3 264 787)4

4 782 133 4 966 277

options

Number of options 120 482 180 723 (301 205) 322 900 (301 205) 322 900

Fair value 412 568 564 750 977 318 461 853 1 250 001 1 017 135

other benefits3 1 490 805 1 424 630 2 915 435 2 636 920 2 915 435 2 636 920

total 5 202 732 8 879 844 14 082 576 13 600 595 (correc -

tion of 13 555 560)4

15 512 427 15 812 332 (correc -

tion of 15 399 561)4

1 Obligation to invest between 20 – 40 % of Cash bonus into shares. Assumptions: Share price at grant = 10 CHF (not fixed yet, final share price will be fixed in April 2012 and therefore the numbers of shares can change.); Cash bonus payout = 68 %

2 Special management grant provided to one EC-Member already in 2008 and one EC-Member in 2011 with a deferred grant of shares.3 Other benefits include contributions to pension funds and accrued pension benefits (73 %), social security (26 %) and other allowances (1 %).4 Correction needed due to adjustments of Final share price at grant: Allocation of shares with CHF 16.794. IFRS booking done with CHF 17.15 (investment shares) and CHF 16.72 (matching shares), therefore the numbers of shares and IFRS cost allocation are slightly different.

5 Further details for new Executive Committee members are displayed in Note 11 on pages 165 – 168.


Other benefitsThe members of the EC participate in the pension plans of the Clari-ant Group, notably the Clariant pension fund with an insured income of up to CHF 200 000 per annum, and the management pension fund with an insured income of up to a further CHF 620 800 per annum. The maximum insured income under the pension plans therefore stands at CHF 820 800 per annum. The CEO participates in Clariant’s pension and insurance plans. Additional pension provisions must be accrued over time, in order to match contractual granted retirement plans.

Clariant’s pension plans conform with the legal framework of the occupational pension scheme (BVG). In future, the maximum con-tribution will be dynamically aligned with Art. 79c BVG. For mem-

bers of the EC and all other Clariant employees, the insured income is defined as the basic salary plus the 50 percent of cash bonus. Equity-linked income components are not subject to pensionable income. The usual term insurance policies for death and disability form part of Clariant’s pension plans. The total employer contribu-tion is approximately 11 percent of the insured income in the case of the Clariant pension fund, and 22 percent of the insured income in the case of the Clariant management pension fund. These contri-butions cover both the contributions to the formation of retirement capital, and the risk components. Both plans are contribution-based; the management pension fund solely provides the members with re-tirement capital upon retirement, and does not incorporate pension payments.

ShaReS heLD by the MeMbeRS oF the exeCutIve CoMMIttee

Number of shares

granted for 2011

Number of shares

granted for 2010

Number of shares

within vesting

period for 2011

Number of shares

within vesting

period for 2010

Number of

privately held

shares for 2011

Number of

privately held

shares for 2010

Hariolf Kottmann 136 020 95 274 (correction

of 94 118)2

131 637 84 000 479 637 452 000

Patrick Jany 76 172 56 688 (correction

of 56 000)2

59 909 40 613 102296 39 904

Christian Kohlpaintner 76 172 56 688 (correction

of 56 000)2

28 344 0 90 000 60 000

Mathias Lütgendorf 151 172 81 688 (correction

of 81 000)2

44 094 15 750 211 844 108 500

Hans-Joachim Müller 69 044 na 50 000 na 0 na

total 508 580 290 338 (correc-

tion of 287 118)2

313 984 140 363 883 777 660 404

oPtIonS heLD by the MeMbeRS oF the exeCutIve CoMMIttee

Number of options

granted for 2011

Number of options

granted for 2010

Number of options

within vesting

period for 2011

Number of options

within vesting

period for 2010

Number of

privately held

options for 2011

Number of

privately held

options for 2010

Hariolf Kottmann 120 482 142 900 263 382 142 900 128 0001 128 0001

Patrick Jany 60 241 60 000 120 241 60 000 100 000 100 000

Christian Kohlpaintner 60 241 60 000 120 241 60 000 0 0

Mathias Lütgendorf 60 241 60 000 120 241 60 000 0 0

Hans-Joachim Müller 0 na 0 na 0 na

total 301 205 322 900 624 105 322 900 228 000 228 000

1 Including 20 000 options granted 2008 in his role as a member of the Board of Directors.2 Correction needed due to adjustments of Final share price at grant: Allocation of shares with CHF 16.794. IFRS booking done with CHF 17.15 (investment shares) and CHF 16.72 (matching shares), therefore the numbers of shares and IFRS cost allocation are slightly different.



Javorka tovey, Commercial black belt

Specially trained project managers known as Black Belts steer the Clariant excellence continuous improvement process. a number of different Clariant excellence projects have already led to benefits of more than Chf 160 million between 2009 and 2011.

97

Index

Consolidated Financial Statements of the Clariant Group Page 99

99 Consolidated balance sheets 100 Consolidated income statements 100 Consolidated statements of comprehensive income 101 Consolidated statements of changes in equity 102 Consolidated statements of cash flows 103 Notes to the consolidated financial statements 158 Report of the statutory auditor

Review of Trends Page 159 159 Five-year Group overview

Financial Statements of Clariant Ltd, Muttenz Page 160

160 Clariant Ltd balance sheets 161 Clariant Ltd income statements 162 Notes to the financial statements of Clariant Ltd 170 Appropriation of available earnings 171 Report of the statutory auditor 172 Forward-looking statements


99financial report

Consolidated FinanCial statements oF the Clariant group

Consolidated financial statements of the Clariant GroupConsolidated balance sheets at 31 December 2011 and 2010

ASSETS

Notes 1

31.12.2011

CHF mn

%

31.12.2010

CHF mn

%

Non-current assets

Property, plant and equipment 5 2 494 1 669

Intangible assets 6 1 762 269

Investments in associates and joint ventures 7 563 224

Financial assets 8 28 18

Prepaid pension assets 17 139 117

Deferred income tax assets 9 192 119

Total non-current assets 5 178 57.0 2 416 40.8

Current assets

Inventories 10 1 151 800

Trade receivables 11 1 134 985

Other current assets 12 341 264

Current income tax receivables 41 26

Near cash assets 13 35 703

Cash and cash equivalents 14 1 199 716

Total current assets 3 901 43.0 3 494 59.0

Non-current assets held for sale 22 2 – 11 0.2

Total assets 9 081 100.0 5 921 100.0

EQUITY AND LIABILITIES

Notes 1

31.12.2011

CHF mn

%

31.12.2010

CHF mn

%

Equity

Share capital 15 1 183 921

Treasury shares (par value) 15 – 51 – 36

Other reserves 1 047 275

Retained earnings 754 599

Total capital and reserves attributable to Clariant shareholders 2 933 1 759

Non-controlling interests 93 47

Total equity 3 026 33.3 1 806 30.5

Liabilities

Non-current liabilities

Financial debts 16 1 835 1 305

Deferred income tax liabilities 9 289 85

Retirement benefit obligations 17 538 443

Provision for non-current liabilities 18 242 320

Total non-current liabilities 2 904 32.0 2 153 36.4

Current liabilities

Trade and other payables 19 1 325 1 170

Financial debts 20 1 139 240

Current income tax liabilities 323 242

Provision for current liabilities 18 364 310

Total current liabilities 3 151 34.7 1 962 33.1

Total liabilities 6 055 66.7 4 115 69.5

Total equity and liabilities 9 081 100.0 5 921 100.0

1 The notes form an integral part of the consolidated financial statements.

01_Financial_2011_en.indd 99 20.02.2012 15:04:51


Consolidated income statements for the years ended 31 December 2011 and 2010

Notes 1

2011

CHF mn

%

2010

CHF mn

%

Sales 21 7 370 100.0 7 120 100.0

Costs of goods sold – 5 402 – 5 133

Gross profit 1 968 26.7 1 987 27.9

Selling, general and administrative costs – 1 176 – 1 177

Research and development – 176 – 135

Income from associates and joint ventures 7 47 21

Gain from the disposal of activities not qualifying as discontinued operations 23 5 1

Restructuring and impairment 25 – 161 – 331

Operating income 507 6.9 366 5.1

Finance income 26 19 15

Finance costs 26 – 192 – 138

Income before taxes 334 4.5 243 3.4

Taxes 9 – 83 – 52

Net income 251 3.4 191 2.7

Attributable to:

Shareholders of Clariant Ltd 227 180


Net income 251 3.4 191 2.7

Basic earnings per share attributable to the shareholders of Clariant Ltd (CHF/share) 27 0.86 0.81

Diluted earnings per share attributable to the shareholders of Clariant Ltd (CHF/share) 27 0.79 0.73


Consolidated statements of comprehensive income for the years ended 31 December 2011 and 2010

Notes 1

2011

CHF mn

2010

CHF mn

Net income 251 191

Other comprehensive income:

Net investment hedge 28 25 132

Currency translation differences – 102 – 334

Other comprehensive income for the period, net of tax – 77 – 202

Total comprehensive income for the period 174 – 11

Attributable to:

Shareholders of Clariant Ltd 150 – 17



Changes in fair value of financial assets classified as available for sale amount to less than CHF 1 million in 2011 and 2010.


101financial report

Consolidated FinanCial statements oF the Clariant group

Consolidated statements of changes in equity at 31 December 2011 and 2010

CHF mn Other reserves

Total share

capital

Treasury shares

(par value)

Share premium reserves

Cumulative translation

reserves

Total other

reserves

Retained earnings

Total attributable

to equity holders

Non- controlling

interests

Total equity

Balance 31 December 2009 921 – 17 798 – 326 472 468 1 844 52 1 896

Net income – 180 180 11 191

Net investment hedge 132 132 132 132

Currency translation differences – 329 – 329 – 329 – 5 – 334

Total comprehensive income for the period – – – – 197 – 197 180 – 17 6 – 11

Dividends to non-controlling interests – – – 11 – 11

Obligation to purchase Clariant Ltd shares classified

as equity (see note 1.23 and note 20)

– – 8 – 8 – 8

Employee share and option scheme:

Effect of employee services – 21 21 21

Treasury share transactions – 19 – – 62 – 81 – 81

Balance 31 December 2010 921 – 36 798 – 523 275 599 1 759 47 1 806

Net income – 227 227 24 251

Net investment hedge 25 25 25 25

Currency translation differences – 102 – 102 – 102 – 102

Total comprehensive income for the period – – – – 77 – 77 227 150 24 174

Issuance of share capital (see note 15) 262 849 849 1 111 1 111

Dividends to non-controlling interests – – – 17 – 17

Non-controlling interest arising on business

combination (see note 24)

70 70

Acquisition of non-controlling interests (see note 15) – – 52 – 52 – 31 – 83

Employee share & option scheme:

Effect of employee services – 22 22 22

Treasury share transactions – 15 – – 42 – 57 – 57

Balance 31 December 2011 1 183 – 51 1 647 – 600 1 047 754 2 933 93 3 026



Consolidated statements of cash flows for the years ended 31 December 2011 and 2010

Notes 1

2011

CHF mn

2010

CHF mn

Net income 251 191

Adjustment for:

Depreciation of property, plant and equipment (PPE) 5 219 195

Impairment and reversal of impairment 25 21 75

Amortization of intangible assets 6 39 10

Impairment of working capital 89 41

Income from associates and joint ventures 7 – 47 – 21

Tax expense 83 52

Net financial income and costs 125 79

Gain from the disposal of activities not qualifying as discontinued operations 23 – 5 – 1

Other non-cash items 27 – 68

Total reversal of non-cash items 551 362

Dividends received from associates 7 25 31

Interest paid – 122 – 75

Interest received 14 13

Income taxes paid – 145 – 116

Payments for restructuring 25 – 155 – 155

Cash flow before changes in net working capital and provisions 419 251

Changes in inventories – 152 – 78

Changes in trade receivables 13 – 1

Changes in trade payables 17 172

Changes in other current assets and liabilities – 183 54

Changes in provisions (excluding payments for restructuring) 92 244

Cash flow from operating activities 206 642

Investments in PPE 5 – 370 – 224

Investments in financial assets, associates and joint ventures – 15 – 3

Investments in intangible assets 6 – 17 – 18

Changes in current financial assets and near cash assets 695 – 732

Sale of PPE and intangible assets 96 12

Acquisition of companies, businesses and participations 24 – 1 137 –

Proceeds from the disposal of subsidiaries, associates and joint ventures 23 7 4

Cash flow from investing activities – 741 – 961

Proceeds from the issuance of share capital 356 –

Acquisition of non-controlling-interest – 83 –

Purchase of treasury shares – 69 – 79

Sale of treasury shares 1 –

Proceeds from financial debts 1 485 209

Repayments of financial debts – 640 – 181

Dividends paid to non-controlling interests – 17 – 11

Cash flow from financing activities 1 033 – 62

Currency translation effect on cash and cash equivalents – 15 – 43

Net change in cash and cash equivalents 483 – 424

Cash and cash equivalents at the beginning of the period 14 716 1 140

Cash and cash equivalents at the end of the period 14 1 199 716



103

notes to the Consolidated FinanCial statements

financial report

Notes to the consolidated financial statements

1. Accounting policies

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.

The Company 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 state-ments for issue on 13 February 2012. They will be subject to approval by the Annual General Meeting of Shareholders sched-uled for 27 March 2012.

1.02 – Basis of preparationThe consolidated financial statements of the Clariant Group have been prepared in accordance with the International Financial Reporting Standards (IFRS) and with the following significant accounting policies. 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).

The preparation of financial statements in conformity with the IFRS requires the use of estimates and assumptions. These affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of current events and circum-stances, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the con-solidated financial statements, are disclosed under note 4.

1.03 – International Financial Reporting Standards effective in 2011There are no IFRSs or IFRIC interpretations that are effective for the first time for the annual periods beginning on or after 1 January 2011 that have a material impact on the Group.

1.04 – International Financial Reporting Standards not yet effectiveThe other standards, interpretations and amendments already issued by IASB but not yet effective have not been early adopted by the Group.

IAS 19, Employee benefits was revised in June 2011. This revised standard is effective for accounting periods beginning on or after 1 January 2013. For the Group, this revised standard will entail the elimination of the corridor approach and recognition of all actuarial gains and losses in other comprehensive income as they occur. The Group will also be required to immediately recognize all past ser-vice costs and to replace interest costs and expected return on plan assets with a net interest amount that is calculated by applying the discount rate to the net defined benefit liability or asset. When this revised standard becomes effective, it is expected to reduce equity by CHF 235 million and net income by CHF 11 million.

For the other standards, interpretations and amendments that are already issued but not yet effective the Group is still assessing their full impact. They will be adopted as they become effective.

1.05 – Scope of consolidation ›Subsidiaries: Subsidiaries are those entities in which the Group has an interest of more than one half of the voting rights or otherwise has the power to govern the financial and operating policies. These entities are fully consolidated as per the requirements of IAS 27, Consolidated and Separate Financial Statements.

› Investments in associates: Associates are entities in which the Group holds between 20 percent and 50 percent of the voting rights, or over which the Group has a significant influence, but which it does not control. Investments in associates are accounted for by using the equity method as per IAS 28, Investments in Associates.



› Investments in joint ventures: Joint ventures are contractual arrangements wherby two or more parties undertake an economic activity that is subject to joint control. Investments in associates are accounted for by using the equity method as per IAS 31, Interests in Joint Ventures.

›All joint ventures apply the same accounting principles as the Group.

1.06 – Principles and methods of consolidationThe annual closing date of the individual financial statements is 31 December. The consolidated financial statements are prepared by applying uniform presentation and valuation principles.

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

1.07 – Revenue recognitionSales of goods, interest income and dividends are recognized in line with the requirements of IAS 18, Revenue.

1.08 – Exchange rate differencesExchange 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.

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 bal-ance sheets are translated at the exchange rates prevailing on 31 December.

1.09 – Property, plant and equipmentProperty, plant and equipment are valued at historical acquisition or production costs and depreciated on a straight-line basis to the income statement, using the following maximum 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 10 years › Land is not depreciated

Financing costs that are directly associated with the acquisition, construction or production of qualifying property, plant and equip-ment for which the commencement date for the capitalization is after 1 January 2009 are capitalized as a part of the costs of these assets.

1.10 – Intangible assetsGoodwill is recognized as per the requirements of IFRS 3, Business combinations, IAS 38, Intangible assets and IAS 28, Investment in associates. Goodwill is 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 soft-ware. They are amortized on a straight-line basis to the income statement over their estimated useful lives (three to five years). Costs associated with developing and maintaining software pro-grams are recognized as an expense when incurred. Costs directly associated with the production of identifiable and unique soft-ware products controlled by the Group, that will probably generate economic benefits beyond one year, are recognized as intangible assets. Direct costs include software development personnel costs directly related to the software development and an appropriate portion of relevant overheads.

Intangible assets acquired in a business combination are amortized using straight line method over their remaining useful lives of the following periods: › Technology 3 to 15 years ›Customer relationships 13 to 20 years › Trade name 10 years ›Mining rights 19 years ›Order backlog 2 years

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 mar-ket and used in the European Union, either on their own, in mixtures or in products. REACH requires the registration of certain sub-stances, i.e. with volumes equal to or exceeding 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, Intangi-ble Assets and those qualifying for capitalization are reported as intangible assets. As the initial phase of the registration covering volumes equal to or exceeding 1 000 metric tons is completed, the


105


financial report

corresponding costs capitalized as intangible assets are amortized starting from 2011 on a straight-line basis to the income statement over their estimated useful lives of twelve years.

1.11 – Impairment of assetsImpairment of assets are recognized and disclosed as per the requirements of IAS 36, Impairment of assets.

1.12 – InventoriesPurchased goods are valued at acquisition costs, while self-ma-nufactured products are valued at manufacturing costs including related production overhead costs. Inventory held at the balance sheet date is primarily valued at standard cost, which approxi-mates actual costs on a weighted average basis. This valuation method is also used for valuing the cost 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.

1.13 – Trade receivablesTrade receivables are recognized in accordance with IAS 39, Finan-cial Instruments: Recognition and Measurement.

1.14 – Cash and cash equivalentsCash 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 shown within financial debt in current liabilities on the balance sheet.

1.15 – Derivative financial instruments and hedgingDerivative financial instruments and hedges are recognized in accordance with IAS 39, Financial Instruments: Recognition and Measurement.

1.16 – LeasesThe Group classifies leases into finance and operating leases and recognizes them based on the requirements of IAS 17, Leases.

1.17 – Current income taxThe taxable profits (losses) of Group companies are calculated in accordance 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 national income tax rates. Current income tax is accounted for in accordance with the requirements of IAS 12, Income tax.

1.18 – Deferred income taxDeferred income tax is calculated using the comprehensive liabil-ity method as per the requirements of IAS 12, Income Taxes. No deferred income tax is calculated for the temporary differences in investments in Group companies, provided that the investor (parent company) is able to control the timing of the reversal of the tem-porary difference and it is probable that the temporary differences will not reverse in the foreseeable future.

1.19 – Obligations for pensions and similar employee benefitsGroup companies operate various pension schemes. The Group has both, defined benefit and defined contribution plans. Obligations for employee benefits are determined and recorded in line with the requirements of IAS 19, Employee Benefits.

Defined contribution plans: Contributions to defined contribu-tion 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 pro-jected unit credit method. Independent actuaries perform the actuarial valuations for the defined benefit plans on a regular basis, at least every three years.

The Group applies the corridor method. This means, that the por-tion of the actuarial gains and losses to be recognized as income or expense is the excess of the net cumulative unrecognized actuarial gains and losses at the end of the previous reporting year over the greater of 10 percent of the present value of the defined benefit obligation at that date and 10 percent of the fair value of the plan assets at that date, divided by the expected average remaining working lives of the employees participating in the plan.



Some Group companies provide post-retirement 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 methodology 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 the income statement over the expected average remaining working lives of the related employees. These obligations are valued annually by independent qualified actuaries.

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 func-tions of the related employees or in expenses for restructuring and impairment.

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 services. 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 and past service costs 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.

1.20 – ProvisionsProvisions are recognized as per the requirements of IAS 37, Provi-sions, Contingent Liabilities and Contingent assets.

1.21 – Research and developmentDevelopment expenses are capitalized to the extent that the recog-nition criteria according to IAS 38, Intangible assets are met.

The Group considers that uncertainties inherent in the development of key new products preclude it from capitalizing the development costs. At the balance sheet date, no research and development projects met the recognition criteria. Laboratory buildings and equipment included in property, plant and equipment are depreci-ated over their estimated useful lives. 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 will generate probable future economic benefits.

1.22 – Segment reportingSegment information is presented in the same manner as in the internal reporting on behalf of the chief operating decision maker. The chief operating decision-maker, responsible for strategic deci-sions, for the assessment of the segments’ performance and for the allocation of resources to the segments, is the Executive Com-mittee.

With effect from 1 January 2010, Clariant changed its operating structure from formerly four divisions to ten business units, which have full responsibility for their operating results. Further, follow-ing the acquisition of the Süd-Chemie Group in April 2011, Clariant added the business units Catalysis & Energy and Functional Mate-rials as two new segments. In accordance with IFRS 8, “Operating segments”, these twelve business units qualify to be reported in the following eight reportable segments: › Industrial & Consumer Specialties ›Masterbatches › Pigments › Functional Materials › Textile Chemicals ›Catalysis & Energy ›Oil & Mining Services › Leather Services


107


financial report

All other business units, namely Additives, Detergents & Interme-diates, Emulsions, and Paper Specialties, are combined in Perfor-mance Chemicals.

