Switzerland-based specialty chemicals company Clariant delivered growing EBITDA and positive free cash flow in 2016, despite challenges in many of its end-markets. We anticipate that these improvements will be sustainable in 2017 and lead to a funds from operations (FFO)-to-debt ratio of about 30%. We consider the acquisition of two oil production businesses to be the primary reason for the weaker FFO to debt of 25% in 2016, and we note management's focus on improving this ratio. We are therefore revising our outlook on Clariant to stable from negative, and affirming our 'BBB-' long-term corporate credit rating. The stable outlook reflects our view that Clariant will be able to reach and maintain FFO to debt of about 30% in 2017-2018.
