Swiss specialty chemicals maker Clariant said it expected a further slowdown in economic activity as customers in its plastic and coatings businesses run down stocks, after the strong Swiss franc weighed on third-quarter profit.

Clariant, whose products put color into plastics, said on Monday that sales in the third quarter rose 25% in local currencies to 1.865 billion Swiss francs, slightly better than the average forecast in a Reuters poll.

Chief Financial Officer Patrick Jany said the slowdown noted in the second quarter in the plastics industry had spread into pigments, with customers placing smaller, more cautious orders as economic uncertainty clouded their outlook.

"Our customers are extremely cautious in managing their inventories because they don't have a clear view on how 2012 will develop," Jany told Reuters in a telephone interview.

"Therefore the general tendency is to replenish what you have sold and try to reduce you inventories."

This echoes comments from peers BASF and Belgium's Solvay , who last week said they were bracing for slowing demand as customers run down inventories.

Among those affected were the electronics industry, such as computers and mobile phones manufacturers as well as packaging for products like shampoo bottles, Jany said.

The chemical industry's dependence on highly cyclical machinery makers, car manufacturers and builders makes it especially vulnerable to a downturn.

But Jany said he did not see a return to the situation in 2008 and 2009.

"It's a smooth coming down in terms of orders rather than a collapse," he told a conference call.

"A mixed bag with lower operating result, higher earnings and no hoped-for guidance," Vontobel analyst Patrick Rafaisz said in a note.

Strong Swiss Franc

Clariant, which also makes chemicals that add resilience to a new range of Levi commuter jeans, said it had noted a slowdown in emerging markets over the last few quarters.

But the group said sales in its less cyclical units, which account for some 50% of sales, were holding up well, particularly in the oil and mining services and catalysis and energy units.

Higher raw material costs had been offset by price hikes, while the integration of Sued-Chemie would lead to some 700 job cuts worldwide, Clariant said.

Earnings before interest tax depreciation and amortisation (EBITDA) fell to 216 million francs from 232 million francs a year ago, as the strong Swiss franc ate into margins, despite the Swiss National Bank's rate cap.

The Basel-based company cut its full-year sales and margins target on Sept. 5 basing its new forecasts on exchange rates of 1.14 francs per euro and 0.80 francs per dollar.

Just a day later, the Swiss National Bank set a cap of 1.20 francs per euro to shield the Alpine economy from the threat of recession.

Although the SNB's move had improved the situation with the franc, other currencies remained volatile, Jany said.

"The euro-Swiss franc is slightly more favourable. On the other hand the volatility of the dollar and other emerging market currencies is still very very strong," he said.

Clariant confirmed its guidance for full-year sales between 7.0 billion Swiss francs ($8.9 billion) and 7.2 billion and a margin on the basis of EBITDA of between 12.8 and 13.2%.

Jany said Clariant would focus on growing organically but would consider some small acquisitions in the range of 100 to 400 million Swiss francs.