These business units can be described as follows:

The business unit Industrial & Consumer Specialties supplies speciality chemicals and application solutions for the personal care, industrial & home care, crop protection, paints and coatings to construction chemicals, industrial lubricants and engineering and aviation.

The business unit Masterbatches provides color, additive con-centrates and performance solutions for plastics. The products of this business range from being used in medical devices such as inhalers, to drink bottles made from recycled materials and car components.

The business unit Pigments provides organic pigments, pigments preparations and dyes used in coatings, printing, plastics, con-sumer products and other special applications. The portfolio of this business includes high-performance pigments to meet demands of automotive, architectural and plastic industries as well as colo-rants used in traditional printing, ink jet and laser printers.

The business unit Functional Materials comprises the activities of the former adsorbents division of Süd-Chemie. This business unit provides speciality products and solutions to markets of edible oil, the foundry, the pharmaceuticals and the logistics industries, as well as the water treatment industry.

The business unit Textile Chemicals produces dyes and chemi-cals for the textile industry including apparel, upholstery, fab-rics and carpets. The business provides special chemicals for pre-treatment, dyeing, printing and finishing of textiles; optical brighteners and chemicals for the functional treatment of tech-nical textiles; and dyes, such as dispersion reactive, acid and sulphur dyes.

The business unit Catalysis & Energy comprises the activities of former catalyst division of Süd-Chemie. The business unit provides catalysts which improve the energy efficiency of processes in pet-rochemical, polymer, refinery industries, the environmental impact of the automotive industry and inorganic materials to allow for an efficient energy storage.

The business unit Oil & Mining Services provides custom-designed and engineering solutions to the oil, refinery and min-ing industry. Oil Services operates in the area from drilling and exploration to production, transportation and refining in the oil and gas market. Mining Services supplies chemicals and integrated services to the mining, explosives and fertilizer industries.

The business unit Leather Services produces chemicals and services for the global shoe, automotive and garment segments. Chemical and technical solutions for the complete leather manu-facturing process are offered, from the beamhouse to finishing.

The business unit Additives provides flame retardants, waxes and polymer additives for effects in plastics, coating and other applica-tions. This business enhances and protects to make products safer, look better and last longer.

The business unit Detergents & Intermediates provides key raw material for laundry detergents and cleaning products. It also supplies chemical intermediates, especially for the manufacture of agrochemicals and pharmaceuticals.

The business unit Emulsions provides water based emulsions and polymers dispersions for paints, coatings, adhesives, construction, sealants and for the textile, leather and paper industries.

The business unit Paper Specialties is a provider of expertise in management of whiteness, coloration, special coatings and strength for all kinds of paper.

Corporate: Income and expenses relating to Corporate include the costs of the Corporate headquarters and those of corporate coordi-nation functions in major countries. In addition, Corporate includes certain items of income and expense, which are not directly attrib-utable to specific business units.



The Group’s business units are operating segments that offer different products. These operating segments are managed separately because they manufacture, distribute and sell distinct products, which require differing technologies and marketing strat-egies. These products are also subject to risks and returns that are different from those of other business segments.

Segment revenue is revenue reported in the Group’s income state-ment that is directly attributable to a segment and the relevant por-tion 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 expense is an expense resulting from the operating activities of a segment that is 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 cir-cumstances and terms and conditions that would also be available to unrelated third parties.

The segment net assets consist primarily of property, plant and equipment, intangible assets, inventories and receivables less seg-ment 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 taxes.

The Executive Committee assesses the performance of the operating segments based on income statement parameters like third party sales, EBITDA, and operating income. Interest income, expenditure and taxes are not allocated to the segments. The return on the capital invested in each segment is measured by the Return on Invested Capital (ROIC).

1.23 – Share capital and other reservesAll 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 underly-ing, 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. A corresponding effect is recog-nized in shareholders’ equity and reported as equity classified as an obligation to purchase Clariant Ltd shares.

The liability is measured subsequently at amortized cost using 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 cal-culations, 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. It also includes the equity component of the convertible debts issued in 2009.

›Cumulative translation reserve: The translation reserve comprises 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 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 and which are at the same time designated as a hedge of a net investment in a foreign entity, are also reported here.


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1.24 – Treasury sharesTreasury shares are deducted from equity at their par value of CHF 4.00 per share. Differences between this amount and the amount paid for acquiring, or received for disposing of treasury shares are recorded in retained earnings.

1.25 – Financial debtFinancial debt is recognized as per the requirements of IAS 39, Financial Instruments: Recognition and Measurement.

1.26 – InvestmentsInvestments are classified, recognized, measured and impaired based on the requirements of IAS 39, Financial Instruments: Rec-ognition and Measurement. Purchases and sales of investments are recognized on settlement date, which is the date on which the Group receives or delivers the asset.

2. Enterprise Risk Management Identification, Assessment and Management

Under the Group Risk Management Policy, based on the risk man-agement standard of the Institute of Risk Managers, a tool is used to prepare risk assessments every year with quarterly updates by Business Units, Business Services and Regions by assessing threats and opportunities that will impact the objectives set for Clariant overall. These objectives are a result of the overall strat-egy of the company as set by the Board of Directors (BoD) and implemented by the Executive Committee (EC).

The Investment Sub-Committee of the Executive Committee is responsible for monitoring the risk management assessments for relevance and consistency.

Objective setting is finalized during the last quarter of the year. These objectives together with the threats and opportunities to these objectives are subject to scrutiny by the Executive Com-mittee (EC) during meetings with each Business Unit (BU). Also reviewed and discussed are the measures proposed to maximise opportunities and reduce or contain threats.

The Group and the regions are also required to make risk assess-ments on the same criteria. All BU’s, functions and business ser-vices are required to report significant changes to existing identi-fied risks and new threats and opportunities as they arise.

Risk Registers are maintained using financial, operational, reputa-tional and likelihood assessments to score and rank all identified risks. The assessment also addresses the measures in place to manage the risk identified with dates for completion of the mea-sures. Effectiveness of the measures is also assessed.

Threats and opportunities have been identified, quantified and delegated to responsible named individuals being required to deliver effective risk management. The nature of the risk classifica-tion requires different skills to be applied to risk management. The assessments are shared between the different BU’s, services and individuals and subject to reassessment on a quarterly basis.



Consolidated risk assessment is presented to the Audit Committee and Board of Directors. There is a process for accelerated reporting of new or changed risks.

Summaries of BU’s, Regions and Services risk assessments are shared within Clariant to deliver the group summary to all key senior managers.

To support functional responsibility, certain functions have access to risk assessments to support them in their roles. Examples are Environmental Safety & Health Affairs (ESHA) to identify key sites for their property risk survey programme, internal audit and group procurement.

The consolidated risk assessment is benchmarked against pub-lished surveys dealing with risk management. Surveys that are industry specific, business wide and with broad economic coverage are also included in the benchmarking process.

Examples of identified risks included in the Risk Register:

2.1 – Regulation & Compliance: Environmental and product risksClariant is subject to many rules and regulations as well as compli-ance standards. These include chemical industry, country, govern-ment and customer requirements as well as the European Commu-nity’s (EU) Regulations on Registration, Evaluation, Authorization and Restriction of Chemical substances (REACH) being a significant component. Group Responsible Care is responsible for this risk and certain specific tasks are delegated to HR, Legal, ESHA and Logis-tics functions.

2.2 – Site & Location: This includes sites, plant and equipment that are important for the production of Clariant products for sale to customers. Also addressed are country and culture issues that could create threats and opportunities to business objectives. The objective is to main-taining high quality production facilities in key locations. Risk man-agement is delegated to ESHA and Regional Services.

2.3 – Competitor Activity: A number of identified risks include evaluating the merger and acquisition activity that could affect the nature and extent of com-petition. Clariant is a leading participant in its industrial sectors and each sector is monitored to identify changes and consider and plan to deal with the consequences of changes to customers and competitors.

3. Financial risk management

3.1 – Financial risk factorsThe Group’s activities expose it to a variety of financial risks: mar-ket risk (including currency risk, interest rate risk and price risk), credit risk, liquidity risk and settlement risk. The Group’s overall risk management program focuses on the unpredictability of finan-cial markets and seeks to reduce potential adverse effects on the Group’s financial performance at reasonable hedging costs. The Group uses derivative financial instruments to hedge certain risk exposures.

Financial risk management is carried out by a central treasury department (Corporate Treasury) under policies approved by the Excecutive Committee and the Board of Directors. Corporate Treasury identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units. Written principles for overall foreign exchange risk, credit risk, use of derivative financial instruments, non-derivative financial instruments and investing excess liquidity (counterparty risk) are in place.

Market riskForeign exchange risk ›Exposure to foreign exchange risk: The Group operates internationally and is exposed to foreign exchange risks arising from various currency exposures, primarily with respect to the euro and the US dollar and increasingly the currencies of emerging countries. Foreign exchange risks arise from future commercial transactions, recognized assets and liabilities and net investments in foreign operations, when they are denominated in a currency that is not the respective subsidiary’s functional currency.

› Foreign exchange risk management: To manage the foreign exchange risk arising from future commercial transactions and recognized assets and liabilities, entities in the Group use spot transactions, FX forward contracts, FX options and FX swaps according to the Group’s foreign exchange risk policy. Corporate Treasury is responsible, in close co-ordination with the Group’s operating units, for managing the net position in each foreign currency by performing appropriate hedging actions.

The Group’s foreign exchange risk management policy is to selectively hedge net transaction foreign exchange exposures in each major currency according to defined hedging ratios.


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Currency exposures arising from the net assets of the Group’s foreign operations are managed primarily through borrowings denominated in the relevant foreign currency.

Detailed information regarding foreign exchange management is provided in note 28.

› Foreign exchange risk sensitivity: The estimated percentage change of the following foreign exchange rates used in this calculation is based on the foreign exchange rate volatility for a term of 360 days in the future observed at 31 December 2011.

At 31 December 2011, if the euro had strengthened/weakened by 10 percent (2010: 10 percent) against the Swiss franc with all other variables held constant, pre-tax profit for the year would have been CHF 72 million higher/lower (2010: CHF 15 million), mainly as a result of foreign exchange gains/losses on translation of the euro-denominated cash and cash equivalents, intragroup financing and trade receivables. Equity would have been CHF 85 million lower/higher (2010: CHF 65 million), arising mainly from foreign exchange gains/losses on translation of the euro-denominated hedging instruments.

At 31 December 2011, if the US dollar had strengthened/weakened by 16 percent (2010: 11 percent) against the Swiss franc with all other variables held constant, pre-tax profit for the year would have been CHF 37 million higher/lower (2010: CHF 21 million) mainly as a result of foreign exchange gains/losses on translation of US dollar denominated trade receivables.

Interest rate risk ›Exposure to interest rate risk: Financial debt issued at variable rates and cash and cash equivalents expose the Group to cash flow interest rate risk; the net exposure as per 31 December 2011 was not significant. Financial debt issued at fixed rates does not expose the Group to fair value interest rate risk because it is recorded at amortized costs. At the end of 2011, 100 percent of the net financial debt was at fixed rates (2010: 100 percent).

› Interest rate risk management: It is the Group’s policy to manage the cost of interest using fixed and variable rate debt and interest-related derivatives. Corporate Treasury monitors the net debt fix-to-float mix on an ongoing basis.

› Interest rate risk sensitivity: To calculate the impact of a potential interest rate shift on profit and loss, a weighted average interest rate change was determined, based on the terms of the financial debt issued at variable rates, cash and cash equivalents and the movements of the corresponding interest rates (interest rates comparison between the end of 2011 and end of 2010).

At 31 December 2011, if the Swiss franc interest rates on net current financial debt issued at variable interest rates had been 71 basis points higher/lower with all other variables held constant, pre-tax profit for the year would have been CHF 2.0 million lower/higher (2010: CHF 0.5 million for a Swiss franc interest rate shift of 7 basis points).

At 31 December 2011, if the US dollar interest rates on net current financial debt issued at variable interest rates had been 3 basis points higher/lower with all other variables held constant, pre-tax profit for the year would have been not lower/higher (2010: CHF 0.01 million for a US dollar interest rate shift of 3 basis points).

At 31 December 2011, if the euro interest rates on net current financial debt issued at variable interest rates had been 12 basis points higher/lower with all other variables held constant, pre-tax profit for the year would have been CHF 0.2 million lower/higher (2010: CHF 0.1 million for a euro interest rate shift of 23 basis points).

Other price riskWith regard to the financial statements as per 31 December 2011 the Group was not exposed to other price risks in the sense of IFRS 7, Financial Instruments: Disclosures.

Credit risk ›Exposures to credit risk: Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding re ceiv ables and committed transactions. Customer credit risk exposure is triggered by customer default risk and country risk. As per 31 December 2011 and 31 December 2010, the Group has a very diversified portfolio with more than 55 000 (excl. Süd-Chemie) active credit accounts (2010: 50 000), with no significant concentration neither due to size of customers nor due to country risk.



›Credit risk management: The Group has a Group credit risk policy in place to ensure that sales are made to customers only after an appropriate credit risk rating, credit line allocation process as well as recovery. Procedures are standardized within a Corporate customer credit risk policy and supported by the IT system with respective credit management tools. Credit lines are partially backed by credit risk insurance. Süd-Chemie has a credit policy in place, credit risk management actively supported by IT in some affiliates. Credit Ratings and procedures will be harmonized.

Ageing balance of trade receivables 31.12.2011 31.12.2010

Not due yet 88% 92%

Total overdue 12% 8%

– less than 30 days 10% 7%

– more than 30 days 2% 1%

Net trade receivables per group internal risk category

31.12.2011 31.12.2010

A – low credit risk 29% 23%

B – low to medium credit risk 38% 38%

C – medium to above average risk 25% 28%

D – high credit risk 8% 9%

N – new customer awaiting rating 0% 2%

Financial instruments contain an element of risk that the coun-ter party may be unable to either issue securities or to fulfil the settlement terms of a contract. Clariant therefore only cooperates with counterparties or issuers that are at least A-rated. The cumulative exposure to these counterparties is constantly monitored by the Corporate management, therefore there is no expectation of a material loss due to counterparty risk in the future.

The Group maintains a cash pooling structure with a leading European bank, over which most European subsidiaries execute their cash transactions denominated in Euro. As a result of this cash pool the Group at certain times has substantial current financial assets and at other times substantial current financial liabilities. In view of the bank being rated AA- (2010: AA rated) by the most important rating agencies, Clariant does not consider this to pose any particular counterparty risk.

The table below shows in percent of total cash and cash equivalents the share deposited with each of the three major counterparties at the balance sheet date (excluding the bank managing the euro cash pool):

Counterparty Rating 31.12.2011

Bank 1 AA 12%

Bank 2 A 11%

Bank 3 A- 11%

Counterparty Rating 31.12.2010

Bank A AA+ 0%

Bank B AA 15%

Bank C A+ 17%

Bank D A 12%

Liquidity risk › Liquidity risk management: Cash flow forecasting is performed in the subsidiaries of the Group and in aggregate by Corporate Treasury. Corporate Treasury monitors the forecasts of the Group’s liquidity requirements to ensure it has sufficient cash to meet its operational needs while maintaining sufficient headroom on its undrawn committed and uncommitted borrowing facilities. At all times the Group aims to meet the requirements set by the covenants of any of its borrowing facilities. Corporate Management therefore takes into consideration the Group’s debt financing plans and financing options.

Cash which is not needed in the operating activities of the Group is invested in short-term money market deposits or marketable securi-ties. At 31 December 2011, the Group held money market funds of CHF 724 million (2010: CHF 836 million), thereof money market funds of CHF 35 million with initial tenor more than 90 days (2010: 703).

The following table analyzes the maturity profile of the Groups financial liabilities. The amounts disclosed are the contractual undiscounted cash flows and do therefore not reconcile with the financial liabilities disclosed in the consolidated balance sheet.


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financial report

As per 31 December 2011

CHF mn

Less than1 year

Between 1 and 2 years


Over5 years

Borrowings 1 137 751 934 102

Interest on borrowings 82 73 55 3

Finance lease liabilities 4 4 5 12

Trade and other payables 1 033

Derivative financial

instruments

3 29 2

As per 31 December 2010

CHF mn

Less than1 year



Over5 years

Borrowings 238 250 1 019 –

Interest on borrowings 54 49 50 –

Finance lease liabilities 2 3 3 13

Trade and other payables 809 – – –

Derivative financial

instruments

35 – 37 –

The Group covers its liabilities out of operating cash flow gener-ated, liquidity reserves in form of cash and cash equivalents includ-ing time deposits and money market deposits (31 December 2011: CHF 1 234 million vs. 31 December 2010: CHF 1 419 million), uncom-mitted open cash pool limits (31 December 2011: CHF 219 million vs. 31 December 2010: CHF 175 million), uncommitted net working capital facilities and through the selected issuance of capital mar-ket instruments.

3.2 – Fair value estimationIFRS 7 requires the disclosure of fair value measurements in accor-dance with the fair value measurement hierarchy for financial instruments that are measured at fair value in the balance sheet:

› Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

› Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

› Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The following tables present the Group’s assets and liabilities that are measured at fair value at 31 December 2011 and at 31 December 2010 respectively:

31 December 2011

CHF mn

Level 1 Level 2 Level 3 Total

Assets

Available-for-sale

financialassets

20 – 16 36

Financial instruments*’** – 13 – 13


Liabilities

Forward foreign exchange

rate contracts*’**

– – – – 46

Total liabilities – – – – –46

31 December 2010

CHF mn

Level 1 Level 2 Level 3 Total

Assets

Available-for-sale

financialassets

8 – 18 26

Financial instruments*’** – – – –

Total assets 8 – 18 26

Liabilities

Forward foreign exchange

rate contracts*’**

– – 63 – – 63

Total liabilities – – 63 – – 63

** The fair value of forward foreign exchange rate contracts is determined using forward exchange market rates at the balance sheet date.

** For details, see note 28



3.3 – Capital risk managementThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to pro-vide returns for the shareholders and benefits for other stakehold-ers and to maintain an optimal capital structure to minimize the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of pay-outs to the shareholders, return capital to the shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of invested capital as part of the return on invested capital concept. Invested capital is calculated as the sum of total equity as reported in the consoli-dated balance sheet plus current and non-current financial liabili-ties as reported in the consolidated balance sheet plus estimated liabilities from operating leases, less cash and cash equivalents and near cash assets not needed for operating purposes, less net assets held for sale as reported in the consolidated balance sheet. The Group always complied with the externally imposed capital re quire ments related to leverage and gearing requirements pertain-ing to the acquisition term loan facility which is cancelled and termi-nated as of 30 January 2012.

Invested capital was as follows on 31 December 2011 and 2010 respectively:

CHF mn 2011 2010

Total equity 3 026 1 806

Total current and non-current

financial liabilities

2 974 1 545

Estimated operating lease liabilities 457 432

Less cash and cash equivalents and near

cash assets *

– 1 234 – 1 419

Cash needed for operating purposes 147 142

Invested capital 5 370 2 506

* Near cash assets represent deposits over 90 days

At the end of 2011, Clariant considers the invested capital to be adequate.

4. Critical accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the cir-cumstances.

The Group makes estimates and takes assumptions concerning the future. The resulting accounting estimates will, by definition, sel-dom equal the related actual results. The estimates and as sump-tions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

4.1 – Estimated impairment of goodwill and property, plant and equipmentThe Group tests annually whether goodwill has suffered any impair-ment in accordance with the requirements of IAS 36, Impairment of Assets. The recoverable amounts of all cash generating units have been determined based on value-in-use calculations except for the CGUs Functional Material and Catalysis & Energy, for which the recoverable amount is determined using fair value less cost to sell.

In the same procedure, the recoverable value of property, plant and equipment is also assessed according to the same rules. These cal-culations require the use of estimates, in particular in relation to the expected growth of sales, the discount rates, the development of raw material prices and the success of restructuring measures implemented (see notes 5 and 6).

4.2 – Environmental liabilitiesThe Group is exposed to environmental regulations in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for environmental remediation. The Group constantly monitors its sites to ensure compliance with legislative requirements and to assess the liability arising from the need to adapt to changing legal demands. The Group recognizes liabilities for environmental remediation based on the latest assessment of the environmental situation of the individual sites and the most recent requirements of the respective legislation. Where the final remediation results in expenses that differ from the amounts that were previously recorded, such differences will impact the income statement in the period in which such determination was made (see notes 18 and 32).


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financial report

4.3 – Income and other taxesThe Group is subject to income and other taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income and other taxes. There are many transactions and calculations for which the ultimate tax determi-nation is uncertain at the time a liability must be recorded. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences impact the income tax and deferred tax provisions in the period in which such deter-mination is made.

Some subsidiaries generate tax losses. Often these can be used to offset taxable gains of subsequent periods. The Group constantly monitors the development of such tax loss situations. Based on the business plans for the subsidiaries concerned, the recoverability of such tax losses is determined. In the case that a tax loss is deemed to be recoverable, the capitalization of a deferred tax asset for such tax losses is then decided. The time horizon for such a calculation is in line with the mid-term planning scope of the Group.

4.4 – Estimates for the accounting for employee benefitsIAS 19, Employee Benefits requires that certain assumptions are made in order to determine the amount to be recorded for retire-ment benefit obligations and pension plan assets, in particular for defined benefit plans. These are mainly actuarial assumptions such as expected inflation rates, long-term increase in health care costs, employee turnover, expected return on plan assets and discount rates. Substantial changes in the assumed development of any one of these variables may significantly change the Group’s retirement benefit obligation and pension assets (see note 17).

