Clariant AG — Investor Presentation 2003

Jan 23, 2003

UBS Warburg: Swiss Alpine Summit 2003

Measuring Value Creation

François Note Chief Financial Officer

Value creation in specialty

Financial control framework

Measuring economic profit

Clariant financial targets

Tracking value drivers

chemicals

Sum-up

Creating value

Growth Value Focused diversification Efficiency

Value creation in specialty chemicals

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

Value drivers in specialty chemicals

* June 2002, Invested Capital as of Dec 31,2001

Source: McKinsey ** Classification based on 1998 - 2001 performance. Acquisition and divestitures included in sales growth figures

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

Decomposition of market valuation for specialty chemicals 1988 - 2002

* Value of current performance based on average (ROICt, ROICt+1) and current WACC with implied market risk premium Source: McKinsey

Value creation in specialty chemicals

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

Drivers of valuation in specialty chemicals 1998 - 2001 Market-to-book 2002*

ROIC** High Average Low Sales growth** Above average 2.6 1.3 1.7 1.6 1.3 2.1 Below average Average cost of capital

* June 2002 (based on invested capital 2001)

** Classification based on 1998 - 2001 performance. Acquisitions and divestitures included in sales growth figures Source: McKinsey

Value creation in specialty chemicals

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

A financial control framework...

Reporting

• Fast monthly close
• Day 2 monthly sales report
• Electronic inter-company invoicing
• Inter-company balances and netting nearly group wide

Planning

• Monthly bottom-up sales and EBIT forecast
• 3 years capital expenditure plan by project
• 5 years business model at business unit level

Value creation in specialty chemicals

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

Slide 7

...Leveraging our unified business software

WINS: pre customized kernel based on SAP R/3 Rolled out since 1998, now covers 75% of sales

Scope

• Production, supply chain, accounting & costing
• Reporting, treasury, safety & environmentalHuman resources, strategic management
• In house Core Competence Centers
• Harmonized master data management
• Implementation process

Value creation in specialty

Financial control framework

Measuring economic profit

Clariant financial targets

Tracking value drivers

chemicals

Sum-up

Business warehouse

Value creation in specialty chemicals

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

Tracking value drivers

Existing

Organic sales growth, currency adjusted

Price change

2003 & later

• Capacity utilization
• Innovation rate
• Total cost of service
• Total capital bound

Value creation in specialty

Financial control framework

Measuring economic profit

Clariant financial targets

Tracking value drivers

chemicals

Sum-up

Sales drivers analysis

	09 =
	A		B		K	-	M	N
			Group Turnover by Product
	Division
	Business Unit
	Material number 1/2
	Deviation (withot/////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////////
				Total Dev	Curr %	Price %	Vol./Str. %	Total %
	Material number			CHF	%	%	%	%
3	111	Product A		-1'420'680	-19.5	6.7	1.2	-11.7
4	222	Product B		-470'062	-3.6	-8.5	6.1	-6.0
5	333	Product C		-1'941'943	-1.6	-8.4	-12.4	-22.3
6	444	Product D		673'118	-3.9	-6.3	12.6	2.4
	રેરિ	Product E		-1'349'715	-3.2	-4.0	-9.4	-16.6
8	666	Product F		-223'038	-8.6	-12.7	19.0	-2.4
9	777	Product G		-201'469	-3.7	-6.0	6.7	-2.9
	888	Product H		-1'909'022	-3.1	-3.9	-16.1	-23.1
	999	Product I		17'427'028	-32.9	-20.2	418.0	364.8

