Clariant AG — Investor Presentation 2001

Jul 31, 2001

Business structure

August 15th Clariant Investor Relations , 2001 Rothausstrasse 61 4132 Muttenz 1 Schweiz

Results First Half Year 2001

Group key figures – pre special effects1

in CHF mio	First half 2001	First half 2000	Change in %
Sales2	5 197	5 295	– 2
Gross profit	1 693	1 874	– 10
EBITDA	701	877	– 20
Operating income before
goodwill amortization	451	615	– 27
Income before minority interests	143	286	– 50

1 Unaudited

2 Sales grew +2% year-on-year in local currencies

Results First Half Year 2001

Divisional performance overview

Sales first half1			Change in %
in CHF mio	2001	2000	in CHF	in LC
Textile, Leather & Paper Chemicals2	1 254	1 298	– 3	+ 1
Pigments & Additives	1 003	1 088	– 8	– 5
Masterbatches	556	597	– 7	– 4
Functional Chemicals2	967	941	+ 3	+ 6
Life Science & Electronic Chemicals2	858	786	+ 9	+ 12
Cellulose Ethers & Polymerisates	559	585	– 4	0
Total	5 197	5 295	– 2	+ 2

2 As per division the following acquisition effects resulted in the first half of 2001

CHF 13 mio Christianson for January until May

TLP: CHF 30 mio BTP for January-February

CHF –4 mio Clariant Tokuyama for January until June LSE: CHF 77 mio BTP for January-February

August 15th Clariant Investor Relations , 2001 Rothausstrasse 61 4132 Muttenz 1 Schweiz

Divisional EBITDA1

	EBITDA
in CHF mio	First half 20012	% O.S.2	% O.S.3	First half 2000	% O.S.
Textile, Leather & Paper Chemicals	130	10.4	13.6	221	17.0
Pigments & Additives	139	13.9	18.5	238	21.9
Masterbatches	60	10.8	12.1	81	13.6
Functional Chemicals	81	8.4	11.7	140	14.9
Life Science & Electronic Chemicals	13	1.5	11.2	141	17.9
Cellulose Ethers & Polymerisates	57	10.2	12.0	88	15.0
Total Divisions	480	9.2	13.5	909	17.2
Corporate4	93	–	–	– 32	–
Total Group	573	11.0	15.3	877	16.6

1 Unaudited

2 After cash restructuring expense 3 Before cash restructuring expense 4 H1/01 includes an exceptional write off of CHF 94 mio for a not realized project of the FUN division

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Results First Half Year 2001

Operating income pre GWA1

	First half 2001			First half 2000
	in CHF mio2 ROS in %2		ROS in %3	in CHF mio ROS in %
Textile, Leather & Paper Chemicals	77	6.1	11	165	12.7
Pigments & Additives	59	5.9	14.3	200	18.4
Masterbatches	44	7.9	9.4	68	11.4
Functional Chemicals	47	4.9	8.4	97	10.3
Life Science & Electronic Chemicals	– 95	– 11.1	3.2	65	8.3
Cellulose Ethers & Polymerisates	33	5.9	7.7	67	11.5
Total of divisions	165	3.2	9.3	662	12.5
Corporate	– 61	–	–	– 47	–
Total Group	104	2.0	8.7	615	11.6

1 Unaudited

2 After restructuring expense

3 Before restructuring expense

August 15th Clariant Investor Relations , 2001 Rothausstrasse 61 4132 Muttenz 1 Schweiz

Raw materials and energy

Please note all amounts are estimated, year-on-year comparisons

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Raw materials outlook

Outlook 2001/2002

• z Price increase seems to have leveled out, this is underlined by the development of spot prices and contracts
• z Integrated ERP platform due to bundling of procurement and SAP platform roll-out
• z Reduction of raw material dependency by slimming down the divisional portfolio
  • PVA/PVB sale reduced VAM dependency

Textile, Leather & Paper Chemicals I

Sales CHF 1 254 mio, –3% in CHF, +1% in LC EBIT margin 11.0% (Previous year: 12.7%) EBITDA margin 13.6% (Previous year: 17.0%)