4.5 – Acquisition accountingDue to the acquisition of the Süd-Chemie Group during 2011, the use of the acquisition method of accounting has had a significant impact on the Group’s consolidated financial statements. The Group’s con-solidated financial statements reflect the acquired business from the date the acquisition has been completed. Using the acquisition method of accounting requires the acquired assets and assumed liabilities to be recorded as of the acquisition date at their respec-tive fair values. Any excess of the purchase consideration over the estimated fair values of acquired net identified assets is recorded as goodwill in the balance sheet and is allocated to an appropriate cash-generating unit. The fair value of acquired assets and assumed liabilities is determined using valuation techniques. Estimating the fair value assigned to each class of acquired assets and assumed liabilities is based on expectations and assumptions, in particular in relation to the expected growth rate, the discount rate and the remaining useful life, that have been deemed reasonable by the Cor-porate management.



As at 31 December 2011, commitments for the purchase of PPE totalled CHF 58 million (2010: CHF 53 million).

5. Property, plant and equipment

CHF mn Land Buildings Machinery and

equipment

Furniture, vehicles,

computer hardware

Plant under construction

Total Insured value at

31 December

At 1 January 2010

Cost 493 2 189 3 925 403 20 7 030

Accumulated depreciation

and impairment

– 153 – 1 570 – 3 018 – 346 – 16 – 5 103

Net book value 340 619 907 57 4 1 927

Additions 6 23 34 12 149 224

Reclassifications 2 14 43 4 – 63 –

Reclassified to held for sale – 10 – 1 – 11

Disposals – 1 – 3 – 4 – 1 – 9

Depreciation – 49 – 129 – 17 – 195

Impairment – 4 – 27 – 34 – 2 – 67

Exchange rate differences – 39 – 52 – 90 – 2 – 17 – 200

At 31 December 2010 294 524 727 51 73 1 669

Cost 427 1 978 3 475 363 88 6 331

Accumulated depreciation and impairment – 133 – 1 454 – 2 748 – 312 – 15 – 4 662

Net book value 294 524 727 51 73 1 669 6 989

Additions 3 62 75 20 210 370

Acquired in business combinations (see note 24) 109 213 330 62 75 789

Reclassifications – 35 119 8 – 162 –

Reclassified to held for sale – 6 – 2 – 1 – – – 9

Disposals – 4 – 5 – 4 – 1 – 1 – 15

Depreciation – – 53 – 142 – 24 – – 219

Impairment – 1 – 25 – 15 – 1 – – 42

Reversal of impairment 2 1 2 – – 5


At 31 December 2011 388 725 1 078 113 190 2 494

Cost 516 2 171 3 926 428 205 7 246

Accumulated depreciation and impairment – 128 – 1 446 – 2 848 – 315 – 15 – 4 752

Net book value 388 725 1 078 113 190 2 494 7 873

Impairments recognized in 2011 and 2010 arose as a result of the restructuring measures and the entailing site closures (see also note 25). The reversal of impairment in 2011 pertains to recov eries from sale.


117

Notes to the CoNsolidated FiNaNCial statemeNts

financial report

Land, buildings, furniture and machinery and equipment include the following amounts where the Group is a lessee under a finance lease:

CHF mn 31.12.2011 31.12.2010

Cost – capitalized finance leases 30 20

Accumulated depreciation – 12 – 11

Net book value 18 9

Finance lease liability – minimum lease payments:

CHF mn 31.12.2011 31.12.2010

Not later than one year 4 2

Later than one year but not later than five years 9 6

Later than five years 12 13

Total minimum lease payments 25 21

Future finance charge on finance leases – 10 – 11

Present value of finance lease liabilities 15 10

The present value of finance lease liabilities is as follows:

CHF mn 31.12.2011 31.12.2010

Not later than one year 4 1

Later than one year but not later than five years 6 4

Later than five years 5 5

Present value of finance lease liabilities 15 10

The non-current portion of the corresponding liability related to finance lease contracts is disclosed in note 16.



6. Intangible assets

CHF mn Goodwill Technology Customer relationships

Trade names Other Total

At 1 January 2010

Cost 417 198 615

Accumulated amortization and impairment – 209 – 112 – 321

Net book value 208 – – – 86 294

Additions 18 18

Disposals – 3 – 3

Amortization – 10 – 10

Impairment – 8 – 8

Exchange rate differences – 5 – 17 – 22

At 31 December 2010 203 – – – 66 269

Cost 412 191 603

Accumulated amortization and impairment – 209 – 125 – 334

Net book value 203 – – – 66 269

Additions 17 17

Acquired in business combinations (see note 24) 1 084 184 195 86 64 1 613

Reclassifications 3 – 3 –

Amortization – 13 – 8 – 6 – 12 – 39

Impairment – 5 – 5


At 31 December 2011 1 223 161 180 76 122 1 762

Cost 1 432 174 188 82 262 2 138

Accumulated amortization and impairment – 209 – 13 – 8 – 6 – 140 – 376

Net book value 1 223 161 180 76 122 1 762

Amortization is allocated to the line in the income statement, which represents the function to which the intangible asset pertains.

Intangibles reported under “Acquisitions” in 2011 arose on the acquisitions of Süd-Chemie, Prairie Petro-Chem, Octagon Process and Italtinto S.r.l.

As of end 2011, other intangible assets include costs in the amount of CHF 41 million (2010: CHF 34 million) capitalized in connection with the REACH regulation.

Impairment test for goodwill. Goodwill is allocated to the Group’s cash generating units (CGU). Cash generating units con-sist of business segments in accordance with the Group’s segment reporting.


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financial report

The recoverable amount of all the CGUs except Functional Materi-als and Catalysis & Energy is determined based on value-in-use calculations.

The value in use calculations use cash flow projections based on financial budgets approved by the Board of Directors covering a five-year period. No growth is assumed beyond this five-year period. The main assumptions used for cash flow projections were EBITDA in percent of sales and sales growth. The assumptions regarding these two variables are based on Management’s past experience and future expectations of business performance. The pre-tax discount rates used are based on the Group’s weighted average cost of capital adjusted for specific country risks asso-ciated with the cash flow projections. The assumed pre-tax dis-count rate was 11.60 percent for all cash generating units (2010: 11.40 percent).

For all CGUs it was assumed that they achieve sales growth in line with or higher than market growth based on the specific strateg ic plans for those CGUs. It was also assumed that the EBITDA in per-cent of sales will improve over present performance as a result of the restructuring measures implemented. For all these CGUs it was determined that the net present value of their expected cash flows exceeds the carrying amount of the net assets allocated on a value in use basis.

The estimated recoverable amount of the CGU Leather Services on a value in use basis exceeds its carrying amount including goodwill. The recoverable amount would be equal to the carrying amount if the assumed annual sales growth rate were reduced by 2.9 percent, or alternatively, if the operating margin were reduced by 5.2 percent of sales.

If the assumed annual growth rate were reduced by one percent-age point the recoverable amount of the CGU would exceed the net asset value of the CGU’s net assets by CHF 104 million. If raw

material costs were assumed to be one percentage point of sales higher, the recoverable amount of the net assets would exceed the carrying amount by CHF 132 million.

The recoverable amount for the CGUs Functional Materials and Catalysis & Energy which were joined to the Group with the acqui-sition of Süd-Chemie, is determined based on fair value less cost to sell. Fair value of these CGUs is calculated using discounted cash flows. The cash flows are projected for a ten-year period. The cash flow projections beyond this period are extrapolated using a growth rate of 2.8 percent. The assumptions used in this calcula-tion are based on past experience and future expectations of busi-ness performance. The cash flows are discounted using a pre-tax discount rate of 11.60 percent. Cost to sell are estimated and are deducted in determining the recoverable amount.

The recoverable amount of the CGUs Functional Materials and Catalysis & Energy exceeds the carrying amount of the net assets allocated to these CGUs.

The estimated recoverable amount of the CGU Functional Materials on a fair value less cost to sell basis exceeds its carrying amount including goodwill. The recoverable amount would be equal to the carrying amount if the assumed annual sales growth rate were reduced by 1.1 percent, or alternatively, if the operating margin were reduced by 8.5 percent of sales.

If the assumed annual growth rate were reduced by one percent-age point the recoverable amount would exceed the carrying amount of the CGU’s net assets by CHF 103 million. If raw material costs were assumed to be one percentage point of sales higher, the recoverable amount would exceed the carrying amount of the net assets by CHF 729 million.

Goodwill is allocated to the following CGUs:

CHF mn 31.12.2011 31.12.2010

Industrial & Consumer Specialties 34 1

Masterbatches 45 45

Pigments 19 11

Functional Materials 1 291

Catalysis & Energy 1 674

Oil & Mining Services 19 5

Leather Services 141 141

Net book value 1 223 203

1 The CGUs Functional Materials and Catalysis & Energy are added following the acquisition of Süd-Chemie.



7. Investments in associates and joint ventures

CHF mn 2011 2 010

Beginning of the year 224 273

Acquired in business combinations (see note 24) 334

Additions 8 1

Share of profit 47 21

Dividends received – 25 – 31

Exchange rate differences – 25 – 40

End of the year 563 224

The key financial data of the Group’s principal associates and joint ventures are as follows:

CHF mn Country of incorporation

Assets Liabilities Revenue Profit/(Loss) Interest held %

2010

Associates:

Infraserv GmbH & Co. Höchst KG Germany 1 377 978 1 598 10 32

Infraserv GmbH & Co. Gendorf KG Germany 184 104 315 11 50

Infraserv GmbH & Co. Knapsack KG Germany 161 64 219 19 21

Others Germany 99 25 113 8

Total 1 821 1 171 2 245 48

2011

Associates:

Infraserv GmbH & Co. Höchst KG Germany 1 398 1 036 1 422 23 32

Infraserv GmbH & Co. Gendorf KG Germany 195 104 327 22 50

Infraserv GmbH & Co. Knapsack KG Germany 140 55 201 16 21

Others 146 43 138 9

Joint ventures:

ASK Group Germany 525 277 523 8 50

Scientific Design Company Inc. USA 96 56 32 – 3 50

Süd-Chemie India Pvt Ltd. India 73 17 52 13 50

Total 2 573 1 588 2 695 88

In the year 2011, accumulated unrecognized losses as at the balance sheet date amounted to less than CHF 1 million (2010: CHF 0 million).

The Infraserv companies were set up by the former Hoechst group to cater to the infrastructure needs of its subsidiaries prior to 1997. The shareholdings in associates summarized under “Other” con-cern mainly companies specializing in selling Clariant products.

Due to the specialized nature of these companies, there is no active market in which these shareholdings could be traded, hence no fair value is indicated. However, there is no evidence that the recover-able amount would be lower than the carrying amount.

The joint ventures with ASK Group, Scientific Design Company Inc. and Süd-Chemie India Private Limited were acquired as a part of the acquisition of Süd-Chemie Group (see note 24). Clariant owns a 50 percent stake in these joint ventures, which are consolidated using the equity method.


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financial report

8. Financial assets

CHF mn 2011 2010



Additions 13 2

Impairment – 2

Reversal of impairment 23

Repayments and disposals – 23


Financial assets are measured at cost as these include a number of small scale participations in companies, mostly in Germany, which are engaged in activities closely related to the ones of Clariant.

Due to the specialized nature of these companies, there is no active market in which these shareholdings could be traded, hence no fair value is indicated. However, there is no evidence that the recover-able amount would be lower than the carrying amount.

Financial assets also include those derivative financial instruments with positive fair value for which the remaining lifetime exceeds twelve months.

Financial assets are denominated in the following currencies:

CHF mn 31.12.2011 31.12.2010

EUR 27 15

CHF 1 3

Total 28 18

The carrying amounts of the above assets are entirely classified as available for sale.

A loan in the amount of CHF 23 million, which was impaired in full in 2009, was fully repaid in 2011 resulting in a reversal of the impair-ment loss. The reversal of impairment was recognised in “Restruc-turing and impairment” in the income statement and allocated to “Corporate”, consistent with the impairment charge in 2009.

9. Taxes

CHF mn 2011 2010

Current income taxes – 164 – 123

Deferred income taxes 81 71

Total – 83 – 52

The main elements contributing to the difference between the Group’s overall expected tax expense/rate and the effective tax expense/rate are:

2011CHF mn

%

2010 CHF mn

%

Income before tax 334 243

Expected tax expense/rate 1 – 110 32.9 – 81 33.3

Effect of taxes

on items not tax-deductible

– 61 18.3 – 88 36.2

Effect of utilization and changes

in recognition of tax losses and

tax credits

103 – 30.8 98 – 40.3

Effect of tax losses and tax credits

of current year not recognized

– 26 7.8 – 13 5.4

Effect of adjustments to current

taxes of prior periods

6 – 1.8 5 – 2.1

Effect of tax exempt income 29 – 8.7 31 – 12.7

Effect of other items – 24 7.2 – 4 1.6

Effective tax expense/rate – 83 24.9 – 52 21.4

1 Calculated based on the income before tax of each subsidiary (weighted average).



The movement of the net deferred tax balance is as follows:

CHF mn PPE and intangible

assets

Retirement benefit

obligations

Tax losses and

tax credits

Other accruals

and provisions

Total Thereof offset with deferred

tax assets within the

same jurisdiction

Total

Deferred tax assets at 1 January 2010 31 52 36 106 225 – 150 75

Deferred tax liabilities at 1 January 2010 – 228 – 1 – – 33 – 262 150 – 112

Net deferred tax balance at 1 January 2010 – 197 51 36 73 – 37 – – 37

Charged/credited to income 8 4 77 – 18 71

Exchange rate differences 21 – 6 – 13 – 2 –

Net deferred tax balance at 31 December 2010 – 168 49 100 53 34

Deferred tax assets at 31 December 2010 35 50 100 97 282 – 163 119

Deferred tax liabilities at 31 December 2010 – 203 – 1 – – 44 – 248 163 – 85

Net deferred tax balance at 31 December 2010 – 168 49 100 53 34 – 34

At January 1 2011 – 168 49 100 53 34 – 34

Charged/credited to income 12 – 1 69 1 81

Effect of business combinations (see note 24) – 225 23 22 – 50 – 230

Exchange rate differences 20 – 2 – 1 1 18

Net deferred tax balance at 31 December 2011 – 361 69 190 5 – 97

Deferred tax assets at 31 December 2011 41 69 190 140 440 – 248 192

Deferred tax liabilities at 31 December 2011 – 402 – – – 135 – 537 248 – 289

Net deferred tax balance at 31 December 2011 – 361 69 190 5 – 97 – – 97

Of the deferred tax assets capitalized on tax losses, CHF 9 million refer to tax losses of the French subsidiaries (2010: CHF 22 million), CHF 10 million to tax losses of the Italian subsidiaries (2010: CHF 16 million), CHF 77 million to tax losses of the US subsidiaries (2010: CHF 26 million) and CHF 57 million to the tax losses of the Süd-Chemie Group acquired in 2011. Clariant considers it highly prob-able that these tax losses can be recovered.

The total of temporary differences on investments in subsidiaries, for which no deferred taxes were calculated, was CHF 1 021 million at 31 December 2011 (CHF 390 million at 31 December 2010).

Deferred income tax liabilities have not been established for the withholding tax and other taxes that would be payable on the unre-mitted earnings of certain foreign subsidiaries, as such amounts are currently regarded as permanently reinvested. These unremit-ted earnings totalled CHF 2 234 million at the end of 2011 (2010: CHF 1 599 million).

The tax losses on which no deferred tax assets are recognized are reviewed for recoverability at each balance sheet date. The larg-est part of these tax losses arose in Switzerland (with a weighted average tax rate of 14.6 percent) and in the United States (with a tax rate of 39.9 percent). At present their recoverability cannot be reliably assessed.

Fein

typo

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Taxes (continued)


123


financial report

Tax losses on which no deferred tax assets were recognized are as follows:

CHF mn 31.12.2011 31.12.2010

Expiry by:

2011 6

2012 14 4

2013 1 1

2014 3 5

2015 19

After 2015 (2010: after 2014) 703 687

Total 740 703

CHF mn 31.12.2011 31.12.2010

Unrecognized tax credits 20 47

The tax credits in the amount of CHF 2 million expire between 2012 and 2015 (2010: the tax credits in the amount of CHF 12 mil-lion expire between 2011 and 2014). The remaining tax credits of CHF 18 million expire in and after 2016 (2010: the remaining tax credits of CHF 35 million expire in and after 2015).

10. Inventories

CHF mn 31.12.2011 31.12.2010

Raw material, consumables,

work in progress

493 329

Finished products 658 471

Total 1 151 800

CHF mn 2011 2010

Movements in write-downs

of inventories


Additions 28 38

Reversals – 31 – 60



As at 31 December 2011, inventories in the amount of CHF 15 mil-lion were pledged as collateral for liabilities (2010: CHF 15 million).

The cost for raw materials and consumables recognized as an expense and included in “costs of goods sold” amounted to CHF 3 347 million (2010: CHF 3 246 million).

11. Trade receivables

CHF mn 31.12.2011 31.12.2010

Gross accounts receivable – trade 1 162 1 018

Gross accounts receivable – associates

and joint ventures

13 10

Less: provision for impairment

of accounts receivable – 41 – 43

Total trade receivables – net 1 134 985

The following summarizes the movement in the provision for doubtful accounts receivable:

CHF mn 2011 2010

At 1 January – 43 – 54

Charged to the income statement – 10 – 18

Amounts used 6 11

Acquired in business combinations – 3

Unused amounts reversed 6 12

Exchange rate differences 3 6

At 31 December – 41 – 43

Of the provision for impairment the following amounts concerned trade receivables that were individually impaired:

CHF mn 31.12.2011 31.12.2010

Trade receivables aged up

to six months

– 3 – 7

Trade receivables aged over six months – 28 – 29

Total trade receivables – net – 31 – 36

There is no concentration of credit risk with respect to trade receiv-ables, as the Group has a large number of internationally dispersed customers.

The Group recognizes the impairment of trade receivables in “Sell-ing, general and administrative costs” in the income statement.

The amount recognized in the books for trade receivables is equal to their fair value.Collaterals are only required in rare cases (2011: 5 Mio. CHF, 2010: 6 Mio. CHF).



The maximum credit risk on trade receivables is equal to their fair value. Collaterals are only taken in rare cases (2011: CHF 5 million, 2010: CHF 6 million).

The carrying amounts of the Group’s trade receivables are denomi-nated in the following currencies:

CHF mn 31.12.2011 31.12.2010

Currency

CHF 14 5

EUR 456 435

USD 278 221

JPY 72 57

BRL 65 58

CNY 58 35

INR 1 22

Other 190 152

Total trade receivables – net 1 134 985

As of 31 December 2011, trade receivables in the amount of CHF 135 million (2010: CHF 83 million) were past due, but not impaired. These relate to a number of customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

CHF mn 31.12.2011 31.12.2010

Up to three months past due,

but not impaired

123 78

Three to six months past due,

but not impaired

8 2

More than six months past due,

but not impaired 4 3

Total trade receivables – net 135 83

12. Other current assets

Other current assets include the following:

CHF mn 31.12.2011 31.12.2010

Other receivables 258 192

Current financial assets 32 46

Prepaid expenses and accrued income 51 26

Total 341 264

Other receivables include staff loans, advances, advance pay-ments, VAT and sales tax receivables.

Current financial assets include securities and loans to third parties which are classified as available for sale.

The amount recognized in the books for other current assets is equal to their fair value.

The maximum exposure to credit risk of other current assets at the reporting date is their fair value.

There was no impairment of current financial assets in 2011 and 2010.

Other receivables are denominated in the following currencies:

CHF mn 31.12.2011 31.12.2010

CHF 8 4

EUR 88 78

USD 20 11

JPY 22 14

BRL 21 24

CNY 20 8

INR 7 8

Other 72 45

Total 258 192

Current financial assets are denominated in the following currencies:

CHF mn 31.12.2011 31.12.2010

CHF 4 4

EUR 18 14

BRL 1

INR 2 –

JPY 1

USD 1

Other 5 28

Total 32 46

Trade receivables (continued)


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financial report

13. Near cash assets

Near cash assets include the short term deposits with an original maturity between 90 and 365 days.

Near cash assets are denominated in the following currencies:

CHF mn 31.12.2011 31.12.2010

CHF 640

EUR 63

GBP 34 –

Other 1 –

Total 35 703

There were no near cash assets as of 1 January 2010.

14. Cash and cash equivalents

CHF mn 31.12.2011 31.12.2010

Cash at bank and on hand 510 583

Short-term bank deposits 689 133

Total 1 199 716

The effective interest rate on short-term bank deposits in Swiss francs was 0.31 percent (2010: 0.22 percent); these deposits have an average maturity of 44 days (2010: 45 days).

The effective interest rate on short-term bank deposits in euro was 1.09 percent (2010: 0.59 percent); these deposits have an average maturity of 30 days (2010: 79 days).

There were no material short-term bank deposits denominated in currencies other than the Swiss franc and the Euro.The maximum exposure to credit risk on cash and cash equivalents is equal to their book value.

Cash and cash equivalents are denominated in the following currencies:

CHF mn 31.12.2011 31.12.2010

CHF 398 163

EUR 439 225

USD 121 134

JPY 6 5

BRL 10 15

CNY 21 18

INR 49 41

Other 155 115

Total 1 199 716



15. Changes in share capital and treasury shares

Registered shares each with a par value of CHF 4.00 (2010: CHF 4.00)

Number of shares 2011

Par value 2011

CHF mn

Number of shares 2010

Par value 2010

CHF mn

At 1 January 230 160 000 921 230 160 000 921

Capital increase 65 592 254 262 – –

At 31 December 295 752 254 1183 230 160 000 921

Treasury shares – 12 622 649 – 51 – 9 002 210 – 36

Outstanding capital at 31 December 283 129 605 1 132 221 157 790 885

Treasury shares (number of shares) 2 011 2 010

Holdings at 1 January 9 002 210 4 269 387

Shares purchased at fair market value 3 440 953 5 320 084

Shares purchased on exercise of put options 1 200 000 –

Shares sold at fair market value – 174 000 –

Shares transferred to employees – 846 514 – 587 261

Holdings at 31 December 12 622 649 9 002 210

All shares are duly authorized and fully paid in.