UBS Warburg: Swiss Alpine Summit 2003

Measuring Value Creation

Product innovation analysis

				Microsoft Excel - Product Innovation Analysis (x5APtemp975.xls)
	2			File Edit Yiew Insert Format Tools Data Window Paste Special Earnula Bar Status Bar Properties & Busi
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als	>	ন্ত্রী	Arial	BI → → A ・ に = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = ▼ 8			li
		D14	ll ▼	2000
		A	B	C	D		G
	1		Product Innovation Analysis				period 01.200209.2002
	11					Sales	Quantity
	12		Material number		Year	* 1,000 CHF	· 1,000
	13		111	Product A	1998	1,906	26'980 KG
	14		222	Product B	2000	1'890	23,286 KG
	15		333	Product C	1998	1'886	128'905 KG
	16		444	Product D	1957	1'886	25,269 KG
	17		રેકેર	Product E	1998	1'861	232'100 KG
	18		666	Product F	2002	1.858	20'991 KG
	19		777	Product G	2000	1'852	50,805 KG
	20		888	Product H	2002	1'845	27'490 KG
	21		006666	Product I	1977	1'810	153'030 KG
	22		79901	Product J	1999	1'804	161 763 KG
	23		Overall result			1'370'435	806'170 MIX

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

Value creation in specialty chemicals

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

Measuring economic profit

Corporate costs < 1% of sales

Divisions influence > 90% of their G&A costs

• Divisional assets > 90% of group assets
• Consolidated country operating profit
• Risk-adjusted cost of capital for high risk countries

Measuring Value Creation

Value creation in specialty chemicals

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

Economic profit is tracked at BU level

Share of total sales -60% -40% -20% 0% 20% 40% 60% 80% 100% 19981999200020012002Business units with EP > 0 Business units with EP < 0

Value creation in specialty chemicals

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

Clariant main financial targets

Organic sales growth (currency adjusted) above traditional markets

Reduce net debt to < 2.5x EBITDA

Achieve and sustain positive economic profit

Value creation in specialty chemicals

Financial control framework

Tracking value drivers

Measuring economic profit

Clariant financial targets

Sum-up

Other financial targets

Cost base reduction of CHF 250 million by 2003

• Retention of cost savings > 50%
• Net working capital* < 30% of sales
• Capital expenditure 4 - 5% of sales
• R&D cost 4% of sales
• Recurring tax rate < 30%

Sum-up

Value

Growth

• Strong market positions
• Innovation
• Customer Focus

Efficiency

• Cost Reduction
• Process optimization
• Asset utilization

Focused diversification

• Portfolio management
• Resource allocation and selective growth
• Technology

Creating value for our shareholders and customers

Basis for success: Motivated and educated people

Swiss Alpine Summit 2003

UBS Warburg: Swiss Alpine Summit 2003

Backup

Backup

Business structure as of January 1, 2003

T t i l e x e, & L t h P e a e r a p e r C h i l e m c a s	P i t & g m e n s A d d i t i e s v	M t b t h a s e r a c e s	F t i l u n c o n a C h i l e m c a s	f S & L i i e c e n c e E l i t e c r o n c C h i l e m c a s
F. D f l d e n n e e	G. H k e n c e n	N. G t h o n a	R. M e y e r	J. M h l a e r
T t i l D e x e y e s	C B U t i o a n g I d t i n u s r e s	E u r o p e	D t t e e r g e n s	E l i t e c r o n c M t i l a e r a s
T i l t e x e C h i l e m c a s	B U P l t i I d t i a s c n u s r e s	A i P i f i s a a c c	P f e r o r m a n c e C h i l e m c a s	P h a r m a
P a p e r	B U P i t i r n n g I d i t n u s r e s	N A F T A	P r o c e s s C h i l e m c a s	C t s o m u S h i t y n e s s
L t h e a e r	B U S i l i d p e c a e z I d i t n u s r e s	L t i A i a n m e r c a	B i i d o c e s	S i l t p e c a y C F i h i l n e e m c a s

Cellulose Ethers/ Emulsion Powders

Backup

Creating value

Backup

Growth

Backup

Strong market positions

Number one market position

Amongst Top 5

B a c	k u p

Value

Growth

Strong market positions

• Innovation
• Customer Focus

Efficiency

Focused diversification

Innovation

• R&D efforts are customer-driven Help the customers to differentiate their products
• Add magic to the chemistry
  • – formulations - services - solutions
• Shift towards specialties
• Shorten time to market