• z Overall volumes and market position quite stable but sales adversely affected by product mix changes, price decreases and competitive action
• z Strong portfolio of specialty services and products in all segments
• z Global key account management successful in all segments
• z Downturn of US textile industry
• z Sluggish sales in the US automotive sector
• z Positive impact from BTP leather business confirmed

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Results First Half Year 2001

Textile, Leather & Paper Chemicals II

• z Sales in Asia initially satisfactory, were hit by the effects of reduced demand from the US and weak consumption in Japan
• z Procurement bundling and efficient supply systems allowed stabilization of margins despite 2-3% year-on-year increase in raw material prices
• z Very strong performance in South America particularly Brazil
• z Good business trend in Italy and Spain

Textile, Leather & Paper Chemicals 2001/02

2001

Outlook 2001/2002

• z TLP market mostly influenced by the economic cycle development in the US and Europe
• z Currency depreciation in Asia could stay unchanged

2002

• z Expected recovery of GDP growth in 2002 will have positive influence from mid 2002 onwards
• z Clariant expects profitable growth in all business units based on:
• Strong global presence in textiles and leather
• Superior product ranges
• New products
• Cost management

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Textile, Leather & Paper Chemicals 2002

2002

Outlook 2001/2002

• z Measures underway to meet the challenge:
  • Restructuring and shutdown mainly of production sites
  • Restrictive investments
  • Reduction in working capital due to new innovative logistic concepts and software programs for higher inventory turnover
  • High volume products will be further replaced by individualized products
  • Focus on the Asian market in textiles Æ more growth potential
  • Margins will improve in North America's hydrosulphite business, and dye sales should increase
  • Strong growth in dye & optical brightener business in Asia-Pacific

Pigments & Additives I

Sales	CHF 1 003 mio, :–8% in CHF, –5% in LC
EBIT margin	14.3% (Previous year: 18.4%)
EBITDA margin	18.5% (Previous year: 21.9%)

Pigments

• z Volume growth areas were Asia and Latin America, but the positive variation was offset by currency devaluation in those countries, leaving a flat consolidated impact
• z As market share has been maintained overall, the decrease in volumes reflects sluggish demand
• z Due to lower sales volume and inventory reduction, capacity utilization was reduced, with a negative impact on EBIT

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Results First Half Year 2001

Pigments & Additives II

• z Paints markets weak due to general weakness of end-user demand
• z Strong competitive pressure in the plastics market, but a positive trend for the 2nd quarter due to new product developments like Driz Pearls and successfully introduced new products aimed to counter the competition
• z Despite a difficult environment, it was possible to increase sales in Ink Pigments in LC, which shows the competitiveness of products & pricing in the market place. More Asian business could be realized
• z Lower margin in additives than in 2000 due to pricing and a changed product mix. US/Japan weak

Pigments & Additives 2001

2001

• z Pigments with cautious outlook but strong cost cutting steps
• z Non Impact Printing (BU Pigments) should continue to grow strongly
• z Additives and Ink Pigments should grow with success of marketing efforts and new launches
• z Sales and margin increase in the Additives business unit in the second half 2001

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Pigments & Additives 2002

2002

Outlook 2001/2002

• z Significantly more flexibility in cost base through the sale of the Cassella/Offenbach site
• z 2002 newly expanded capacity in Tianjin in Ink Pigments. Sales are expected to grow from mid 2002 onwards
• z The successful introduction of new products in 2001 will continue in 2002 and contribute to increase market share and margins (Ink Pigments)
• z For 2002 stronger growth with Polymer Additives, Flame Retardants and Coatings Additives

Masterbatches I

Sales		CHF 556 mio, –7% in CHF, –4% in LC
EBIT margin	9.4%	(Previous year: 11.4%)
EBITDA margin		12.1% (Previous year: 13.6%)
Capital turnover	2.27	(Previous year: 2.16)

z Europe

• Slowing economic growth and weak fiber market in the Benelux
• Growing PET bottle business and good car business development