Dividends are paid out when declared and are paid out equally on all shares, excluding treasury shares.

In accordance with article 5 of the company’s Articles of Incorpora-tion, no limitations exist with regard to the registration of shares which are acquired in one’s own name and on one’s own account. Special rules exist for nominees.

In accordance with article 12 of the company’s Articles of Incor-poration, each share has the right to one vote. A shareholder can only vote for his own shares and for represented shares, up to a maximum of 10 percent of the total share capital.

These percentage figures are based on information received from the respective shareholders. At 31 December 2011 former shareholders of Süd-Chemie AG, who had exchanged their shares against Clariant shares, were holding in total 15.127 percent of the share capital of Clariant. These shareholders are affiliated with each other for family or other reasons. In addition, the fol-lowing shareholders held a participation of 3 percent or more of the total share capital: Fidelity Management & Research, Boston (United States), 5.23 percent (2010: 5.23 percent); Teachers Insurance and Annuity Association of America – Col-lege Retirement Equity Fund (TIAA-CREF), New York (United States), 3.097 percent (2010: < 3 percent); CS Asset Manage-ment Funds AG, Zürich (Switzerland), 3.0184 percent (2010: 3.04 percent). No other shareholder was registered as holding 3 percent or more of the total share capital. At 31 December 2010 the following shareholders held a participation of 3 percent or more of the total share capital: AXA, Paris (France), 5.09 percent; Amundi, Paris (France), 3.07 percent. No other shareholder was registered as holding 3 percent or more of the total share capital.

Increase in share capital On 31 March 2011, the Annual General Meeting of Clariant AG approved a capital increase, as a result of which in April 2011 Clariant AG issued 65 591 085 newly registered shares with a nominal value of CHF 4.00 each (the new shares). The purpose of this share capital increase was to finance the acquisi-tion of Süd-Chemie.


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financial report

The new shares result from a two-tranche capital increase out of existing authorized capital of the Company. The first tranche consists of 42 575 085 new shares (the exchange shares) issued in connection with the completion of the acquisition of Süd-Chemie in consideration for the contribution in kind of 4 816 187 bearer shares in Süd-Chemie AG (see note 24).

The second tranche consists of 23 016 000 new shares (the rights issue) issued at a subscription price of CHF 16.00 per share.

This issuance of the new shares increased the share capital of Clariant AG by CHF 262 million. The share premium reserve increased by CHF 849 million, net of costs of CHF 13 million incurred in connection with the capital increase.

In addition to the above mentioned increase in the share capital, in July 2011, Clariant AG issued 1169 newly registered shares for the conversion of two convertible bonds.

Non-controlling interest. In 2011, the Group increased its stake in Masterbatches producer Colex Spolka z o.o in Poland to 100 percent by purchasing the remaining non-controlling interests with the carrying amount of less than CHF 1 million, at a purchase consideration of CHF 11 million. Also, the Group purchased an addi-tional 3.85 percent stake in the Süd-Chemie Group subsequent to the business combination, with the carrying amount of CHF 31 mil-lion, for a purchase consideration of CHF 72 million (see note 24). The excess consideration paid to acquire the non-controlling inter-est over its carrying amount is recognized directly in equity.



16. Non-current financial debts

CHF mn Interest rate in %

Term Notional amount

Net amount 31.12.2011

Net amount 31.12.2010

Straight bond 3.125 2007 – 2012 250 CHF mn 250 250

Straight bond 4.375 2006 – 2013 600 EUR mn 716 736

Certificate of indebtedness mixed 2008 – 2011 100 EUR mn 125

Convertible bond 3.000 2009 – 2014 300 CHF mn 279 271

Straight bonds 2.750 2011 – 2015 200 CHF mn 199

Straight bond 3.125 2011 – 2017 100 CHF mn 99



Total straight bonds and certificates of indebtedness 1 987 1 382

Liabilities to banks and other financial institutions 1 87 39

Obligations under finance leases 11 9

Subtotal 2 085 1 430

Less: current portion – 250 – 125

Total 1 835 1 305

The value of the liability part of the convertible bond recognized in the balance sheet

is calculated as follows:

Face value 300 300

Equity component – 31 – 31

Liability component on initial recognition on 2 July 2009 269 269

Transaction cost – 4 – 5

Interest expense 32 16

Interest paid – 18 – 9

Total 279 271

Breakdown by maturity 2012 – 250

2013 803 775

2014 576 271

2015 201

2016 150

after 2016 (2010: after 2014) 105 9

Total 1 835 1 305

Breakdown by currency CHF 618 521

EUR 1 173 780

Other 44 4

Total 1 835 1 305

Fair value comparison (including current portion)

Straight bonds 1 281 1 018

Certificates of indebtedness 444 125

Convertible bond 350 617

Others 99 47

Total 2 174 1 807

Total net book value of assets pledged as collateral for financial debts 44 40

Total collateralized financial debts 9 13

1 Thereof non interest bearing foreign exchange contracts with negative fair value of CHF 41 million (2010: CHF 37 million). Average interest rate on the interest bearing part of the liabilities in 2011: 1.72 percent (Japan, Pakistan, Turkey) (2010: 8.73 percent – Pakistan, GB and Germany).


129


financial report

In March 2011, Clariant signed an acquisition term loan facil-ity with a group of seven banks amounting to CHF 1 120 million. The initial term of the facility is one year from 21 April 2011 with an extension option of another year. Any drawdowns from this facility were intended to be utilized for the partial financing of the acquisition of Süd-Chemie (see note 24). In 2011, CHF 120 million and CHF 400 million were withdrawn under this facility, of which CHF 120 million was repaid subsequently during the year. CHF 400 million were still outstanding at the year-end and are classified as current financial debts (see note 20). Certain financial covenants tested semi-annually were applicable for this acquisition term loan facility. The facility is repaid and terminated as of 30 January 2012.

In May and June 2011, the Group launched two new bonds in the amount of CHF 200 million and CHF 100 million with a term of 4.5 years and 6 years respectively.

In June 2011, after the acquisition of Süd-Chemie, Clariant repaid a bond (US dollar private placement) worth CHF 117 million in full. Clariant also settled the accrued interest, cross currency swaps and interest payment swaps in connection with this bond. One-time costs pertaining to this repayment amounting to CHF 16 million are recognized in finance costs in the second quarter of 2011. This amount includes a make-whole payment and costs incurred to terminate early the overlaying derivatives pertaining to this placement.

In October 2011, a certificate of indebtedness with a nominal amount of EUR 100 million was paid back. Including accrued inter-est the repayment amounted to CHF 124 million.

In October 2011, the Group issued two certificates of indebtedness in the German market amounting to EUR 365 million. The two cer-tificates have a term of three years (EUR 242 million) and 4.5 years (EUR 123 million) each with fix and float coupons. The interest to be paid for the certificates of indebtedness is based on six months Euribor (variable tranche) or mid-swap (fixed tranche), respectively, plus a credit margin premium (spread).

In December 2011, Clariant cancelled Süd-Chemie’s syndicated multicurrency revolving credit facility after repayment of the amount of EUR 183 million (including accrued interests) drawn under this facility.

Valuation. Non-current financial debt is recognized initially at fair value, net of transaction costs incurred. Financial debt is subse-quently stated at amortized cost. There are no long-term financial liabilities valued at fair value through profit and loss.

The value of the liability component and the equity component of the convertible bond was determined at the issuance of the bond. The fair value of the liability component, included in the non-cur-rent borrowings, was calculated using a market rate of interest for an equivalent bond without conversion rights. The residual amount, representing the value of the equity conversion option, is included in shareholder’s equity in share premium reserve.

The fair values for the bonds and convertible bond are quoted mar-ket prices as of the balance sheet date. The fair values of the other non-current financial debts, which are equal to their book value, are determined on a discounted cash flow basis.

Covenants. There are no financial covenants for non-current financial debts as of end of 2011.

Exposure of the Group’s borrowings to interest rate changes ›Bonds: the interest rates of all bonds, including the convertible bond, are fixed.

› Liabilities to banks and other financial institutions: mostly consisting of syndicated bank loans with variable interest rates (LIBOR plus applicable margin according to a defined pricing grid based on the Group’s performance).

›Other financial debts: mostly current debt at variable interest rates.

›Certificate of Indebtedness of EUR 242 million with a fixed interest rate of 3.740 percent and a floating interest rate of 3.783 percent. Using interest rate swaps, the floating interest rate was swapped to a fixed rate.

›Certificate of Indebtedness of EUR 123 million with a fixed interest rate of 4.24 percent and a floating interest rate of 3.983 percent. Using interest rate swaps, the floating interest rate was swapped to a fixed rate.

Collateral. Certain Asian subsidiaries pledge trade receivables and inventories as a security for bank overdraft facilities. In case the subsidiaries default on their obligations, the borrowers have the right to take possession of these assets and receive the cash flows resulting from them.

The assets are pledged at the usual market conditions.



17. Retirement benefit obligations

Apart from the legally required social security schemes, the Group has numerous independent pension plans. The assets are princi-pally held externally. For certain Group companies however, no independent assets exist for the pension and other non-current employee benefit obligations. In these cases the related liability is included in the balance sheet as part of the non-current liabilities.

Defined benefit post-employment plans. Defined benefit pensions and termination plans cover the majority of the Group’s employees. Future obligations and the corresponding assets of those plans considered as defined benefit plans under IAS 19 are reappraised annually and reassessed at least every three years by independent actuaries. Assets are valued at fair value. US employ-ees transferred to Clariant with the Hoechst Specialty Chemicals business remain insured with Hoechst for their pension claims incurred prior to 30 June 1997.

The largest defined benefit plans are operated in Switzerland, UK, US and Germany. These plans make up more than 90 percent of the total defined benefit obligation.

The German plan is unfunded and covers the supplementary pen-sion liabilities for plan members whose salaries exceed the level of the German mandatory social security coverage. All other pen-sion liabilities regarding German staff members are covered by a funded multi-employer plan which is accounted for as a defined contribution plan.

The defined benefit obligation in UK is a funded plan covering the pension liabilities of UK employees who joined the company before 31 December 2003. Staff members who joined after this date are covered by a defined contribution plan.

In the US Clariant operates a defined benefit pension plan that is a funded plan covering the pension liabilities of employ-ees who joined the company before 31 December 2000. Staff members who joined after this date are covered by a defined contribution plan. For members of management whose annual salaries exceed the amount of USD 245 000 an additional pen-sion scheme is in place in the form of an unfunded defined ben-efit obligation, which covers the part exceeding this amount.

In Switzerland Clariant operates a funded defined benefit pen-sion plan that covers the pension liabilities of all employees of the Swiss Clariant companies up to a salary level of CHF 200 000.

For members of management whose annual salaries exceed this amount, an additional pension scheme is in place in the form of a funded defined benefit obligation.

Any shortfalls in funded provisions for pension commitments to members of the Executive Committee are accounted for as an unfunded defined benefit obligation.

In addition, in 2011, Clariant acquired the Süd-Chemie group (see note 24) with the most important pension plans in Germany and the US.

Post-employment medical benefits. The Group operates a number of post-employment medical benefit schemes in the USA, Canada and France. The method of accounting for the liabilities associated with these plans is largely equal to the one used for defined benefit pension schemes. These plans are not externally funded, but are recognized as provisions in the balance sheets of the Group companies concerned.

Expenses for net benefits are recorded in the same line and func-tion in which the personnel costs are recorded.


131


financial report

Changes in the present value of defined benefit obligations:

CHF mn Pension plans (funded and unfunded)

Post-employment medical benefits (unfunded)

2011 2010 2011 2010

Beginning of the year 1 959 1 933 78 78

Current service costs 44 61 1 2

Interest costs on obligation 81 84 4 4

Contributions to plan by employees 14 13

Benefits paid out to personnel in reporting period – 106 – 104 – 3 – 4

Actuarial losses/gains of reporting period 40 112 2 8

Past service costs of reporting period 1 2

Liabilities acquired in a business combination (see note 24) 158 7

Termination benefits 2

Effect of curtailments 1 –

Effect of settlements – 5 – 1

Exchange rate differences – 12 – 139 – 9

End of the year 2 180 1 959 89 78

Changes in the fair value of plan assets:

CHF mn 2011 2010

Beginning of the year 1 475 1 461

Assets acquired in business combinations (see note 24) 60

Expected return on plan assets 72 73

Contributions to plan by employees 14 13

Contributions to plan by employer 56 55

Benefits paid out to personnel in reporting period – 83 – 85

Actuarial gain/loss of the reporting period – 56 32

Effect of settlements – 3

Exchange rate differences 6 – 71

End of the year 1 544 1 475

The Group expects to contribute CHF 95 million to its defined ben-efit pension plans in 2012.

As at 31 December 2011 and 2010, the pension plan assets included no directly held registered shares or bonds issued by the Company.



Retirement benefit obligations (continued)

The amounts recognized in the balance sheet:

CHF mn Defined benefit pension plans

Post-employment medical benefits

Total

31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010

Present value of funded obligations – 1 742 – 1 569 – 1 742 – 1 569

Fair value of plan assets 1 544 1 475 1 544 1 475

Deficit/surplus – 198 – 94 – – – 198 – 94

Present value of unfunded obligations – 438 – 390 – 89 – 78 – 527 – 468

Unrecognized actuarial losses (gains) 336 250 2 2 338 252

Unrecognized past service costs (gains) – – – 1 – – 1

Net liabilities in the balance sheet – 300 – 234 – 87 – 77 – 387 – 311

Thereof recognized in:

CHF mn 31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010

Retirement benefit obligation – 439 – 351 – 87 – 77 – 526 – 428

Prepaid pension assets 139 117 139 117

Net liabilities in the balance sheet

for defined benefit plans – 300 – 234 – 87 – 77 – 387 – 311

The amounts recognized in the income statement are as follows:

CHF mn 2011 2010 2011 2010 2011 2010

Current service costs – 44 – 61 – 1 – 2 – 45 – 63

Interest costs – 81 – 84 – 4 – 4 – 85 – 88

Expected return on plan assets 72 73 72 73

Net actuarial gains/losses recognized in the

current year

1 – 14 – 2 – 1 – 14

Past service costs recognized in the current year – 1 1 3 – 3

Termination benefits – 2 – – 2

Effect of curtailments – 1 – 1 –

Effect of settlements 1 1 – 2

Total expenses – 54 – 87 – 6 – 2 – 60 – 89

CHF mn 2011 2 010 2011 2010 2011 2010

Actual return on plan assets 16 105 – – 16 105


133


financial report

Reconciliation to prepaid pension asset and retirement benefit obli-gations reported in the balance sheet:

CHF mn 31.12.2011 31.12.2010

Defined benefit obligation – 526 – 428

Defined contribution obligation – 12 – 15

Retirement benefit obligation – 538 – 443

Prepaid pension plan asset 139 117

Net retirement benefit obligation recognized – 399 – 326

The major categories of plan assets as a percentage of total plan assets:

31.12.2011%

31.12.2010 %

Equities 31 31

Bonds 39 34

Cash 6 6

Property 16 16

Alternative investments 8 13

The principal actuarial assumptions at balance sheet date in percent:

2011

%

2010

%

Group Most important countries Group Most important countries

Weighted average

Switzer-land

United Kingdom

United States

Germany Weighted average

Switzer-land

United Kingdom

United States

Germany

Discount rate 3.9 2.8 4.8 4.8 4.9 4.0 2.8 5.5 5.4 4.8

Expected return on plan assets 4.6 3.8 4.7 7.5 – 4.8 3.8 6.0 7.5 –

Expected inflation rate 1.7 0.5 3.1 2.8 2.0 1.7 0.5 3.6 3.0 2.0

Future salary increases 2.9 2.0 4.4 4.0 2.5 2.9 2.0 4.9 4.0 2.5

Long-term increase in health care costs 8.2 – – 8.9 – 8.8 – – 10.0 –

Current average life expectancy

for a 65 year old male

in years 17 19 21 19 18 17 18 22 18 18

Current average life expectancy

for a 65 year old female

in years 21 21 24 20 23 20 21 24 20 22



Retirement benefit obligations (continued)

The weighted average expected long-term rate of return on plan assets represents the average rate of return expected to be earned on plan assets over the period the benefits included in the benefit obligation are to be paid. In developing the expected rate of return, the Group considers long-term compound annualized returns of historical market data for each asset category, as well as histori-

and former employees of other companies which are members of the same pension plan. There is no consistent or reliable basis for allocating the obligation, plan assets and cost to individual compa-nies participating in the plan.

Based on the statutory actuarial calculation of 2010, the pension fund’s obligations are fully funded. Also for 2011 it is anticipated that the pension plan liabilities are covered by the respective assets.

cal actual returns on the Group’s plan assets. Using this reference information, the Group develops for each pension plan a weighted average expected long-term rate of return.

A one percentage point change in health care cost trend rates would have the following effects on the obligation for post- employment medical benefits:

CHF mn One percentage point increase

One percentage point decrease

Effect on the aggregate of the service cost and interest costs 1 – 1

Effect on defined benefit obligation 7 – 6

Amounts for current and previous periods:

Defined benefit pension plansCHF mn

2011 2010 2009 2008 2007

Defined benefit obligation for pension plans,

funded and unfunded

– 2 180 – 1 959 – 1 933 – 1 765 – 2 012

Fair value of plan assets 1 544 1 475 1 461 1 294 1 743

Deficit – 636 – 484 – 472 – 471 – 269

Experience adjustments on plan liabilities – 1 8 25 27 – 23

Experience adjustments on plan assets – 56 32 95 – 394 – 24

Post-employment medical benefitsCHF mn

2011 2010 2009 2008 2007

Defined benefit obligation for post-employment

medical plans

– 89 – 78 – 78 – 80 – 88

Experience adjustments on plan liabilities 2 1 – 7 – 2 – 2

Defined contribution post-employment plans. In 2011, CHF 27 million were charged to the income statements of the Group companies as contributions to defined contribution plans (2010: CHF 28 million).

In Germany, approximately 6 700 Clariant employees are insured in a defined benefit plan which is a multi-employer plan and as such is accounted for as a defined contribution plan. The reason for this accounting practice is that the plan exposes the participating Clariant companies to actuarial risks associated with the current


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In case the multi-employer plan faces a situation where the pen-sion plan liabilities exceed the assets, this can be remedied either by increasing the employer’s contributions to the pension plan or by reducing the benefits which are paid out to the entitled par-ties. In the case of a reduction of the benefits it has to be verified whether this triggers the requirement for additional funding by the employer. The decision is at the discretion of the board of the pen-sion fund, which is constituted by representatives of the compa-nies participating in the multi-employer plan and their employee representatives.

18. Movements in provisions

CHF mn Environmental provisions

Personnel provisions

Restructuring provisions

Other provisions

Total provisions

2011

Total provisions

2010

At 1 January 120 139 261 110 630 636

Additions 13 124 160 36 333 534

Effect of business combinations (see note 24) 15 1 6 22 –

Amounts used – 15 – 118 – 155 – 32 – 320 – 433

Unused amounts reversed – 2 – 3 – 20 – 21 – 46 – 54

Changes due to the passage of time

and changes in discount rates

4 1 1 6 8


At 31 December 132 138 242 94 606 630

Of which

– Current portion 30 109 186 39 364 310

– Non-current portion 102 29 56 55 242 320

Total provision 132 138 242 94 606 630

Expected outflow of resources

Within one year 30 109 186 39 364 310

Between one and three years 56 22 53 27 158 223

Between three and five years 22 2 3 5 32 42

Over five years 24 5 – 23 52 55

Total provision 132 138 242 94 606 630

Environmental provisions. Provisions for environmental li a bil i-ties are made when there is a legal or constructive obligation for the Group which will result in an outflow of economic resources. It is difficult to estimate the action required by Clariant in the future to correct the effects on the environment of prior disposal or release of chemical substances by Clariant or other parties and the associated costs, pursuant to environmental laws and regulations.

Clariant contributions to this pension plan amounted to CHF 12 mil-lion in 2011 (CHF 15 million in 2010) .

The multi-employer plan originates in the pension plan scheme of the German companies of the former Hoechst Group, to which a part of the activities of Clariant pertained until 1997. Several of the companies which were formerly part of the Hoechst Group con-tinue to participate in this multi-employer plan.

The material components of the environmental provisions consist of the costs to fully clean and refurbish contaminated sites and to treat and contain contamination at sites where the environmental exposure is less severe. The Group’s future remediation expenses are affected by a number of uncertainties which include, but are not limited to, the method and extent of remediation and the per-centage of material attributable to Clariant at the remediation sites relative to that attributable to other parties.



The environmental provisions reported in the balance sheet con-cern a number of different obligations, mainly in Switzerland, the United States, Germany, Brazil and Italy.

Provisions are made for remedial work where there is an obligation to remedy environmental damage, as well as for containment work where required by environmental regulations. All provisions relate to environmental liabilities arising in connection with activities that occurred prior to the date when Clariant took control of the relevant site. At each balance sheet date, Clariant critically reviews all pro-visions and makes adjustments where required.

