For more than a week, the Muttenz group has had to answer questions about serious auditing irregularities dating back two years. The news, said to have been triggered by a whistleblower’s action, broke shortly before Conrad Keijzer, appointed as CEO at the end of 2020, planned to present financial results for 2021 that would have shown a 15% sales rise and an EBITDA margin of 16-17%, well inside the forecast range.

Keijzer this week was also expected to present a strategic plan for moving forward after the extended period of turbulence. On news that both publication of results and the annual shareholders meeting had been delayed, Clariant’s share price in Zurich fell by as much as 20%. The reportedly steepest intraday drop since September 2001 initially wiped out more than 1.3 billion Swiss francs in value.

Clariant’s board is said to have been only belatedly informed about a five month-long internal audit being led by accountants from Pricewaterhouse Cooper (PwC), who had declined to sign off on financial results. The company has since hired Deloitte and Gibson, Dunn & Crutcher to lead an independent audit of its books and said that results for 2020 and the first half of 2021 may have to be restated.

A criminal investigation is not in progress, the company stressed. Clariant said also that the irregularities do not concern sales or cash flow, but relate to costs booked under accrual accounting rules. Keijzer told analysts that the internal investigation is focusing on a small group of employees in one or in one or more emerging market offices, with collusion from “one or more individuals” in head office.

While a few employees have been suspended, a larger group has been told that all of their future bookings in Clariant’s accounting system will have to be approved by compliance, management said at a press briefing. But Keijzer said the company also will need to assess “cultural issues”, as there are “are strong indications” that some employees in thought tricking the system was good if it helped to better meet the guidance.

A former Clariant senior executive who left last year told the Bloomberg news agency that some problems might have been anticipated, as the Swiss player for some time has been under “huge pressure, both internal and external,” to change its entire corporate focus.

In a corporate revamp lasting several years, the company has divested former key businesses that had lower margins, while restructuring others. The moves have gone hand in hand with biting cost-cutting measures, including layoffs.

A planned merger with US chemical producer Huntsman fell afoul of activist investor White Tale Holdings in late 2017, and a proposed merger in plastics with major shareholder (31.5%) SABIC abruptly collapsed in mid-2019 for unexplained reasons. Clariant meanwhile has also sold its once market-leading masterbatch portfolio to US plastics player Avient (formerly PolyOne). 

In its last major asset sale to date, completed last month, the company divested its global colorants business to Germany‘s Heubach Group and US private equity investor SK Capital, while announcing plans to repurchase a minority stake. Between divestments, Clariant has made several bolt-on acquisitions and invested in its catalyst business in Germany and China.

Author: Dede Williams, Freelance Journalist