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Results First Half Year 2001

Masterbatches II

• z Americas
  • Consumer confidence in the US weighs on businesses
  • Downward plastics market
  • Masterbatches for packaging, medical applications and construction were solid
  • Various measures taken in early 2001, i.e. shutdown of one plant and rationalization
• z Asia-Pacific
  • Good sales development despite increasing negative impact from US/Japan slowdown
  • Big success with color systems, special effects and functional additives used for example in coatings for fungicides

Masterbatches Global Outlook

• z Europe
  • Slower sales in the US affects Europe. Strict capacity management implemented with targeted protection of return on net assets
  • Color management systems and expansion of additive MB business will lead to positive earnings contribution
• z Americas
  • Cautious outlook for remainder of 2001
  • 2002 earnings improvement by rationalization underway
• z Asia-Pacific
  • Slowdown of demand in H2/01. But positive impact from Clariant's measures such as technical improvements in production

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Functional Chemicals I

Results First Half Year 2001

Sales	CHF 967 mio, +3% in CHF, +6% in LC
EBIT margin	8.4% (Previous year: 10.3%)
EBITDA margin	11.7% (Previous year: 14.9%)

Detergents

• z High energy and raw material costs, negative FX effects due to USD sourcing, pricing pressure and restructuring costs all weighed on result
• z Product portfolio streamlining through phase out in detergents to continue until year end
• z Volumes in most important market Europe down
• z Streamlining of projects continued

Functional Chemicals II

Performance Chemicals

• z Strong sales increase and good earnings
• z New business gained in functional fluids
• z New applications developed in cooperation with the TLP division for paper treatment
• z Crop protection application business below expectations due to weak agro markets

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Functional Chemicals III

Process Chemicals

Results First Half Year 2001

• z Good sales in oilfield chemicals and mining
• z High raw material costs a burden, but dependence reduced through optimized sourcing and product mix improvement
• z Various reorganizations, portfolio streamlinings and acquisitions accomplished
• z Marketing across business lines: new applications for fertilizer industry with products for mining chemicals developed

Biocides

• z Reorganized and integrated in all aspects
• z Ready to exploit Clariant network in order to grow sales and earnings
• z Next year 25% growth expected

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August 15th Clariant Investor Relations , 2001 Rothausstrasse 61 4132 Muttenz 1 Schweiz

Functional Chemicals Outlook I

Detergents

• z Volume growth and price increases for H2/01
• z Raw material prices will level out
• z Concentration of sites and new projects to be implemented
• z For 2002 higher capacity utilization

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Functional Chemicals Outlook II

Performance Chemicals

Outlook 2001/2002

• z Cautious development of good business expected in H2/01
• z Outlook for 2002 is very good due to much improved portfolio and better cost structure

Process Chemicals

• z Stable business in H2/01 expected
• z For 2002 expectation of strong growth in sales and earnings
• z Gain of market shares

Biocides

• z No change expected in H2/01
• z Significant growth to start in 2002

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August 15th Clariant Investor Relations , 2001 Rothausstrasse 61 4132 Muttenz 1 Schweiz

Life Science & Electronic Chemicals I

Sales	CHF 858 mio, +9% in CHF, +12% in LC
EBIT margin	3.2% (Previous year: 8.3%)
EBITDA margin	11.2% (Previous year: 17.9%)

Electronic Materials

• z Significant slowdown of semiconductor industry since Q2/01 which represents 60% of sales
• z Japan now also affected by downswing
• z Consequence: volumes down, capacities underutilized at customers and inventory reductions combined with pressure on margins
• z Volumes in the flat panel business which represents approximately 30% of the BU's sales - are up +20%. Gain of market share, but price reduction of 10-15%
• z The set-up of new products and intensified customer service (due to new product evaluation) leads to higher costs. But both measures represent an investment in margins for an upswing in the future

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Results First Half Year 2001