Personnel provisions. Personnel provisions include holiday en ti-tlements, compensated absences such as sabbatical leave, jubilee, annual leave or other long-service benefits, profit sharing and bonuses. Such provisions are established in proportion to the ser-vices rendered by the employee concerned.

Restructuring provisions. Restructuring provisions are estab-lished where there is a legal or constructive obligation for the Group that will result in the outflow of economic resources. The term restructuring refers to the activities that have as a conse-quence staff redundancies and the shutdown of production lines or entire sites. When the Group has approved a formal plan and has either started to implement the plan or announced its main features to the public, a restructuring provision is created. The

Movements in provisions (continued) restructuring provisions newly added in 2011 concern site clo-sures and headcount reductions in various countries with the largest amounts incurred in Germany, Switzerland, France and the United States. For more information regarding the restructur-ing measures see also note 25.

Other provisions. Other provisions include provisions for obliga-tions relating to tax and legal cases and other items in various coun-tries and/or for which the amount can only be reliably estimated.

All non-current provisions are discounted to reflect the time value of money where material. Discount rates reflect current market assess-ments of the time value of money and the risk specific to the provi-sions in the respective countries.


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financial report

19. Trade and other payables

CHF mn 31.12.2011 31.12.2010

Trade payables 782 622

Payables to associates and joint ventures 61 31

Accruals 292 361

Other payables 190 156

Total 1 325 1 170

The amount recognized for trade payables is equal to their fair value.

20. Current financial debts

CHF mn 31.12.2011 31.12.2010

Banks and other financial institutions 889 107

Obligation to purchase Clariant Ltd shares – 8

Current portion of non-current financial debts 250 125

Total 1 139 240

Breakdown by maturity:

CHF mn 31.12.2011 31.12.2010

Up to three months after the balance sheet date 824 107

Three to six months after the balance sheet date 296 3

Six to twelve months after the balance sheet date 19 130

Total 1 139 240

Current financial debt is recognized initially at fair value, net of transaction costs incurred. Financial debt is subsequently stated at amortized cost. There are no current financial liabilities valued at fair value through profit and loss.

In 2011, CHF 120 milllion and CHF 400 million have been drawn under the acquisition term loan facility, of which CHF 120 million was repaid subsequently during the year (see Note 16). CHF 400 million, which was outstanding at the year-end, is included in the current debts from bank and other financial institutions. Certain financial covenants tested semi-annually were applicable for this acquisition term loan facility. The facility is canceled and termi-nated as of 30 January 2012.

In 2010, an obligation to purchase Clariant Ltd shares arose on written put options that cover 500 000 shares of Clariant Ltd with a strike price of CHF 17.00. A corresponding effect of these options was recognised in shareholders’ equity (see note 1.23) in the year 2010.

The fair value of current financial debt other than the current por-tion of non-current financial debt approximates its carrying amount due to the short-term nature of these instruments.



SEGMENTSCHF mn

Industrial & Con-sumer Specialities

Masterbatches Pigments Functional Materials 1

Textile Chemicals Catalysis & Energy 1 Oil & Mining Sevices

Leather Services Performance Chemicals 2

Total segments continuing operations

Corporate Total Group

2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Segment sales 1 479 1 544 1 124 1 260 988 1 191 456 676 823 491 620 606 265 326 1 314 1 440 7 413 7 190 – 7 413 7 190

Sales to other segments – 6 – 18 – – – 15 – 23 – – 1 – 2 – – – 2 – – – 21 – 25 – 43 – 70 – – 43 – 70

Total sales 1 473 1 526 1 124 1 260 973 1 168 456 675 821 491 620 604 265 326 1 293 1 415 7 370 7 120 – – 7 370 7 120

Operating expenses – 1 268 – 1 325 – 1 022 – 1 141 – 809 – 974 – 430 – 663 – 776 – 430 – 555 – 534 – 243 – 288 – 1 156 – 1 258 – 6 576 – 6 296 – 178 – 149 – 6 754 – 6 445

Income from associates and joint ventures 10 5 – 1 20 8 6 1 1 6 2 2 – – 4 4 49 21 – 2 – 47 21

Gain from the disposal of subsidiaries and associates – – – – – 1 – – – – – – – – 5 – 5 1 – – 5 1

Restructuring and impairment – 3 – 25 – 4 – 16 – 22 – 63 – 1 – 10 – 78 – 1 – – 1 – 1 – 1 – 2 – 15 – 44 – 199 – 117 – 132 – 161 – 331

Operating income 212 181 98 104 162 140 31 3 – 32 66 67 71 21 37 144 146 804 647 – 297 – 281 507 366

Finance income 19 15

Finance costs – 192 – 138

Income before taxes 334 243

Taxes – 83 – 52

Net income 251 191

Segment assets 856 719 560 570 757 738 1 077 474 501 1 771 263 195 283 290 749 748 6 790 3 761 6 790 3 761

Segment liabilities – 159 – 154 – 87 – 88 – 71 – 79 – 74 – 52 – 66 – 109 – 59 – 50 – 21 – 25 – 113 – 118 – 745 – 580 – 745 – 580

Net operating assets 697 565 473 482 686 659 1 003 422 435 1 662 204 145 262 265 636 630 6 045 3 181 – – 6 045 3 181

Corporate assets without cash 1 057 741 1 057 741

Corporate liabilities without financial liabilities – 2 336 – 1 990 – 2 336 – 1 990

Net debts 4 – 1 740 – 126 – 1 740 – 126

Total net assets 697 565 473 482 686 659 1 003 422 435 1 662 204 145 262 265 636 630 6 045 3 181 – 3 019 – 1 375 3 026 1 806

Thereof:

Investments in PPE and intangibles for the period 97 72 31 25 34 26 18 27 20 50 9 7 4 4 57 47 327 201 60 41 387 242

Investments in associates and joint ventures 54 46 2 2 138 136 158 5 1 169 11 11 – – 25 27 562 223 1 1 563 224


Add: systematic depreciation of PPE 35 37 26 29 25 34 19 21 23 25 5 4 4 5 35 40 195 172 24 23 219 195

Add: impairment 5 12 2 5 6 30 1 13 8 1 – 1 – – 2 10 30 66 – 9 9 21 75

Add: amortization of intangible assets 1 – 1 2 1 – 8 – – 15 – – – – 1 – 27 2 12 8 39 10

EBITDA 3 253 230 127 140 194 204 59 37 – 1 107 72 76 25 42 182 196 1 056 887 – 270 – 241 786 646

Add: restructuring and impairment 3 25 4 16 22 63 1 10 78 1 – 1 1 1 2 15 44 199 117 132 161 331

Less: impairment (Reported under restructuring and impairment) – 5 – 12 – 2 – 5 – 6 – 30 – 1 – 13 – 8 – 1 – – 1 – – – 2 – 10 – 30 – 66 9 – 9 – 21 – 75

Less: gain from the disposal of subsidiaries and associates – – – – – – 1 – – – – – – – – – 5 – – 5 – 1 – – – 5 – 1

Add: Additional charge to COGS as a result of the sale of Süd-Chemie inventories revalued to fair value less cost to sell 54 54

EBITDA before restructuring and disposals 251 243 129 151 210 236 59 34 69 107 72 76 26 43 177 201 1 065 1 019 – 90 – 118 975 901





Operating income before restructuring, impairment and disposals 215 206 102 120 184 202 32 13 46 67 67 72 22 38 141 161 843 845 – 126 – 149 717 696

1 The segments “Catalysis & Energy” and “Functional Materials” represent the activities of Süd-Chemie, consolidated for May to December 2011.

2 Performance Chemicals includes all other business units namely, Additives, Detergents & Intermediates, Emulsions and Paper Specialties.

3 EBITDA is earning before interest, tax, depreciation and amortization.

Calculation of net debtCHF mn

31.12.2011 31.12.2010

Non-current financial debt 1 835 1 305

Add: current financial debt 1 139 240

Less: cash and cash equivalents – 1 199 – 716

Less: Near cash assets – 35 – 703

Net debt 1 740 126

Segment assets consist of property, plant and equipment, good-will, intangible assets, inventories, receivables and investments in associates. They exclude deferred tax assets, financial assets and operating cash. Segment liabilities comprise trade payables. They exclude items such as tax liabilities, provisions, pension

21. Segment information

Intersegment transactions are entered into under the normal cir-cumstances and terms and conditions that would also be available to unrelated third parties.

4


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financial report

SEGMENTSCHF mn

Industrial & Con-sumer Specialities

Masterbatches Pigments Functional Materials 1

Textile Chemicals Catalysis & Energy 1 Oil & Mining Sevices

Leather Services Performance Chemicals 2

Total segments continuing operations

Corporate Total Group

2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010

Segment sales 1 479 1 544 1 124 1 260 988 1 191 456 676 823 491 620 606 265 326 1 314 1 440 7 413 7 190 – 7 413 7 190

Sales to other segments – 6 – 18 – – – 15 – 23 – – 1 – 2 – – – 2 – – – 21 – 25 – 43 – 70 – – 43 – 70

Total sales 1 473 1 526 1 124 1 260 973 1 168 456 675 821 491 620 604 265 326 1 293 1 415 7 370 7 120 – – 7 370 7 120

Operating expenses – 1 268 – 1 325 – 1 022 – 1 141 – 809 – 974 – 430 – 663 – 776 – 430 – 555 – 534 – 243 – 288 – 1 156 – 1 258 – 6 576 – 6 296 – 178 – 149 – 6 754 – 6 445

Income from associates and joint ventures 10 5 – 1 20 8 6 1 1 6 2 2 – – 4 4 49 21 – 2 – 47 21

Gain from the disposal of subsidiaries and associates – – – – – 1 – – – – – – – – 5 – 5 1 – – 5 1

Restructuring and impairment – 3 – 25 – 4 – 16 – 22 – 63 – 1 – 10 – 78 – 1 – – 1 – 1 – 1 – 2 – 15 – 44 – 199 – 117 – 132 – 161 – 331


Finance income 19 15

Finance costs – 192 – 138

Income before taxes 334 243

Taxes – 83 – 52

Net income 251 191

Segment assets 856 719 560 570 757 738 1 077 474 501 1 771 263 195 283 290 749 748 6 790 3 761 6 790 3 761

Segment liabilities – 159 – 154 – 87 – 88 – 71 – 79 – 74 – 52 – 66 – 109 – 59 – 50 – 21 – 25 – 113 – 118 – 745 – 580 – 745 – 580

Net operating assets 697 565 473 482 686 659 1 003 422 435 1 662 204 145 262 265 636 630 6 045 3 181 – – 6 045 3 181

Corporate assets without cash 1 057 741 1 057 741

Corporate liabilities without financial liabilities – 2 336 – 1 990 – 2 336 – 1 990

Net debts 4 – 1 740 – 126 – 1 740 – 126

Total net assets 697 565 473 482 686 659 1 003 422 435 1 662 204 145 262 265 636 630 6 045 3 181 – 3 019 – 1 375 3 026 1 806

Thereof:

Investments in PPE and intangibles for the period 97 72 31 25 34 26 18 27 20 50 9 7 4 4 57 47 327 201 60 41 387 242

Investments in associates and joint ventures 54 46 2 2 138 136 158 5 1 169 11 11 – – 25 27 562 223 1 1 563 224


Add: systematic depreciation of PPE 35 37 26 29 25 34 19 21 23 25 5 4 4 5 35 40 195 172 24 23 219 195

Add: impairment 5 12 2 5 6 30 1 13 8 1 – 1 – – 2 10 30 66 – 9 9 21 75

Add: amortization of intangible assets 1 – 1 2 1 – 8 – – 15 – – – – 1 – 27 2 12 8 39 10

EBITDA 3 253 230 127 140 194 204 59 37 – 1 107 72 76 25 42 182 196 1 056 887 – 270 – 241 786 646


Less: impairment (Reported under restructuring and impairment) – 5 – 12 – 2 – 5 – 6 – 30 – 1 – 13 – 8 – 1 – – 1 – – – 2 – 10 – 30 – 66 9 – 9 – 21 – 75



EBITDA before restructuring and disposals 251 243 129 151 210 236 59 34 69 107 72 76 26 43 177 201 1 065 1 019 – 90 – 118 975 901





Operating income before restructuring, impairment and disposals 215 206 102 120 184 202 32 13 46 67 67 72 22 38 141 161 843 845 – 126 – 149 717 696

1 The segments “Catalysis & Energy” and “Functional Materials” represent the activities of Süd-Chemie, consolidated for May to December 2011.

2 Performance Chemicals includes all other business units namely, Additives, Detergents & Intermediates, Emulsions and Paper Specialties.

3 EBITDA is earning before interest, tax, depreciation and amortization.

liabilities and corporate borrowings. Capital expenditure comprises additions to property, plant and equipment and intangibles.

The Group does not have sales in excess of 10 percent of the total sales to any single external customer.

Reconciliation segment assets to total assetsCHF mn

31.12.2011 31.12.2010

Segment assets 6 790 3 761

Corporate assets without cash 1 057 741

Cash 1 199 716

Near cash assets 35 703




Segment information (continued)

Geographic informationCHF mn

Sales 1 Non-current assets 2

2011 2010 2011 2010

EMEA 3 671 3 529 3 345 1 447

of which Germany 1 039 996 2 303 741

of which Switzerland 95 110 177 189

of which MEA 642 552 78 49

North America 958 860 807 152

of which USA 848 777 730 146

Latin America 1 144 1 199 323 319

of which Brazil 535 579 199 211

Asia / Pacific 1 597 1 532 372 262

of which China 442 424 151 119

of which India 170 205 29 33

Total 7 370 7 120 4 847 2 180

1 Allocated by region of third-party sale's destination.2 Non-current assets exclude deferred tax assets and pension plan assets.

All of the Group’s segments generate their revenues to the larg-est extent from the sale of products. These come in such a great variety that a meaningful grouping below the segment information is not possible.

22. Discontinued operations and assets held for sale

During the years 2011 and 2010 there were no discontinued operations.

Assets held for sale in the amount of CHF 2 million as at 31 December 2011 refer to land in the US pertaining to Corporate. The sale transaction for the land in the United States is expected to be completed in 2012.

Assets held for sale in the amount of CHF 11 million as at 31 December 2010 refer to land in India and land in the US pertain-ing to Corporate. The land in India was sold on 1 February 2011 for a sale consideration of CHF 51 million. This sale transaction resulted in a gain of CHF 43 million, which is recognized in “Selling, general and administrative costs” in the income statement in 2011.

Other Disposals: On 10 June 2011, the Group sold a building in Tsuen Wan, Hong Kong, for a sale consideration of CHF 17.4 million. The sale transaction resulted in a gain of CHF 16.9 million, recog-nized in “Selling, general and administrative costs” in Corporate in the income statement in 2011.

On 9 December 2011, Clariant sold land and building in Onsan, South Korea, for a sale consideration of CHF 24 million. The sales transaction resulted in a gain of CHF 17 million, recognized in “Sell-ing, general and administrative costs” in Pigments in the income statement in 2011.


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financial report

23. Disposal of activities not qualifying as discontinued operations

In this section, disposals of subsidiaries, associates and activities are reported that do not qualify as discontinued operations in the sense of IFRS 5. The following disposals took place in 2011 and 2010:

On 4 October 2011 Clariant sold its Polysilazane coatings business pertaining to the segment Performance Chemicals. On 11 Novem-ber 2011, Clariant disposed its product range of Licomer wax emul-sions and acrylic polymer dispersions for floor-care applications pertaining to business unit Additives.

With this acquisition Clariant aims to complement its portfolio with high growth businesses, less cyclicality and to gain access to new attractive market segments.

Since the acquisition date, Süd-Chemie is fully consolidated in Clariant’s financial statements. The summary of the financial impact of consolidating Süd-Chemie in the accounts at the acquisi-tion date, using the provisional fair values of identified assets and liabilities is as follows.

As some of the allocated values are still under assessment, this overview should be considered as provisional.

On 4 January 2010 Clariant India sold the business of diketene and downstream intermediate products at Balkum site pertaining to the business unit Pigments.

The net cash flow of 2010 reported in this note also includes the remaining proceeds received from the buyer of the industrial park services in Griesheim in Germany, which were sold in 2009.

Net income and cash flow from the disposal of activitiesCHF mn

2011 2010

Consideration for sale received 7 3

Total consideration for sale 7 3

Net assets sold including disposal-related expenses:

PPE and intangibles 1 2

Inventories 1 –

Net assets disposed of 2 2

Disposal related costs – –

Total net assets sold including disposal-related expenses 2 2

Gain on disposals 5 1

Net cash flow 7 4

24. Business combinations

Acquisition – Süd-Chemie. On 21 April 2011, Clariant acquired a 96.15 percent stake in the German-based, specialty chemicals company Süd-Chemie for an overall purchase consideration of CHF 1 790 million. The transaction was officially announced on 16 Feb-ruary 2011.

Clariant acquired 11 384 093 shares in Süd-Chemie directly and indirectly by way of a cash payment of CHF 1 034 million and by exchanging the newly issued shares of Clariant AG for those of Süd-Chemie in the ratio of 1:8.84, resulting in an amount of CHF 756 million (see note 15).



CHF mn 2011

Total cash outflow for the acquisition 1 034

Purchase of shares in Süd-Chemie from the Family Shareholders against Exchange Shares (see note 15) 756

Total consideration for purchase of 96.15 percent of shares in Süd-Chemie 1 790

Recognised amounts of identifiable assets and liabilities assumed:

Property plant and equipment 785

Intangible assets 482

Shareholdings in associated companies and joint ventures 334

Inventories 301

Receivables 228

Cash and cash equivalents 25

Financial debt – 646

Pension plan liabilities – 104

Other assets and liabilities – 345

Deferred tax liabilities – 227

Provisional fair value of net assets acquired – 833

Non-controlling interests (including reported non-controlling interest) 70

Goodwill 1 027

The goodwill arising from the acquisition of Süd-Chemie is attrib-utable to a number of factors such as future growth potential, cost synergies and the acquired workforce. The tax deductibility of goodwill is still to be assessed. The non-controlling interest is allocated proportionately and has no goodwill allocated to it.

For this purchase, acquisition costs of CHF 26 million, comprising M&A and legal costs and tax advisory and consulting charges, are recognized in “Selling, general and administrative costs” in the year 2011.

From the acquisition date up to the end of the year 2011, Süd- Chemie reported net sales of CHF 948 million and a net loss of CHF 75 million. This result includes a significant number of items of a one time nature which were incurred in connection with the takeover by Clariant. The operating result was in line with the expectations.

If the acquisition had occurred on 1 January 2011, group sales would have been CHF 404 million higher and the net result would have been CHF 2 million lower.

The activities of Süd-Chemie are represented by the two new Busi-ness Units Catalysis & Energy and Functional Materials, which are included from the acquisition date onwards.

Subsequent to the acquisition of the 96.15 percent stake in Süd-Chemie, Clariant initiated a public takeover offer to acquire the remaining 455 907 shares representing a 3.85 percent non-con-trolling interest in Süd-Chemie. By the end of 2011 Clariant has acquired all of these shares for a total consideration of CHF 72 mil-lion. The excess consideration paid to acquire the non-controlling interest over its carrying amount is recognized directly in equity.

Business combinations (continued)


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financial report

Acquisition – Prairie Petro-Chem. On 1 April 2011, Clariant acquired the assets of the Canadian partnership entity Prairie Petro-Chem, a leading supplier of specialty oil and gas production, drill-ing and industrial chemicals. With this acquisition, Clariant aims to enhance its presence in Bakken Shale, positioned to be one of North America’s leading oil and gas producing regions. The purchase con-sideration for this acquisition amounts to CHF 35 million. The net identified assets amount to CHF 20 million and goodwill to CHF 15 million. Net sales and net profit from the acquisition date up to the end of the year 2011 by Prairie Petro-Chem amounted to CHF 25 million and CHF 4 million respectively. If the acquisition had occurred on 1 January 2011, group sales would have been CHF 8 million higher and the net profit would have been CHF 2 million higher.

Acquisition – Octagon Process. On 19 March 2011, Clariant acquired 100% of the equity interests in US-based privately-held Octagon Process L.L.C. and its service company Katapullt L.L.C., for a total purchase consideration of CHF 75 million in cash. Octagon Process L.L.C. is a specialty manufacturer and distributor of air-craft wing de-icing and runway de-icing fluids to the airline indus-try. With this acquisition, Clariant is expanding its capacities in the North American de-icing market. The purchase price allocation of the transaction is still preliminary. The provisional net identified assets are estimated to amount to CHF 41 million and goodwill to CHF 34 million. Net sales and net loss from the acquisition date up

to the end of the year 2011 amounted to CHF 27 million and CHF 3 million respectively. If the acquisition had occurred on 1 January 2011, group sales would have been CHF 54 million higher and net profit would have been around CHF 1 million higher.

Acquisition – Italtinto S.r.l. On 15 April 2011, Clariant acquired 100 percent of the corporate capital of Italtinto S.r.l., an Ital-ian company, for a total purchase consideration of CHF 22 mil-lion in cash. Italtinto S.r.l. produces and sells integrated tinted systems for paints, colorants, automatic dispensing machines, color matching software and paint mixers. With this acquisition, Clariant gains access to attractive markets for color management systems. The net identified assets are estimated to amount to CHF 14 million and goodwill to CHF 8 million. Net sales from the acquisition date up to the end of the year 2011 by Italtinto S.r.l. amounted to CHF 5 million. The net loss during this period was less than CHF 1 million. If the acquisition had occurred on 1 Jan-uary 2011, the Group‘s net sales would have been CHF 2 million higher and the net profit would have been higher by less than CHF 1 million.

