Clariant AG

Our stable outlook on Clariant reflects our view that its adjusted EBITDA will grow to about CHF960 million in 2019, with continued positive FOCF exceeding CHF200 million. We view an FFO-to-debt ratio of between 20%-30% on a weighted-average basis as commensurate with the current rating. We also bear in mind management's commitment to the rating, and therefore assume that acquisitions, if any, will be financed prudently. We could take a negative rating action on Clariant if its operating performance weakened, or if it pursued material debt-financed acquisitions without ensuring prudent financing in advance. Downward pressure could also arise if Clariant's dividends were higher than we currently anticipate, leading to adjusted FFO to debt approaching 20%. We could consider a positive

...Clariant has demonstrated steady revenue growth on the back of stronger volumes and prices in 2018, while EBITDA benefited from lower restructuring costs. For the full year, Clariant reported 5% revenue growth in local currency, with some foreign exchange tailwinds from Swiss franc appreciation (4% reported growth). The group benefited from growth across all geographies. In the first quarter of 2019, the organic growth slowed to 2%, with pricing initiatives (+3%) fully offsetting a 1% volume decline (reported sales were still affected by negative foreign exchange). In particular, Plastics & Coatings business areas suffered due to softening in China and the automotive end-market, albeit order intake points to improvement during the year. Our adjusted EBITDA in 2018 amounted to Swiss franc (CHF) 886 million, with a 13.4% margin (versus CHF865 million a year ago). Over the first three months of 2019, reported EBITDA declined by 8% (after restructuring and other one-off costs), with decline...

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