Life Science & Electronic Chemicals II

Agro

• z End markets slow due to low grain prices, weather problems and zero growth
• z Strong competition from India and China in intermediates in addition to selective pricing pressure
• z Customer registration of important key product at the EPA still pending
• z Product price increases could be implemented
• z Evaluation of several active compounds
• z Traditional lower sales in H1/01 than in H2

Life Science & Electronic Chemicals III

Pharma

• z Good results with multicustomer-active ingredients
• z Multicustomer-intermediates business is very competitive
• z Delays and approval problems with three major projects/products in custom manufacturing lead to idle facility costs and inventory build up
• z Good business in Japan opened up new markets for Clariant

Specialty Intermediates

• z Restructuring pushed forward
• z Sale of Cassella-Offenbach site and three plants in Frankfurt-Griesheim to third party

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Outlook 2001/2002

Life Science & Electronic Chemicals Outlook I

Electronic Materials

• z Cyclical downswing to level out until about mid 2002
• z Upswing will lead to quick growth and good earnings in flat panels and in photoresists
• z Portfolio with new products (i.e. Light Management Films, applications for Ferro Liquid Crystal Displays, Anti Reflective Coatings) will contribute to market share gain

Life Science Molecules

Agro

• z New product introductions in H2/01
• z Strong product pipeline of more than 30 projects will drive above-average growth until end 2002
• z Restructuring efforts in plants will increase earnings levels
• z Start up of 3 new intermediates with sales increase in H2/01

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August 15th Clariant Investor Relations , 2001 Rothausstrasse 61 4132 Muttenz 1 Schweiz

Life Science & Electronic Chemicals Outlook II

Pharma

Outlook 2001/2002

• z Targeted growth from 58 projects in pipeline
• z H2/01 will remain difficult with no earnings improvement
• z Streamlined production, strict cost management, broader customer base, better project management, product pipeline and more focused project selection in 2002
• z Revitalization of outsourcing trends will quickly support business

Specialty Intermediates

• z Various underutilized capacities in industry intermediates such as diketene derivatives and pigment intermediates
• z Optimization and restructuring will continue

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Results First Half Year 2001

Cellulose Ethers & Polymerisates I

Sales	CHF 559 mio, –4% in CHF, 0% in LC
EBIT margin	7.7% (Previous year: 11.5%)
EBITDA margin	12.0% (Previous year: 15.0%)

Cellulose Ethers / Emulsion Powders (CE&EP)

• z Downswing in construction industry in Germany leads to volume decrease
• z Stable prices, unfavorable FX rates and far higher raw material prices contributed to the margin reduction
• z Good business with hydroxyethylcellulose for premium emulsions in the paint industry

Cellulose Ethers & Polymerisates II

Emulsions

• z Slowdown in Europe and bad weather influenced construction industry
• z Pricing pressure from global trend to low priced paints
• z Raw material price increase mainly VAM squeezed margins
• z Price increases implemented, but time lag and reduced ability to roll them over to customers due to heavy competition in the industry
• z 50% Joint Venture with Harlow Chemical Company sold to Yule Catto in August

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Results First Half Year 2001

Cellulose Ethers & Polymerisates III

PVA/PVB

• z Generally good growth, especially in PVA
• z Growth despite slowdown in customer industries, i.e. paper and construction
• z Strategy to globalize resulted in first successes
• z Pricing stable to positive, but VAM raw material impact hindered margin increase
• z Business has been sold to Kuraray:
  • Kuraray already has backward integration
  • Clariant does not want to invest into backward or forward integration
  • Good sale price could be realized now

Cellulose Ethers & Polymerisates

• z Expected deconsolidation of PVA/PVB in H2/01
• z Capacity reductions in CE & EP will stabilize earnings, but upswing in H2/01 is not on the agenda
• z Emulsion will improve margins gradually due to cost-cutting measures taken and price increases that started in 2000
• z Brighter outlook for 2002 both for sales and margin recovery

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Results First Half Year 2001

German restructuring projects

• z Operating and site responsibilities transferred to divisions
• z Flexible and efficient structures
• z Reduction of complexity and streamlining of portfolio
• z Concentration on specialties and reduction/elimination of semispecialty activities
• z Cost reduction of at least DEM 100–150 mio
• z Headcount reduction of 800
• z Lowering the break-even sustainably