The summary of the impact of consolidating Prairie Petro-Chem, Octagon Process and Italtinto S.r.l. on the consolidated accounts at their respective acquisition dates, using the provisional fair values of identified assets and liabilities is as follows:

CHF mn 2011

Cash outflow for the acquisition 132

Total purchase consideration 132

Recognised provisional amounts of identifiable assets and liabilities assumed:

Property plant and equipment 4

Intangible assets 47

Inventories 19

Receivables 24

Cash and cash equivalents 4

Pension plan liabilities – 1

Other assets and liabilities – 19

Deferred tax liabilities – 3

Provisional fair value of net assets acquired – 75

Goodwill 57

There were no business combinations in 2010.



25. Restructuring and impairment

Restructuring and impairment expenses for the years ended 31 December 2011 and 2010:CHF mn

2011 2010

Restructuring expenses (CHF mn) 140 256

Payments for restructuring 155 155

Impairment loss (CHF mn) 21 75

thereof charged to PPE (see note 5) 37 67

thereof charged to intangible assets (see note 6) 5 8

thereof charged to financial assets (see note 8) – 21 0

Total Restructuring and impairment 161 331

In order to increase profitability over a sustained period, Clariant implements far-reaching measures designed to improve the Group’s performance. The aim of these efforts is to increase the Group’s operating result and reduce net working capital. The changes that are being made to the processes and structures in order to achieve these goals in a substantial loss of jobs across the Group.

Restructuring. In 2011, Clariant recorded expenses for restructur-ing in the amount of CHF 140 million. This concerned not only site closures, but also restructuring measures regarding the subsidi-aries in Germany and the United States, which were acquired with Süd-Chemie.

In 2010, Clariant recorded expenses for restructuring in the amount of CHF 256 million mainly in Switzerland, France, Korea, China, the United States and Spain where sites are closed and headcount is being further reduced. In February 2010, Clariant announced the closure of production facil-ities in Muttenz, Switzerland, and Thane, India, pertaining to the Business Units Textile Chemicals, Paper Specialties and Pigments. The closures will lead to a reduction of approximately 500 positions and to restructuring and impairment expenses of up to CHF 150 million. In the year 2010, CHF 104 million were incurred for these closures.

In June 2010, Clariant further announced the closure of its produc-tion facilities at Onsan, Korea, pertaining to the Business Unit Pig-ments. This closure will lead to a reduction of approximately 130 positions and to restructuring and impairment expenses of up to CHF 50 million. In the year 2010, CHF 17 million were incurred for the closure of this facility.

In October 2010, Clariant announced the closure of sites and activities mainly in Switzerland, France and the United States. The resulting restructuring and impairment costs are posted in accor-dance with IFRS requirements over the period to the finalization of these measures in 2013.

Impairment. Impairment expenses recognized in 2011 and 2010 arose as a result of restructuring measures and the entailing site closures. These impairment expenses were partly offset by the repayment of an impaired loan in the amount of CHF 23 million in 2011 (see note 8).


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financial report

26. Finance income and costs

Finance incomeCHF mn

2011 2010

Interest income 14 12

thereof interest on loans and receivables 6 7

thereof income from financial assets held to maturity 7 5

Other financial income 5 3

Total finance income 19 15

Finance costsCHF mn

2011 2010

Interest expense – 122 – 74

thereof effect of discounting of non-current provisions – 6 – 8

Other financial expenses – 22 – 20

Currency result, net – 48 – 44

Total finance costs – 192 – 138

Other financial expenses include losses on the sale of securities, bank charges and miscellaneous finance expenses.

In the year 2011 foreign exchange gains of CHF 6 million pertaining to the ineffective part of hedges on net investment were recog-nized in the income statement (2010: CHF 7 million).

Interest expense, other than the effect of discounting of non-cur-rent provisions, pertains to financial debts measured at amortised costs. Interest expenses in 2011 also include expenses for the acquisition loan facility to acquire Süd-Chemie in the amount of CHF 12 million and the one time effect of the repayment of the US Private Placement of Süd-Chemie in June 2011 in the amount of CHF 16 million.

Interest costs capitalised on qualifying assets for 2011 is CHF 4 million (2010: CHF 1 million). Interest income on impaired financial assets amounted to less than CHF 1 million in 2011 (2010: less than CHF 1 million).



27. Earnings per share (EPS)

Earnings per share are calculated by dividing the Group net income by the average number of outstanding shares (issued shares less treasury shares).

2011 2010

Net income attributable to shareholders of Clariant Ltd (CHF mn) 227 180

Diluted net income attributable to shareholders of Clariant Ltd (CHF mn)

Net income attributable to shareholders of Clariant Ltd 227 180

Impact of assumed conversion of convertible bond on net income 12 10

Total 239 190

Shares

Holdings on 1 January 223 544 786 225 905 255

Effect of the issuance of share capital and transactions with treasury shares

on weighted average number of shares outstanding

41 041 968 – 2 360 469

Weighted average number of shares outstanding 264 586 754 223 544 786

Adjustment for granted Clariant shares 2 248 782 1 959 325

Adjustment for dilutive share options 181 127 383 194

Adjustment for assumed conversion of the convertible bond, where dilutive 35 086 549 35 087 718

Weighted average diluted number of shares outstanding 302 103 212 260 975 023

Basic earnings per share attributable to shareholders of Clariant Ltd (CHF/share) 0.86 0.81

Diluted earnings per share attributable to shareholders of Clariant Ltd (CHF/share) 0.79 0.73

The dilution effect is triggered by various different items. One is the effect of Clariant shares granted as part of the share based payment plan, which have not yet vested. To calculate this dilutive potential it is assumed that they had vested on 1 January of the respective period.

The other item is the effect of options granted as part of the share based payment plan, which have not yet vested. To calculate this dilutive potential, it is assumed that all options which were in the money at the end of the respective period had been exercised on 1 January of the same period. The effect of the services still to be rendered during the vesting period were taken into consideration.

The third dilution effect arises from the convertible bond issued in 2009. In calculation of dilutive earnings per share, the convertible bond is assumed to have been converted into ordinary shares at the beginning of the reporting period, and the net income is adjusted for the impact of the assumed conversion.

Diluted earnings per share are calculated adjusting the weighted average number of ordinary shares outstanding to assume conver-sion of all dilutive potential ordinary shares.

No dividends were paid out to shareholders in 2011 and 2010.


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financial report

Foreign exchange management. To manage the exposure to the fluctuations in foreign currency exchange rates, the Group follows a strategy of hedging both balance sheet and revenue risk, partially through the use of forward contracts and currency swaps in various currencies. In order to minimize financial expenses, the Group does not hedge the entire exposure.

The following tables show the contract or underlying principal amounts and the respective fair value of financial instruments by type at year-end.

The contract or underlying principal amounts indicate the volume of business outstanding at the balance sheet date and do not repre-sent the amount at risk.

Financial instrumentsCHF mn

Contract or underlying principal amount

Positive fair values Negative fair values

31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010

Commodity related instruments

Commodity contracts 24 1 0

Interest rate related instruments

Interest swaps 468 – 3

Currency related instruments

Forward foreign exchange rate contracts 567 451 12 0 – 43 – 63

Total financial instruments 1 059 451 13 0 – 46 – 63

The fair value of these financial instruments is recorded in “Other current assets” in the balance sheet in the case of a positive value or as an accrual in “Trade and other payables” in the case of a negative value and if the instruments expire within the next twelve months. If the remaining lifetime exceeds twelve months, the

28. Financial instruments

Risk management (hedging) instruments and off-balance sheet risks. Clariant uses forward foreign exchange rate and option contracts, interest rate and currency swaps, commodity contracts and other financial instruments to hedge the Group’s risk exposure to volatility in interest rates, currencies and prices and to manage the return on cash and cash equivalents. Risk exposures from existing assets and liabilities as well as anticipated transac-tions are managed centrally.

Interest rate management. It is the Group’s policy to manage the cost of interest using fixed and variable rate debt and interest-related derivatives.

value is recorded in financial assets in case it is positive and in non-current financial debt in case it is negative. Commodity related instruments refer to raw material price risks hedged by subsidiar-ies of Süd-Chemie. They are scheduled to be discontinued in the course of 2012.

Financial instruments by maturityCHF mn

31.12.2011 31.12.2010

Due dates:

Up to one month after the balance sheet date 9 8

More than one and up to three months after the balance sheet date 15 15

More than three and up to twelve months after the balance sheet date 277 146

More than one and up to five years after the balance sheet date 758 282

Total financial instruments 1 059 451



Financial instruments (continued)

Financial instruments by currency CHF mn

31.12.2011 31.12.2010

USD 60 43

EUR 998 408

JPY 1

Total financial instruments 1 059 451

Financial instruments effective for hedge-accounting purposesCHF mn

31.12.2011 31.12.2010

Notional amount of hedges of net investments in foreign entities: 274 188

Contracts with positive values 61 –

Contracts with negative values 213 188

Borrowings denominated in foreign currencies – 1 160 – 861

On 6 April 2006, Clariant issued a bond in the amount of EUR 600 million, denominated in euros (see note 16). The bond was designated as a hedge of a net investment in some of Clariant’s European subsidiaries. The unrealized foreign exchange gain as at 31 December 2011 in the amount of CHF 22 million (2010: CHF 140 million gain) resulting from the translation of the bond into Swiss francs was recognized in the cumulative translation reserves in shareholders’ equity. In 2011, forward contracts in the amount of EUR 225 million (2010: EUR 150 million) and repurchased EUR-bond tranches in the amount of EUR 11 million (2010: EUR 11 million), were also designated as hedging instruments as a part of the hedge of net investments. A foreign exchange loss of CHF 5 million (2010: 24 million loss) was recognized in the cumulative translation reserves in the shareholders’ equity.

On 17 July 2008 Clariant issued a certificate of indebtedness in the amount of EUR 100 million, denominated in euros (see note 16). The certificate of indebtedness was designated as a hedge of a net investment in some of Clariant’s European subsidiaries. The realized foreign exchange gain as at 31 December 2011 in the amount of CHF 1 million (2010: 23 million unrealized gain) resulting from the translation of the Certificate of Indebtedness into Swiss francs was recognized in the cumulative translation reserves in shareholders’ equity. In 2011, no unrealized foreign exchange result pertaining to the ineffective portion of the hedge of net investment has been recognized in the income statement (2010: 7 million gain).

On 21 October 2011, Clariant issued two certificates of indebted-ness amounting to EUR 365 million, denominated in euros (see note 16). The certificate of indebtedness were designated as a hedge of a net investment in some of Clariant’s European subsidiaries. The unrealized foreign exchange gain as at 31 December 2011 in

the amount of CHF 7 million resulting from the translation of the certificates of indebtedness into Swiss francs was recognized in the cumulative translation reserves in shareholders’ equity.

In 2010 Clariant did not engage in any cash flow hedges. In 2011, certain cash flow hedges were taken over through the acquisition of the Süd-Chemie group which were terminated before the end of 2011.

Securitization. During 2011 Süd-Chemie entered into factoring arrangements.

The volume of the factoring is disclosed in the table below.

Volumes of securitization of trade receivablesCHF mn

31.12.2011

Trade receivables denominated in euros 18

Trade receivables denominated in US dollars 8

Others 13

Total 39

Related liability in the balance sheet denominated

in euros

7

Total 7


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financial report

have vested. The bank in return has the right to claim a share from Clariant at the pre-determined strike price for each option that is sold to it by plan participants.

The options become vested and are exercisable after two years and expire after five years. The fair value of the stock options granted in 2011 at grant date was CHF 4.15 (2010: CHF 3.15) determined using a share price of CHF 15.02 (2010: CHF 12.74) and an exercise price of CHF 18.00 (2010: CHF 15.50). The expected volatility was determined at 32.0 percent (2010: 35.5 percent), based on market assumptions. Assumed dividends range between CHF 0.10 and CHF 0.30 (2010: between CHF 0.10 and CHF 0.30) for later periods. The risk-free interest rate was determined at 1.69 percent (2010: 1.85 percent). The Black-Scholes valuation Model was used to determine the fair values.

The expense recorded in the income statement spreads the costs of each grant equally over the measurement period of one year and the vesting period of three years for shares and the vesting period of two years for options. Assumptions are made concerning the forfeiture rate which is adjusted during the vesting period so that at the end of the vesting period there is only a charge for the vested amounts.

During 2011, CHF 22 million (2010: CHF 21 million) for equity- settled share based payments and less than CHF 1 million (2010: CHF 1 million) for cash-settled share based payments were charged to the income statement.

As of 31 December 2011 the total carrying value of liabilities aris-ing from share-based payments is CHF 41 million (2010: CHF 26 million). Thereof CHF 39 million (2010: CHF 24 million) was re-cognized in equity for equity-settled share-based payments and CHF 2 million (2010: CHF 2 million) in non-current liabilities for cash-settled share-based payments.

Options for Board of Directors (non-executive members) 1

Base year Granted Exercisable from

Expiry date Exercise price

Share price at grant date

Number 31.12.2011

Number 31.12.2010

2008 2008 2010 2013 12.50 8.58 260 000 260 000

2010 2010 2012 2015 15.50 12.74 222 400 222 400

2011 2011 2013 2016 18.00 15.02 216 865

Total 699 265 482 400

1 Past and current members.

29. Employee participation plans

In 2010, the former Clariant Executive Bonus Plan (CEBP) was replaced with the Group Senior Management – Long Term Incen-tive Plan (GSM-LTIP). Under this new plan, a certain percentage of the actual bonus is granted to the plan participants in form of registered shares of Clariant Ltd (investment shares). These shares vest immediately upon grant, but are subject to a 3-year blocking period. The plan participants receive an additional share free of cost (matching share) for each investment share held at the end of the blocking period.

These shares were granted for the first time in 2011, based on the performance achieved in the base year 2010. The number of shares not yet vested and thus disclosed for this period are the matching shares.

The CEBP plan established in 2005 continues to exist until all granted shares have vested. Under this plan the granted registered shares of Clariant Ltd become vested and are exercisable after three years. No options are granted under the CEBP.

The options granted under the CESOP established in 1999 entitle the holder to acquire registered shares in Clariant Ltd (one share per option) at a predetermined strike price. They become vested and are exercisable after three years and expire after ten years.

In April 2008, Clariant established a new stock option plan for members of management and the Board of Directors. Options granted under this plan in 2011, 2010 and 2008, entitle the holder to acquire registered shares of Clariant Ltd (one share per option) at a predetermined strike price. The plan is set up in a way that Clariant contracted a third party bank to issue tradable options to the plan participants in accordance with the rules of the plan. The plan participants can sell the options back to this bank after they



Employee participation plans (continued)

Options for senior members of Management and Executive Committee 1




Number 31.12.2011

Number 31.12.2010

2000 2001 2004 2011 41.80 42.02 – 7 229

2001 2002 2005 2012 27.20 26.87 166 354 166 354

2002 2003 2006 2013 14.80 14.88 87 352 87 352

2003 2004 2007 2014 12.00 18.74 49 326 49 326

2003 2004 2007 2014 16.30 18.74 53 479 53 479

2004 2005 2008 2015 19.85 19.85 146 237 146 237

Total 502 748 509 977

Options for members of Management and Executive Committee 1




Number 31.12.2011

Number 31.12.2010

2008 2008 2010 2013 12.50 8.58 954 675 1 102 731

2010 2010 2012 2015 15.50 12.74 2 764 000 2 823 300

2011 2011 2013 2016 18.00 15.02 2 328 807

Total 6 047 482 3 926 031

1 Past and current members.

As per 31 December 2011, the weighted average remaining con-tractual life of all share options was 2.86 years (2010: 3.28 years).

Shares for Board of Directors (non-executive members)

Base year Granted Vesting in Share price at grant date

Number 31.12.2011

Number 31.12.2010

2008 2008 2011 9.45 – 6 615

Total – 6 615

Shares for members of Management and Executive Committee

Base year Granted Vesting in Share price at grant date

Number 31.12.2011

Number 31.12.2010

2007 2008 2011 9.45 318 789

2008 2009 2012 7.45 634 306 738 881

2009 2010 2013 12.50 862 518 895 040

2010 2011 2014 17.15 447 018

2011 2011 2016 16.60 50 000

Total 1 993 842 1 952 710


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financial report

Weighted average

exercise price

Options 2011

Shares 2011

Weighted average

exercise price

Options 2010

Shares 2010

Shares/options outstanding at 1 January 15.08 4 918 408 1 959 325 15.08 3 139 397 1 645 807

Granted 2 549 998 944 036 3 045 700 979 339

Exercised/distributed* 16.45 – 179 956 – 898 770 14.42 – 1 154 269 – 664 946

Cancelled/forfeited – 38 955 – 10 749 – 112 420 – 875

Outstanding at 31 December 16.21 7 249 495 1 993 842 15.08 4 918 408 1 959 325

Exercisable at 31 December 14.77 1 717 423 – 6.94 1 872 708

Fair value of shares/options outstanding in CHF 5 741 883 18 482 915 32 197 421 37 109 616

* Options exercised/distributed include 134 456 options (2010: 942 269) pertaining to the 2008 and 2010 Option plan, which were sold by the plan participants in the market and are cur-rently held by third parties. Total options of these plans sold in the market at 31 December 2011 are 1 362 225 (31 December 2010: 1 227 769) with a fair value at grant date of CHF 946 315 (31 December 2010: CHF 9 367 877).

The fair value of shares granted during 2011 is CHF 16 million (2010: CHF 12 million) calculated based on market value of shares at grant date.

The fair value of options granted in 2011 was CHF 11 million (2010: CHF 20 million) calculated based on the Black-Scholes valuation model.

30. Personnel expenses

CHF mn 2011 2010

Wages and salaries – 1 186 – 1 234

Social welfare costs – 327 – 273

Shares and options granted to directors and employees – 23 – 22

Pension costs – defined contribution plans – 27 – 28

Pension costs – defined benefit plans – 54 – 87

Other post-employment benefits – 6 – 2

Total – 1 623 – 1 646

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Payables and receivables with related partiesCHF mn

31.12.2011 31.12.2010

Receivables from related parties 13 11

Payables to related parties 31 32

Loans to related parties 3 –

Loans from related parties 31 –

Guarantees to third parties on behalf of

related parties

46 –

Transactions with Key ManagementCHF mn

2011 2010

Salaries and other short-term benefits 9 9

Post-employment benefits 3 3

Share-based payments 5 4

Total 17 16

There are no outstanding loans by the Group to any members of the Board of Directors or Executive Committee.

32. Commitments and contingencies

Leasing commitments. The Group leases various land, buildings, machinery and equipment, furniture and vehicles under fixed-term agreements. The leases have varying terms, escalation clauses and renewal rights.

Commitments arising from fixed-term operating leases mainly con-cern buildings in Switzerland and Germany. The most important partners for operating leases of buildings in Germany are the Infra-serv companies. There exist no particular renewal options other than annual prolongations in case there is no explicit termination of the lease contract.

31. Related party transactions

Clariant maintains business relationships with related parties. One group consists of the associates and joint ventures, where the most important ones are described in note 7. The most important busi-ness with these companies is the purchase of services by Clariant (e.g. energy and rental of land and buildings) in Germany.

The second group of related parties is key management compris-ing the Board of Directors and the Executive Committee. The infor-mation required by Art. 663bbis of the Swiss Code of Obligations regarding the emoluments for the members of the Board of Direc-tors and the Executive Committee is disclosed in the Statutory Accounts of Clariant Ltd on pages 165 to 169 of this report. More information on the relationship with the Board of Directors is given in the chapter Corporate governance (non-audited).

The third group of related parties are the pension plans of major subsidiaries. Clariant provides services to its pension plans in Swit-zerland, the United Kingdom and the United States. These services comprise mainly administrative and trustee services. The total cost of these services is CHF 1 million (2010: CHF 1 million), of which approximately half is charged back to the pension plans. The num-ber of full-time employees corresponding to these is approximately eight (2010: five).

Transactions with related partiesCHF mn

2011 2010

Income from the sale

of goods to related parties

37 23

Income from the rendering

of services to related parties

4 9

Expenses from the purchase

of goods to related parties

– 62 – 51

Expenses from services

rendered by related parties

– 208 – 254

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL REPORT

CHF mn 31.12.2011 31.12.2010

2011 46

2012 48 29

2013 31 16

2014 20 11

2015 14 9

2016 10

Thereafter 20 20

Total 143 131

Guarantees in favor of third parties 31 39

Expenses for operating leases were CHF 74 million in 2011 (2010:

CHF 79 million).

Purchase commitments. In the regular course of business,

Clariant enters into relationships with suppliers whereby the Group

commits itself to purchase certain minimum quantities of materials

in order to benefit from better pricing conditions. These commit-

ments are not in excess of current market prices and reflect normal

business operations. At present, the purchase commitments on

such contracts amount to about CHF 210 million (2010: CHF 200

million).

Contingencies. Clariant operates in countries where political,

economic, social, legal and regulatory developments can have an

impact on the operational activities. The effects of such risks on

the company’s results, which arise during the normal course of

business, are not foreseeable and are therefore not included in the

accompanying financial statements.

In the aftermath to the procedure to acquire subsequent to the

acquisition of Süd-Chemie the 1.36 percent of shares still in

possession of third parties (squeeze-out) a law office initiated

appraisal proceedings to reassess the adequacy of the cash com-

pensation paid to the minority shareholders. Clariant opines that

the cash compensation agreed is fair and complies with all legal

and economic requirements. At this time it cannot be determined if

and to what extent these proceedings will lead to additional finan-

cial liabilities.