R&D expenditures 4%

of sales

Target 30% of sales

with products younger

than 5 years

200 inventions and

3000 patent

applications per year

Committed to R&D as motor for innovation-based sustainable growth

B	k
a	c u p

Value

Growth

Strong market positions

• Innovation
• Customer Focus

Efficiency

Focused diversification

Customer focus

• Tailor-made solutions for customers
• One-stop-shopping if wanted
• Global presence - serving customers locally
  • – following the markets
• Supply chain management
  • – optimizing range of products
  • –optimizing level of inventories

B a	c	k u	p

V	l a u e
	G t h r o w

Efficiency

• Cost Reduction
• Process optimization
• Asset utilization
• Focused diversification

Cost reduction

• More than 75% of all projects completed (Restructuring program 2001)
• US: significant capacity adaption in textile dyes
• France: Lillebonne site closed and transferred to Lamotte
• Italy: Turin site closed and transferred to Milan-Palazzolo site

Germany:

• – Efficiency program
• – Project Cassella-Offenbach
• LSE: closure/ sale of 5 sites will be completed year-end

Cost reduction

200120022003Cost base reduction cumulated, in CHF millions 60 150 250

Growth

Value

Backup

• Process optimization
• Asset utilization
• Focused diversification

Backup

Growth Value

Efficiency

• Cost Reduction
• Process optimization
• Asset utilization
• Focused diversification

Process optimization and asset utilization

Supply chain management

• – Optimizing range of products
• – Optimizing inventory levels
• Standardizing processes
• Optimizing global production network

Backup

Focused diversification

Backup

Portfolio management: Market potential

Slide 29

Portfolio management Divestiture of non-core businesses

Active portfolio management:

• Concentrate on sustainable growth areas
• Reduce raw material dependency
• Reduce high volume dependent products
• Focus on high value added businesses
• Reduce share of cyclical business

Actions:

• 2001: Sale of Cassella- Offenbach to Allessa Chemie
• 2001: Sale of PVA / PVB business unit to Kuraray
• 2001: Sale of 50% stake in Harlow Chemicals joint venture to Yule Catto
• 2002: Sale of European emulsions and emulsion powders businesses to Celanese AG

Efficiency

Growth

Value

Backup

• Focused diversification
  • Portfolio management
  • Resource allocation and selective growth
  • Technology

Value

Backup

Resource allocation and Selective growth

G t h r o w	P d t r o c u t i c a e g o r e s	S i- i l t i e m s p e c a e s	S i l t i p e c a e s	F i n e h i l c e m c a s
E f f i i c e n c y	G t h r o w h i e m p a s s	I t l t h n e r n a g r o w	I t l t h d n e r n a g r o w a n t i l o p e r a o n a l i t / c o m p m e n a r y d d- i i i t a o n a c q s o n s u	f R i d i t l e n o r c e n e r n a t h d d d- g r o w a n a o n i i t i a c q s o n s u
	C t o n c e p	S l i t e e c e v h l t g r o o n w y	I i t n n o v a o n d i h t r v e n g r o w	I i d i t n n o v a o n- r v e n h t g r o w
F d d i i f i t i o c u s e v e r s c a o n	C f h l a s o w i t g e n e r a o n	S l r p s u u	B l d t l a a n c e o s u r p u s	N d e e s
P f l i t t o r o o m a n a g e m e n

Resource allocation and selective growth

Technology R&D expenditures: 4% of sales (1-10% dependent on innovation potential) Capital expenditures: 4-5% of sales (short-term below that level)

Technology

Backup

Network of interdivisional technology teams

Focused on technologies and competencies that Focussed on technologies and competences that are for more than one Division are for core for more than one division