To be finalized by mid 2002 Æ accounting effects in 2002/03

Allessa: Positive EBIT impact for Clariant

• z Sale of Clariant's second biggest site EBIT impact to Allessa Chemie
• z Reduces the headcount by ~ 1 500
• z Guaranteed off-take with time limit
• z Exit from low margin commodity production (sales p.a. ~ CHF 80 mio)

Please note all amounts are estimated

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August 15th Clariant Investor Relations , 2001 Rothausstrasse 61 4132 Muttenz 1 Schweiz

Divestitures successfully completed

• z Three of five planned disposals have already been successfully completed during 2001
• z Sale of Cassella-Offenbach
• z Sale of PVA/PVB business unit to Kuraray
• z Sale of 50% joint-venture stake in Harlow Chemicals Company to Yule Catto
• z Two more disposals in the fields of paper chemicals and specialty intermediates are planed to be completed by year end
• z Gross cash-inflows of about 1.5 times sales
• z After-tax net result impact of ∼ CHF 450 mio to be accounted for in H2/01

1 Net book value

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Results First Half Year 2001

Innovation at Clariant

Market launches will lead to high growth, sales and earnings

• z Committed to success through innovation
• z Our R& D efforts are application and customer driven
• z Shift of portfolio quality to specialties
• z Large high quality portfolio pipeline of short-, mediumand long-term projects
• z Specialty and growth products in the introduction phase
• z Well positioned in businesses growing faster than GDP

• Latin America and Asia stable despite weaker currencies and downswing in Japan
• z Decreased operating profit mainly due to raw materials and idle facilities
• z Gross margin reduction of 2.8% from H1/00 to 32.6% in H1/01

First half 2001 results at a glance II

• z Goodwill impairment of CHF 1.2 bn
• z One-off restructuring measures of CHF 347 mio
• z Financial results improved
• z Taxes influenced by special effects with the underlying 2001 tax rate unchanged around 32% of cash earnings before tax and goodwill amortization
• z Book loss reduces equity base to CHF 2 bn

Analysis of sales development1

August 15th Clariant Investor Relations , 2001 Rothausstrasse 61 4132 Muttenz 1 Schweiz

Development of operating profit in the first half

Comparison 2001 versus 2000 in CHF mio

Cash flow & net financial debt

Results

Results First Half Year 2001

• z Operating cash flow decreased to CHF 595 mio in H1/01 compared to CHF 700 mio in H1/00 mainly due to the decline in operating performance
• z Higher inventories due to sluggish sales increased net current assets – despite active management – by CHF 175 mio over year-end 2000
• z Investments in fixed assets increased in the first half 2001 by CHF 60 mio year-on-year due to new production facilities for exclusive customer projects
• z Increased net debt to CHF 5.3 bn: gearing ∼260%

Net debt reduced by end 2001

• z 2001 CAPEX budget cut: CHF 100 mio
• z Net current assets will be reduced
• z Asset disposal program will yield gross proceeds of ~ CHF 1 bn and streamline the portfolio
• z Restructuring program will lower cost base by CHF 300 mio

Restructuring Costs – divisional breakdown

August 15th Clariant Investor Relations , 2001 Rothausstrasse 61 4132 Muttenz 1 Schweiz

Regional breakdown of restructuring costs – Plan I

• z Goodwill of CHF 2.5 bn from BTP reduced by CHF 1.2 bn
• z Future BTP goodwill amortization CHF 69 mio (previously CHF 135 mio)

Rothausstrasse 61 4132 Muttenz 1

Schweiz

Earnings to improve in 2002

• z 2001 stable
  • Initial effects of restructuring
  • EU downturn impact
  • Operating margin for full year 2001 not to exceed margin of H1/01
• z 2002 earnings to improve
  • Restructuring measures to cut costs by CHF 300 mio within next two years
  • Many newly launched products will gain established growth positions in markets
  • Potential upswing of major economies could start in H1/02