In the ordinary course of business, Clariant is involved in lawsuits,

claims, investigations and proceedings, including product liability,

intellectual property, commercial, environmental and health and

safety matters. Although the outcome of any legal proceedings

cannot be predicted with certainty, management is of the opinion

that there are no such matters pending which would be likely to

have any material adverse effect in relation to its business, finan-

cial position, or results of operations.

Environmental risks. Clariant is exposed to environmental liabili-

ties and risks relating to its past operations, principally in respect

of remediation costs. Provisions for non-recurring remediation

costs are made when there is a legal or constructive obligation

and the cost can be reliably estimated. It is difficult to estimate the

action required by Clariant in the future to correct the effects on

the environment of prior disposal or release of chemical substances

by Clariant or other parties, and the associated costs, pursuant to

environmental laws and regulations. The material components of

the environmental provisions consist of costs to fully clean and

refurbish contaminated sites and to treat and contain contamina-

tion at sites where the environmental exposure is less severe.

33. Exchange rates of principal currencies

Rates used to translate the consolidated balance sheets (closing

rate):

31.12.2011 31.12.2010

1 USD 0.94 0.94

1 EUR 1.22 1.25

1 BRL 0.50 0.56

1 CNY 0.15 0.14

100 INR 1.76 2.09

100 JPY 1.21 1.15

Average sales-weighted rates used to translate the consolidated

income statements and consolidated statements of cash flows:

2011 2010

1 USD 0.89 1.04

1 EUR 1.24 1.38

1 BRL 0.53 0.59

1 CNY 0.14 0.15

100 INR 1.91 2.28

100 JPY 1.11 1.19


34. Important subsidiaries

Country Company name Participation

%

Holding/

Finance/Service

Sales Production Research

Argentina Clariant (Argentina) SA, Lomas de Zamora, Buenos Aires 100.0 n n

Australia Clariant (Australia) Pty. Ltd, Glen Waverley 100.0 n n

Süd-Chemie Australia Pty Ltd, Penrith 100.0 n n

Austria Clariant (Österreich) GmbH, Vienna 100.0 n n

Belgium Clariant Masterbatches Benelux SA, Louvain-La-Neuve 100.0 n n

Bermuda Clariant Reinsurance Ltd, Hamilton 100.0 n

Brazil Clariant S.A., São Paulo 100.0 n n

Clariant Administração de Bens Ltda., São Paulo 100.0 n

Süd-Chemie do Brasil Ltda, Jacarei 100.0 n

British Virgin

Islands Clariant Finance (BVI) Ltd, Tortola 100.0 n

Clearwater Technologies Ltd, Tortola 100.0 n

Canada Clariant (Canada) Inc., Toronto 100.0 n n

Phostech Lithium Inc., St. Bruno de Montarville 100.0 n n

Chile Clariant Colorquímica (Chile) Ltda., Maipú-Santiago de Chile 100.0 n n

China Baotou Süd-Chemie Chemical Materials Co., Ltd, Baotou 100.0 n

Clariant (China) Ltd, Hong Kong 100.0 n n n

Clariant (Tianjin) Ltd, Tianjin 94.8 n n

Clariant Bohai Pigments Preparations (Tianjin) Ltd 90.0 n n

Clariant Chemicals (China) Ltd, Shanghai 100.0 n n

Clariant Chemicals (Guangzhou) Ltd, Guangzhou 100.0 n n

Clariant Chemicals (Huizhou) Ltd, Daya Bay, Huizhou 100.0 n

Clariant Masterbatches (Beijing) Ltd, Beijing 100.0 n n

Clariant Masterbatches (Shanghai) Ltd, Shanghai 100.0 n n

Clariant Pigments (Tianjin) Ltd, Tianjin 60.0 n n

Clariant Specialty Chemicals (Zhenjiang) Co., Ltd, Zhenjiang 100.0 n

Jiangsu Süd-Chemie Chemical Materials Co., Ltd, Zhenjiang 100.0 n n

Jiangsu Süd-Chemie Performance Packaging Material Co., Ltd, Changshu 100.0 n n

Panjin Süd-Chemie Liaohe Catalyst Co., Ltd, Panjin City 60.0 n n

Shanghai Süd-Chemie Catalysts Co., Ltd, Shanghai 100.0 n n

Süd-Chemie Catalysts (Nanjing) Co., Ltd, Nanjing 100.0 n n n

Süd-Chemie China Holding Limited, Hong Kong 100.0 n

Süd-Chemie Investment Management (Shanghai) Co., Ltd, Shanghai 100.0 n

Süd-Chemie Redhill Bentonite (Liaoning) Co., Ltd, Jianping 100.0 n

Colombia Clariant (Colombia) SA, Cota-Cundinamarca 100.0 n n

Egypt The Egyptian German Company for Dyes & Resins SAE, Cairo 100.0 n n

Finland Clariant Masterbatches (Finland) Oy, Vantaa 100.0 n

France Airsec S.A.S., Choisy Le Roi 100.0 n n n

Bentofrance S.A.S., Portes-les-Valence 100.0 n n

Clariant Masterbatches (France), Trosly Breuil 100.0 n n n

Clariant Production (France), Trosly Breuil 100.0 n n

Clariant Services (France), Trosly Breuil 100.0 n

Clariant Specialty Fine Chemicals (France), Trosly Breuil 100.0 n n n

K.J. Quinn, Graulhet 100.0 n

Société Française des Bentonites et Dérivés S.A.S., Le Tréport 100.0 n n n

Süd-Chemie France S.A.S., Choisy Le Roi 100.0 n


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financial report

Germany Clariant Advanced Materials GmbH, Frankfurt-Höchst 100.0 n n n

Clariant Beteiligungs GmbH, Frankfurt-Höchst 100.0 n

Clariant Masterbatches (Deutschland) GmbH, Lahnstein 100.0 n n n

Clariant Produkte (Deutschland) GmbH, Frankfurt-Höchst 100.0 n n n

Clariant Vertrieb (Deutschland) GmbH und Co. KG, Frankfurt-Höchst 100.0 n

Clariant Verwaltungsgesellschaft mbH, Frankfurt-Höchst 100.0 n

Clariant SE, Frankfurt-Höchst 100.0 n n

Phostech Lithium GmbH, Munich 100.0 n

SC Beteiligungsgesellschaft mbH, Bensheim 100.0 n

Süd-Chemie AG, Munich 100.0 n n n n

Süd-Chemie Alvigo Catalysts GmbH, Munich 60.0 n

Süd-Chemie Finance GmbH, Munich 100.0 n

Süd-Chemie Zeolites GmbH, Bitterfeld-Wolfen 100.0 n n n

Süd-Chemie IP GmbH & Co KG, Munich 100.0 n n

Süd-Chemie Verwaltungs GmbH, Munich 100.0 n

Great Britain Clariant Distribution UK Limited, Yeadon, Leeds 100.0 n

Clariant Horsforth Limited, Yeadon, Leeds 100.0 n

Clariant Masterbatches UK Ltd, Yeadon, Leeds 100.0 n

Clariant Oil Services UK Ltd, Yeadon, Leeds 100.0 n

Clariant Production UK Ltd, Yeadon, Leeds 100.0 n n

Clariant Services UK Ltd, Yeadon, Leeds 100.0 n

Süd-Chemie (UK) Limited, Northwich 100.0 n

Greece Süd-Chemie Hellas Monoprosopi E.P.E., Adamas, Milos 100.0 n

Guatemala Clariant (Guatemala) SA, Guatemala City 100.0 n n

Clariant Trading (Guatemala) SA, Guatemala City 100.0 n

Honduras Clariant Honduras S.A. de C.V., San Pedro Sula 100.0 n n

India Clariant Chemicals (India) Ltd, Thane 63.4 n n n

Italtinto India Private Limited, Mahape Navi Mumbai 100.0 n n

Süd-Chemie Adsorbents Pvt. Ltd, New Delhi 100.0 n

Indonesia PT Clariant Indonesia, Tangerang 100.0 n n

P.T. Süd-Chemie Indonesia, Cileungsi, Bogor West Java 100.0 n n

Ireland Clariant Masterbatches Ireland Limited, Naas 100.0 n n

Italy Clariant (Italia) S.p.A., Milan 100.0 n

Clariant Masterbatches (Italia) S.p.A., Milan 100.0 n n n

Clariant Prodotti (Italia) S.p.A., Milan 100.0 n

Italtinto S.r.l., Carasco 100.0 n n n

Società Sarda di Bentonite S.r.l., Santa Giusta 100.0 n n n

Süd Chemie Catalysts Italia S.r.l., Novara 100.0 n n n

Süd-Chemie Imic Italia S.r.l., Silvano Pietra 75.0 n n

Japan Clariant (Japan) K.K., Tokyo 100.0 n n n

San-Ai Co., Ltd, Osaka 100.0 n

Süd-Chemie Catalysts Japan, Inc., Tokyo 61.4 n n n

Korea Clariant (Korea) Ltd, Seoul 100.0 n

Süd-Chemie Korea Co., Ltd, Pohang, Gyeongbuk 94.8 n n n

Liechtenstein Clariant Insurance AG, Triesen 100.0 n

Luxemburg Clariant Finance (Luxembourg) S.A., Luxemburg 100.0 n

Malawi Süd-Chemie Water and Process Technologies (Malawi) (Pty) Ltd, Blantyre 100.0 n n

Country Company name Participation%

Holding/Finance / Service







Malaysia Chemindus Sdn. Bhd., Kuala Lumpur 55.0 n n

Clariant (Malaysia) Sdn. Bhd., Petaling Jaya 100.0 n

Clariant Masterbatches (Malaysia) Sdn Bhd, Petaling Jaya 60.0 n n

Mexico Clariant (Mexico) S.A. de C.V., Ecatepec de Morelos 100.0 n n

Clariant Productos Químicos S.A. de C.V., Ecatepec de Morelos 100.0 n

Minera Sumex, S.A. de C.V., Mexico-City, DF 100.0 n

Süd-Chemie de México, S.A. de C.V., Puebla 100.0 n n n

Morocco Clariant (Maroc) S.A., Casablanca 100.0 n n

Netherlands Clariant Participations (The Netherlands) B.V., Maastricht 100.0 n

New Zealand Clariant (New Zealand) Ltd, Albany-Auckland 100.0 n n

Norway Clariant Oil Services Scandinavia AS, Bergen 100.0 n n n

Pakistan Clariant Pakistan Ltd, Karachi-Korangi 75.0 n n

Peru Clariant (Perú) SA, Lima 90.8 n n

Minera Doña Herminia S.A., Callao 100.0 n

Süd-Chemie Perú S.A., Callao 100.0 n n

Poland COLEX Spolka z o.o., Zgierz 100.0 n n

Süd-Chemie Polska Sp. z o.o., Gdansk 100.0 n

Qatar Süd-Chemie Qatar W.L.L., Mesaieed 65.0 n n

Russia Süd-Chemie Alvigo Catalysts LLC, Moscow 60.0 n

Süd-Chemie CIS LLC, Moscow 100.0 n

Saudi Arabia Clariant Masterbatches (Saudi Arabia) Ltd, Riyadh 93.0 n n

Singapore Clariant (Singapore) Pte. Ltd, Singapore 100.0 n n

Süd-Chemie South East Asia Pte. Ltd, Singapore 100.0 n n

South Africa Clariant Southern Africa (Pty) Ltd, Weltevreden Park, Johannesburg 100.0 n n

Süd-Chemie SA (Proprietary) Limited, Chloorkop, Gauteng 100.0 n

Süd-Chemie-Sasol Catalysts (Proprietary) Limited, Chloorkop, Gauteng 80.0 n

Spain Clariant Ibérica Producción S.A., El Prat de Llobregat, Barcelona 100.0 n n

Clariant Ibérica Servicios S.L., El Prat de Llobregat, Barcelona 100.0 n

Clariant Masterbatch Ibérica S.A., Sant Andreu de la Barca 100.0 n n

Süd-Chemie España, S.L., Yuncos-Toledo 100.0 n n

Sweden Clariant (Sverige) Holding AB, Gothenburg 100.0 n

Clariant Masterbatches Norden AB, Malmö 100.0 n n n

Switzerland Clariant Beteiligungen AG, Muttenz 100.0 n

Clariant Chemiebeteiligungen AG, Muttenz 100.0 n

Clariant Consulting AG, Muttenz 100.0 n

Clariant International AG, Muttenz 100.0 n

Clariant Produkte (Schweiz) AG, Muttenz 100.0 n n

EBITO Chemiebeteiligungen AG, Muttenz 100.0 n

LiFePO4+C Licensing AG, Muttenz 100.0 n

Taiwan Clariant Chemicals (Taiwan) Co., Ltd, Taipei 100.0 n n

Thailand Clariant (Thailand) Ltd, Klongton, Bangkok 100.0 n n

Clariant Masterbatches (Thailand) Ltd, Chonburi 100.0 n n

Süd-Chemie (Thai) Co., Ltd, Bangkok 100.0 n

Turkey Clariant (Türkiye) A.S., Gebze 100.0 n n

Süd-Chemie (TR) Madencilik Sanayi ve Ticaret A.S., Balikesir 100.0 n n

UAE Clariant (Gulf) FZE, Jebel Ali, Dubai 100.0 n


157


financial report

Ukraine Süd-Chemie Alvigo Catalysts Ukraine LLC, Severodonetsk 60.0 n n

Uruguay Clariant (Uruguay) SA, Montevideo 100.0 n

USA Clariant Corporation, Charlotte, NC 100.0 n n n

Katapullt LLC, Albany, NY 100.0 n

Octagon Process, L.L.C., Las Vegas, NV 100.0 n n n

Süd-Chemie & Co. Limited Partnership, Wilmington, DE 100.0 n

Süd-Chemie Corporation of America, Wilmington, DE 100.0 n

Süd-Chemie Inc., Wilmington, DE 98.8 n n n

Süd-Chemie North America Inc., Wilmington, DE 100.0 n

Tecpro Holding Corporation Inc., Wilmington, DE 100.0 n

Venezuela Clariant Venezuela S.A., Maracay 100.0 n n




35. Events subsequent to the balance sheet date

On 17 January 2012, Clariant Finance (Luxembourg) S.A. issued an Eurobond in the amount of EUR 500 million, guaranteed by Clariant Ltd. The fixed rate notes with a minimum denomination of EUR 100 000 and a final coupon of 5.625 percent per annum will mature on 24 January 2017. The proceeds are to be used for gen-eral corporate purposes optimizing Clariant’s debt maturity profile.

With value date January 30, 2012, the last drawn part of the syn-dicated bridge loan facility to acquire Süd Chemie (CHF 400 million as of 31 December 2011) has been repaid in full. All commitments under the facility have been cancelled by then. The facility there-fore ceases to exist.



OpinionIn our opinion, the consolidated financial statements for the year ended 31 December 2011 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.

Report on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circum-stances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of consolidated financial statements according to the instructions of the Board of Directors.

We recommend that the consolidated financial statements submit-ted to you be approved.

PricewaterhouseCoopers Ltd

Dr. Daniel Suter Ruth Sigel Audit expert Audit expertAuditor in charge

Basel, 13 February 2012

Report of the statutory auditor to the general meeting of Clariant Ltd, Muttenz

Report of the statutory auditor on the consolidated financial statementsAs statutory auditor, we have audited the consolidated financial statements of Clariant Ltd, which comprise the consolidated bal-ance sheet, consolidated income statement, consolidated state-ment of comprehensive income, consolidated statement of changes in equity, consolidated statement of cash flows and notes (pages 99 to 157, for the year ended 31 December 2011.

Board of Directors’ ResponsibilityThe Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as the International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judg-ment, including the assessment of the risks of material misstate-ment of the consolidated financial state-ments, whether due to fraud or error. In making those risk assessments, the auditor con-siders the internal control system relevant to the entity’s prepara-tion and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the cir-cumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting pol-icies used and the reason-ableness of accounting estimates made, as well as evaluating the overall presentation of the consoli-dated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.


159financial report

ReVieW oF tReNds

Review of trends Five-year Group overview Five-year Group overview 2007–2011 2011 2010 2009 2008 2007

Segment sales CHF mn 7 413 7 190 6 716 8 189 8 660

Change relative to preceding year

in Swiss francs % 3 7 – 18 – 5 5

in local currency % 16 13 – 16 1 4

Group sales 1 CHF mn 7 370 7 120 6 614 8 071 8 533


in Swiss francs % 4 8 – 18 – 5 5

in local currency % 16 13 – 14 1 4

Operating income before exceptionals CHF mn 717 696 270 530 539

Change relative to preceding year % 3 158 – 49 – 2 – 9

as a % of sales 9.7 9.8 4.1 6.6 6.3

Operating loss/income CHF mn 507 366 – 20 229 278

Change relative to preceding year % 39 – – 109 – 18 – 28

as a % of sales 6.9 5.1 – 0.3 2.8 3.3

EBITDA CHF mn 786 646 263 691 628

Change relative to preceding year % 22 146 – 62 10 – 21

as a % of sales 10.7 9.1 4.0 8.6 7.4

Net loss/income CHF mn 251 191 – 194 – 37 5

Change relative to preceding year % 31 – 424 – 840 – 106

as a % of sales 3.4 2.7 – 2.9 – 0.5 0.1

Investment in property, plant and equipment CHF mn 370 224 135 270 306

Change relative to preceding year % 65 66 – 50 – 12 – 6

as a % of sales 5 3 2 3 4

Personnel costs CHF mn 1 623 1 646 1 757 1 759 1 930

Change relative to preceding year % – 1 – 6 – – 9 6

as a % of sales 22 23 27 22 23

Employees at year-end number 22 149 16 176 17 536 20 102 20 931

Change relative to preceding year % 37 – 8 – 13 – 4 – 4

1 Including trading.



Financial statements of Clariant Ltd, MuttenzClariant Ltd balance sheets at 31 December 2011 and 2010 ASSETS 31.12.2011

CHF

%

31.12.2010 CHF

%

Non-current assets

Shareholdings in Group companies 2 059 579 865 1 725 063 497

Loans to Group companies 2 278 400 300 241 734 360

Intangible assets 15 333 895 7 097 697

Total non-current assets 4 353 314 060 84.0 1 973 895 554 62.0

Current assets

Receivables from Group companies 48 899 273 85 902 866

Other receivables 886 832 1 289 474

Accrued income 5 489 206 1 384 696

Marketable securities 127 661 512 182 312 477

Short term deposits – 702 590 000

Cash and cash equivalents 647 726 281 237 464 536

Total current assets 830 663 104 16.0 1 210 944 049 38.0

Total assets 5 183 977 164 100.0 3 184 839 603 100.0

EQUITY AND LIABILITIES 31.12.2011CHF

%

31.12.2010 CHF

%

Total share capital 1 183 009 016 920 640 000

Reserves

General reserve 1 454 963 681 648 346 529

– thereof reserves from capital contributions 1 2 719 261 672

– thereof from retained earnings 2 – 1 264 297 991

Reserve for treasury shares 181 148 697 124 032 351

– thereof reserves from capital contributions 1 181 148 697

– thereof from retained earnings

Free reserves 236 981 551 141 761 615

Total reserves 1 873 093 929 914 140 495

Accumulated gains

Gain for the financial year 124 436 035 95 219 936

Total accumulated gains 124 436 035 95 219 936

Total equity 3 180 538 980 61.4 1 930 000 431 60.6

Liabilities

Non-current liabilities

Bonds 300 000 000

Straight bonds – 250 000 000

Convertible bond 299 990 000 300 000 000

Certificate of indebtedness 451 831 100 160 400 000

Loans from Group companies 24 886 683 35 040 674

Total non-current liabilities 1 076 707 783 20.8 745 440 674 23.4

Current liabilities

Straight bonds 250 006 544

Provisions 1 282 113 862 512

Liabilities to Group companies 208 040 184 419 753 075

Other liabilities 443 399 342 45 437 289

Accrued expenses 24 002 218 43 345 622

Total current liabilities 926 730 401 17.8 509 398 498 16.0

Total liabilities 2 003 438 184 38.6 1 254 839 172 39.4

Total equity and liabilities 5 183 977 164 100.0 3 184 839 603 100.0

1 This amount of capital contribution reserves is subject to the approval of the Swiss Federal Tax Administration. Until now, the Swiss Federal Tax Administration provisionally confirmed qualifying capital contributions of approximately CHF 1.6 billion. For further information see also note 8 to the financial statements of Clariant Ltd.

2 This amount corresponds to capital contribution reserves formerly offset with losses. For further information see also note 8 to the financial statements of Clariant Ltd.


161financial report

FINANCIAL STATEMENTS OF CLARIANT LTD, MUTTENZ

Clariant Ltd income statements for the years ended 31 December 2011 and 2010

31.12.2011CHF

31.12.2010CHF.

Income

Income from participation and interests on loans 351 946 174 156 835 981

Income from cash and cash equivalents, marketable securities and short-term deposits 14 033 296 4 117 099

Exchange rate gains realized 164 908 886 116 340 100

Reversal of depreciation of financial assets 155 716 157 209 920 000

Other income 32 595 452 9 793 378

Total income 719 199 965 497 006 558

Expenses

Financial expenses 475 682 354 217 830 934

Administrative expenses 118 462 800 80 485 748

Depreciation of financial assets – 52 847 000

Other expenses (including taxes) 618 776 622 940

Exceptional expense – 50 000 000

Total expenses 594 763 930 401 786 622

Gain for the financial year 124 436 035 95 219 936



2. Financial assets

After a regular review of the cash generating capabilities of all sub-sidiaries of Clariant Ltd, write-downs of previous periods amount-ing to CHF 156 million on the investments (including non-current loans) in some of these companies were reversed (2010: reversal of a write-down of investments of CHF 210 million and write-down of loans of CHF 53 million)

The principal direct and indirect affiliated companies and other holdings of Clariant Ltd are shown on pages 154 to 157 of the Financial Report of the Clariant Group.

