CLARIANT: "Hard bread to chew", but...!

European chemical companies are having to grit their teeth, including "our" long-standing model portfolio stock CLARIANT. The headwind is blowing from various directions: In particular, the strong Swiss franc, the lack of restocking by customers and a generally poor macroeconomic environment are not playing into the cards. Without a turnaround, a potential increase in volume remains difficult. Our previous view that the course towards a focused, attractive specialty chemicals group has been set very precisely is of little help here... with the exception of the bioethanol misdevelopment, the rightly decided closure of which is likely to leave deep marks on the 2023 accounts. In our view, however, the "avalanche" has now bottomed out and the meters of "snow" should gradually melt away... but it is still a little too early for "spring fever". But at some point the depleted stocks will have to be replenished, at least sequentially. Various customers may even have miscalculated, because with the enormous tensions on the Red Sea and in the Suez Canal, the emerging supply uncertainty could lead to a build-up of stocks, or at least "safety stocks". So unless all else fails, which we definitely do not expect, the low tide should have been reached in 4Q23! This does not mean that the end markets will not remain challenging in 2024. But we should never forget that the chemical industry is indispensable in today's world!

Nevertheless, BASF has also reported a slump in profits for 2023 - although this is not surprising in Germany: According to preliminary figures, the decline in sales amounted to -21%, while the dip in EBIT (earnings before interest and taxes) compared to the previous year even amounted to -45%. If our MP weighting in CLARIANT were not too high, we would add to the stock below CHF 11. However, we are reducing our price target to CHF 17.50!