3. Cash, marketable securities and current financial assets

Securities include treasury shares valued at fair market value in the amount of CHF 117 million (prior year CHF 171 million) (see also note 5). Because of the decreasing share price a depreciation about CHF 111 million was recorded.

Notes to the financial statements of Clariant Ltd

1. Accounting policies

Introduction. The statutory financial statements of Clariant Ltd comply with the requirements of the Swiss company law.

Exchange rate differences. Balance sheet items denominated in foreign currencies are converted at year-end exchange rates. Real-ized exchange gains and losses as well as all unrealized exchange losses are recorded in the income statement.

Financial assets. These are valued at acquisition cost less adjustments for impairment of value.

Provisions. Provisions are made to cover existing liabilities.

4. Share capital

Capital issued 31.12.2011 31.12.2010

Number of registered shares each with a par value of CHF 4.00 (2010: CHF 4.00) 295 752 254 230 160 000

In CHF 1 183 009 016 920 640 000

Conditional capital 31.12.2011 31.12.2010

Number of registered shares each with a par value of CHF 4.00* (2010: CHF 4.00) 40 000 000 40 000 000

In CHF 160 000 000 160 000 000

*Thereof 1’169 shares with a par value of CHF 4 676 were already converted.

At the Annual General Meeting 2011, a capital increase in the amount of CHF 262 million was approved. It was executed in two steps. The first tranche consisted of 23 016 000 new shares issued at a subscription price of 16 CHF. The second tranche consisted of 42 575 085 shares extended to shareholders of the Süd-Chemie AG in exchange for Süd-Chemie shares. The calculated exchange price amounted to CHF 17.80. CHF 864 million were recorded as an agio into the general reserves.

In July, Clariant AG issued 1 169 newly registered shares for the conversion of convertible bonds.


163financial report

NOTES TO ThE FINANCIAL STATEMENTS OF CLARIANT LTD

5. Treasury shares (number with a par value of CHF 4.00 each (2010: CHF 4.00)

2011 2010

Holdings on 1 January 9 002 210 4 269 387

Shares bought at market value 3 440 953 5 320 084

Shares purchased on exercise of put options 1 200 000 –

Shares sold at market value – 174 000 –

Shares to employees – 846 514 – 587 261

Holdings on 31 December 12 622 649 9 002 210

The average price of shares bought in 2011 was CHF 14.94 (2010: CHF 15.05).

The average price of shares sold in 2011 was CHF 9.31 (2010: 7.82 CHF).

6. Reconciliation of equity

CHF Share capital General reserve Reserve for treasury shares Free reserves Net income Total

from capital contribution 1

from retained earnings 2

from capital contribution 1

from retained earnings

Balance 31 December 2010 920 640 000 648 346 529 124 032 351 – 141 761 615 95 219 936 1 930 000 431

Treasury share transactions – 57 116 346 57 116 346 –

Appropriation of profit/loss

carried forward to reserves

95 219 936 – 95 219 936 –

Reclassified Capital

contribution reserve

1 264 297 991 – 1 264 297 991 –

Capital contribution 262 369 016 863 733 498 1 126 102 514

Profit of the financial year 124 436 035 124 436 035

Balance 31 December 2011 1 183 009 016 2 719 261 672 – 1 264 297 991 181 148 697 – 236 981 551 124 436 035 3 18 538 980

1 This amount of capital contribution reserves is subject to the approval of the Swiss Federal Tax Administration. Until now, the Swiss Federal Tax Administration provisionally confirmed qualifying capital contributions of approximately CHF 1.6 billion. For further information see also note 8 to the financial statements of Clariant Ltd.

2 This amount corresponds to capital contribution reserves formerly offset with losses. For further information see also note 8 to the financial statements of Clariant Ltd.



7. Bonds and certificates of indebtedness

CHF thousand Interest rate Term Amount 31.12.2011 Amount 31.12.2010

Straight bond 3.125 2007 – 2012 250 000 250 000

Convertible bond 3.000 2009 – 2014 299 990 300 000

Certificate of indebtedness 6.211 2008 – 2011 – 32 080

Certificate of indebtedness 2.461 2008 – 2011 – 128 320

Certificate of indebtedness 3.740 2011 – 2014 299 160 –

Certificate of indebtedness 4.240 2011 – 2016 152 671 –

Straight bond 2.750 2011 – 2015 200 000 –

Straight bond 3.125 2011 – 2017 100 000 –

Total 1 301 821 710 400

The bond issued in 2007 of CHF 250 million was reclassified from

non-current to current liabilities.

In May and June 2011, Clariant Ltd launched two new bonds in the

amount of CHF 200 million and CHF 100 million with a term of 4.5

years and 6 years respectively.

In October 2011, a certificate of indebtedness with a nominal

amount of EUR 100 million was paid back. Including accrued inter-

est the repayment amounted to CHF 124 million.

In October 2011, Clariant Ltd issued two certificates of indebted-

ness in the German market amounting to EUR 365 million. The two

certificates have a term of 3 years (EUR 242 million) and 4.5 years

(EUR 123 million) each with fix and float coupons. The interest to

be paid for the certificates of indebtedness is based on six months

Euribor (variable tranche) or mid-swap (fixed tranche), respectively,

plus a credit margin premium (spread).

8. General reserves

The general reserve must be at least 20 percent of the share capi-

tal of Clariant Ltd as this is the minimum amount required by the

Swiss Code of Obligations.

Under Swiss tax law, qualifying capital contributions contributed to

the company Clariant Ltd by its shareholders since 1997 may be dis-

tributed without being subject to Swiss withholding tax effective

1 January 2011, if certain conditions are met. The balance sheet

2011 of Clariant Ltd was adapted in order to document the potential

capital contribution reserves in the relevant sub-accounts (General

reserves from capital contributions and treasury reserves from

capital contributions) of the General reserve as requested by the

Swiss Federal Tax Administration (SFTA). Until now, the SFTA pro-

visionally confirmed capital contribution reserves of approximately

CHF 1.6 billion. Due to a remaining Swiss withholding tax expo-

sure, these provisionally confirmed capital contribution reserves

cannot be distributed until the SFTA has explicitly allowed such

distributions (request currently pending as per 13 February 2012).

At this stage, the SFTA is of the opinion that capital contribu-

tion reserves which were formerly offset with losses (CHF 1.26

billion) will not qualify as capital contribution reserves anymore

(even if compensated with newly generated retained earnings).

Clariant Ltd does not unconditionally share this opinion, why such

potential capital contribution reserves are also documented as

capital contribution reserves in the balance sheet 2011.

9. Reserve for treasury sharesClariant Ltd has met the legal requirements for treasury shares

required by the Swiss Code of Obligations.

10. Contingent liabilities

CHF mn Outstanding

liabilities

31.12.2011

Outstanding liabilities

31.12.2010

Outstanding liabilities as guarantees in favor of Group companies 973 984

Outstanding liabilities as guarantees in favor of third parties – –

165financial report


11. Emoluments to members of the Board of Directors and the Executive Committee

1. Board of Directors

Emoluments to members of the Board of Directors

Name Member of the

Board of Directors

Cash compensation Social contribution Cash amount

2011

Cash amount

2010

Membership

in 2011

Honorarium in CHF

Committee fee in CHF

in CHF in CHF in CHF

Jürg Witmer full year 500 000 20 000 37 878 557 878 567 759

Rudolf Wehrli full year 250 000 40 000 22 719 312 719 316 479

Peter Isler full year 100 000 20 000 8 626 128 626 133 844

Peter Chen full year 100 000 40 000 13 640 153 640 150 103

Klaus Jenny full year 250 000 60 000 20 678 330 678 336 198

Dominik Koechlin full year 100 000 20 000 9 228 129 228 132 156

Carlo G. Soave full year 100 000 20 000 9 228 129 228 132 156

Hariolf Kottmann 1 full year – – – – –

Dolf Stockhausen 2 since 15.05.2011 37 500 7 500 2 884 47 884 NA

Konstantin Winterstein since 15.05.2011 37 500 7 500 – 45 000 NA

Total 1 475 000 235 000 124 881 1 834 881 1 768 695

1 After taking over the function as CEO, no further Board of Directors‘ compensations are extended.2 Due to contractual agreement payout will take place in 2012.

Name Share based compensation

in 2011 3

Share based compensation

in 2010 3

Jürg Witmer 194 110 110 804

Rudolf Wehrli 97 228 57 833

Peter Isler 75 410 41 463

Peter Chen 75 410 41 463

Klaus Jenny 97 228 58 528

Dominik Koechlin 75 063 35 906

Carlo G. Soave 75 063 35 906

Hariolf Kottmann – 7 733

Dolf Stockhausen – NA

Konstantin Winterstein – NA

Total 689 513 389 636

3 The values above are in accordance with IFRS principles.


Clariant Annual Report 2011166

Shares held

Name Number of shares granted

Number of shares granted

Number of shares within

vesting period


vesting period

Number of privately

held shares

Number of privately

held shares

31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010

Jürg Witmer – – – 1 323 137 628 61 305

Rudolf Wehrli – – – 1 323 12 490 7 305

Peter Isler – – – 1 323 29 554 16 908

Peter Chen – – – 1 323 5 931 4 087

Klaus Jenny – – – 1 323 77 019 41 422

Dominik Koechlin – – – – 11 100 10 100

Carlo G. Soave – – – – 15 100 15 100

Hariolf Kottmann 1 See EC Overview

Dolf Stockhausen – NA – NA 11 461 304 NA

Konstantin Winterstein – NA – NA 5 000 NA

Total – – – 6 615 11 755 126 156 227

Options held

Name Number of options granted

Number of options granted

Number of options within vesting period


Number of excercisable

options


options

31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010

Jürg Witmer 60 241 63 500 123 741 63 500 80 000 80 000

Rudolf Wehrli 30 120 31 750 61 870 31 750 40 000 40 000

Peter Isler 24 096 23 850 47 946 23 850 20 000 20 000

Peter Chen 24 096 23 850 47 946 23 850 20 000 20 000

Klaus Jenny 30 120 31 750 61 870 31 750 40 000 40 000

Dominik Koechlin 24 096 23 850 47 946 23 850 20 000 20 000

Carlo G. Soave 24 096 23 850 47 946 23 850 20 000 20 000

Hariolf Kottmann 1 See EC Overview

Dolf Stockhausen 2 – NA – NA – NA

Konstantin Winterstein – NA – NA – NA

Total 216 865 222 400 439 265 222 400 240 000 240 000

1 After taking over the function as CEO, no further Board of Directors compensations are extended. Please refer to the Executive Management table.2 Additionally holding: 20 700 options to sell

Emoluments to members of the Board of Directors and the Executive Committee (continued)


167financial report

2. Executive Committee

Hariolf Kottmann

Others Total 2011 Total 2010

Annual compensation

Base salary 1 000 000 2 450 000 3 450 000 3 100 000

Cash bonus 1 020 150 2 094 708 3 114 858 4 092 000

Share-based bonus:

Value 1 279 209 2 345 756 3 624 965 3 264 787

Options:

Value 412 568 564 750 977 318 461 853

Other payments 1 490 805 1 424 630 2 915 435 2 636 920

Total annual compensation 5 202 732 8 879 844 14 082 576 13 555 560

Total compensation 5 202 732 8 879 844 14 082 576 13 555 560

On 1 July 2011 Dr. Hans-Joachim Müller joined the Executive Com-mittee as a member. Due to his contractual relationship with Süd-Chemie, he received an additional payment from Süd-Chemie for his responsibilities, that is not included in the Executive Commit-tee Remuneration in the table above. This payment includes royalty payments for 2010 (EUR 810 990), eligibility for royalty for 2011, and cash payments for Long-Term-Incentives in the amount of EUR 530 145 (Payments in 2011 and 2012).


The values above are in accordance with IFRS. Other benefits include contributions to pension funds (73 percent), social security (26 percent) and other allowances (1 percent). The totals of the table above together with the totals of the remuneration for the Board of Directors add up to the total reported in note 31. Related parties of the consolidated financial statements for the transaction with Key Management.



Shares held

Name Number of shares granted 2

Number of shares granted 2


vesting period


vesting period

Number of privately

held shares

Number of privately

held shares

for 2011 for 2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010

Hariolf Kottmann 1 136 020 95 274 131 637 84 000 479 637 452 000

Patrick Jany 76 172 56 688 59 909 40 613 102 296 39 904

Christian Kohlpaintner 76 172 56 688 28 344 – 90 000 60 000

Mathias Lütgendorf 151 172 81 688 44 094 15 750 211 844 108 500

Hans-Joachim Müller 3 69 044 NA 50 000 NA NA

Total 508 580 290 338 313 984 140 363 883 777 660 404

Options held

Name Number of options granted

Number of options granted




options


options

31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010

Hariolf Kottmann 120 482 142 900 263 382 142 900 128 000 1 128000 1

Patrick Jany 60 241 60 000 120 241 60 000 100 000 100 000

Christian Kohlpaintner 60 241 60 000 120 241 60 000 –

Mathias Lütgendorf 60 241 60 000 120 241 60 000 –

Hans-Joachim Müller 3 – NA – NA – NA

Total 301 205 322 900 624 105 322 900 228 000 228 000

1 Including shares immediately vested.2 The number of shares granted as part of the matching share program will be determined after the balance sheet date. The number disclosed is based on the target achievement, the amount of variable

estimated remuneration accrued and an estimated fair value of the shares at the grant date. Therefore correction of the 2010 figures were made.3 Member of the Executive Committee since 01.07.2011

Emoluments to members of the Board of Directors and the Executive Committee (continued)


169financial report


14. Risk management

The Board of Directors and Group Management annually engage in a comprehensive risk assessment procedure, which includes the risks arising on the activities of Clariant Ltd. In the process, the enterprise risks and their developments are analyzed and it is ensured that measures to the effect of their containment are implemented. Particular attention is paid to the risks of financial reporting. A more detailed description of the risk assessment can be found in the notes of the consolidated financial statements in note 2, “Enterprise risk management” on page 109.

12. Voting and legal registration limitations

In accordance with article 5 of the Articles of Incorporation, no limitations exist with regard to registration of shares which are acquired in one’s own name and on one’s own account. Special rules exist for nominees.

In accordance with article 12 of the Articles of Incorporation, each share has the right to one vote. A shareholder can only vote for his own shares and for represented shares up to a maximum of 10 percent of total share capital.

13. Shareholders holding three percent or more of total capital

These percentage figures are based on information received from the respective shareholders. At 31 December 2011 former share-holders of Süd-Chemie AG, who had exchanged their shares against Clariant shares, were holding in total 15.127 percent of the share capital of Clariant. These shareholders are affiliated with each other of family or other reasons. In addition, the following shareholders held a participation of 3 percent or more of the total share capital: Fidelity Management & Research, Boston (United States), 5.23 per-cent (2010: 5.23 percent); Teachers Insurance and Annuity Asso-ciation of America – College Retirement Equity Fund (TIAA-CREF), New York (United States), 3.097 percent (2010: < 3 percent); CS Asset Management Funds AG, Zürich (Switzerland), 3.0184 percent (2010: 3.04 percent). No other shareholder was registered as holding 3 percent or more of the total share capital. At 31 December 2010 the following shareholders held a participation of 3 percent or more of the total share capital: AXA, Paris (France), 5.09 percent; Amundi, Paris (France), 3.07 percent. No other shareholder was registered as holding 3 percent or more of the total share capital.



Appropriation of available earnings

The Board of Directors proposes to transfer the gains for the finan-cial year in the amount of CHF 124 436 035 to free reserves.

Available unappropriated earnings CHF

Balance from prior year –

Gain for the financial year 124 436 035

Total available unappropriated earnings 124 436 035

Appropriation CHF

Transfer to free reserves – 124 436 035

Balance to be carried forward –

Proposed payout of nominal value reductionThe Board of Directors proposes to repay CHF 0.30 of the nomi-nal value of each registered share, as a result of a reduction of the nominal value from CHF 4.00 to CHF 3.70 per registered share. The proposed payout would reduce the share capital by CHF 88 725 676.20. The proposed payout of the nominal value reduc-tion of CHF 0.30 each is expected at the end of June 2012, subject to approval by the ordinary General Meeting of shareholders and subject to the fulfillment of the necessary requirements and the entry of the share capital reduction in the Commercial Register of the Canton of Baselland.


171financial report

OpinionIn our opinion, the financial statements for the year ended 31 December 2011 comply with Swiss law and the company’s arti-cles of incorporation.

Report on other legal requirementsWe confirm that we meet the legal requirements on licensing according to the Auditor Oversight Act (AOA) and independence (article 728 CO and article 11 AOA) and that there are no circum-stances incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal control system exists which has been designed for the preparation of financial state-ments according to the instructions of the Board of Directors.

We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements sub-mitted to you be approved.

PricewaterhouseCoopers Ltd

Dr. Daniel Suter Ruth Sigel Audit expert Audit expertAuditor in charge

Basel, 13 February 2012

Report of the statutory auditor to the general meeting of Clariant Ltd, Muttenz

Report of the statutory auditor on the financial statementsAs statutory auditor, we have audited the financial statements of Clariant Ltd, which comprise the balance sheet, income statement and notes (pages 160 to 169), for the year ended 31 December 2011.

Board of Directors’ ResponsibilityThe Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibil-ity includes designing, implementing and maintaining an internal control system relevant to the prepa-ration of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making account-ing estimates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial state-ments based on our audit. We con-ducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the finan-cial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appro-priate in the cir-cumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting pol-icies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial state-ments. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.




Forward-looking statements

Forward-looking statements contained herein are qualified in their entirety as there are certain factors that could cause results to differ materially from those anticipated. Investors are cautioned that all forward-looking statements involve risks and uncertainty. In addition to the factors discussed above, among the factors that could cause actual results to differ materially are the following: the timing and strength of new product offerings; pricing strategies of competitors; the company’s ability to continue to receive adequate products from its vendors on acceptable terms, or at all, and to con-tinue to obtain sufficient financing to meet its liquidity needs; and changes in the political, social and regulatory framework in which the company operates or in economic or technological trends or conditions, including currency fluctuations, inflation and consumer confidence, on a global, regional or national basis.


173financial report


Publication details

PublisherClariant International Ltd, Muttenz

Financial EditorPhilipp Baberschke

ContactHead of Group Communications & Investor Relations Ulrich SteinerTel. +41 61 469 67 45Fax +41 61 469 67 67

Head of Corporate CommunicationsUlrich NiesTel. +41 61 469 61 58Fax +41 61 469 75 49

Websitewww.clariant.com

Ordering addressOrders may be placed on the Clariant website: www.clariant.comor sent in writing to the following address:Clariant International LtdInvestor RelationsRothausstrasse 614132 MuttenzSwitzerland

® Product and service marks protected by Clariant in many countries

®* Product and service marks licensed to Clariant in many countries

© 2011 Clariant International Ltd, Rothausstrasse 61, 4132 Muttenz, Switzerland

Content and editorial officeGFD Finanzkommunikation, Frankfurt

Design, graphics and layoutKuhn, Kammann & Kuhn GmbH, Cologne

PhotographyJo Röttger, Hamburg

PrintingNeidhart + Schön, Zurich

Note about forward-looking statementsThis report contains forward-looking statements based on current assumptions and projections made by management. Such state-ments are subject to known and unknown risks, uncertainties and other factors which may cause the actual results and performance of Clariant International Ltd to differ from those expressed in, implied or projected by the forward-looking information and statements. The information published in this report is provided by Clariant Interna-tional Ltd and corresponds to the status as of the date of publication of this report.

DisclaimerClariant International Ltd published Annual Reports in English and German. The English version is legally binding.

Energy efficient and CO2 compensated printprinted carbon neutralSC2012022003 - swissclimate.ch


5-year group overview 2007 – 2011CHF m 2011 2010 2009 2008 2007

group sales1 7 370 7 120 6 614 8 071 8 533


in Swiss francs (%) 4 8 – 18 – 5 5

in local currencies (%) 16 13 – 14 1 4

operating income before exceptionals 717 696 270 530 539

operating income 507 366 – 20 229 278

ebItDa before exceptionals 975 901 495 783 812

ebItDa 786 646 263 691 628

net income/loss 251 191 – 194 – 37 5

earnings per share 0.86 0.81 – 0.91 – 0.2 0.0

ebItDa margin before exceptionals (%) 13.2 12,7 7.5 9.7 9.5

operating cash flow 206 642 757 391 540

Investment in property, plant and equipment 370 224 135 270 306

R&D expenditures 176 135 150 184 211

Return on Invested Capital (RoIC) (%) 13.1 18.1 5.7 9.0 8.3

Depreciation and amortization 258 205 225 253 273

net working capital 1 1 442 1 132 1 396 1 923 2 176

in % of sales 19.6 15.9 21.1 23.8 25.5

total assets 9 081 5 921 6 092 5 946 7 285

equity (including non-controlling interests) 3 026 1 806 1 896 1 987 2 372

equity ratio (%) 33.3 30.5 31.1 33.4 32.6

net debt 1 740 126 545 1 209 1 361

gearing (%) 58 7 29 61 57

number of employees 22 149 16 176 17 536 20 102 20 931

1 Based on annualized sales of the new Business Units

www.clariant.com

Clariant International LtdRothausstrasse 614132 MuttenzSwitzerland

© Clariant International Ltd, 2012 SAP-

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