Financial Summary. Key Figures

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SAP-Nr

. 1100242

Profitable Growth under Way

Annual Report 2011

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Sales 7 370 7 120

EBITDA before exceptionals 975 901

EBITDA margin before exceptionals (%) 13.2 12.7

Net income 251 191

Basic earnings per share 0.86 0.81

Operating cash flow 206 642

Investment in property, plant and equipment 370 224

Research & development costs 176 135

Total assets 9 081 5 921

Total equity 3 026 1 806

Equity ratio (%) 33.3 30.5

Net financial debt 1 740 126

Gearing1_ratio_(%) ₅₈ ₇

Employees 22 149 16 176

1_{Net financial debt to equity}

SaLeS by buSIneSS unIt CHF m

Total 2011: 7 370

Industrial & Consumer Specialties 1 473 20 % Masterbatches 1 124 15 %

Pigments 973 13 % Textile Chemicals 675 9 % Oil & Mining Services 620 8 % Leather Services 265 4 % Performance Chemicals1_{1 293 18 %} Functional Materials2 ₄₅₆ _{6 %} Catalysis & Energy2 ₄₉₁ _{7 %}

1_{Performance Chemicals includes the Business Units Additives, Detergents & Intermediates,}

Emulsions, Paper Specialties.

2_{May – December 2011}

SaLeS by RegIon CHF m

Total 2011: 7 370

Europe 3 029 41 % Middle East & Africa 642 9 % North America 958 13 % Latin America 1 144 15 %

Asia/Pacific 1 597 22 %

Cover photo

The cover photo was taken at St. Jakob-Park in Basel, home of the 14-time Swiss football champions, FC Basel. Stadium seats can be made with products from three of Clariant´s Business Units: Additives, Masterbatches and Pigments. Their products provide, amongst other things, vibrant color; block light with their UV stabilizers; repel dust with their antistatics; and fight fire with their flame retardants.

Profi table Growth under Way Annual Report 2011

Clariant

Annual Report 20

11

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business units in 2011

Functional Materials Key FIguReS 20111

Sales (CHF m) 456

EBITDA before exceptional items

(CHF m) 59

Employees 2 829

Functional Materials has been part of the Clariant Group since the acquisi-tion of Süd-Chemie in 2011. This Business Unit is among the market leaders in specialty products and solutions for improving product and efficiency char-acteristics in various industries including adsorbents, solutions for protective packaging, and water treatment.

www.functionalmaterials.clariant.com

Industrial & Consumer Specialties Key FIguReS 2011

Sales (CHF m) 1 473

(CHF m) 251

Employees 1 801

The Industrial & Consumer Specialties Business Unit has the highest sales volume in the Clariant Group and is one of the largest providers of specialty chemicals and application solutions for consumer care and industrial markets such as the agricultural, metalworking, machine-building, and aircraft indus-tries. Its EcoTain®_{label exemplifies its uncompromising pursuit of the principle} of environmental sustainability.

www.ics.clariant.com Catalysis & Energy

Key FIguReS 20111

Sales (CHF m) 491

(CHF m) 107

Employees 2 659

Catalysis & Energy has been part of the Clariant Group since the acquisition of Süd-Chemie in 2011. This Business Unit holds a leading position as a producer of catalysts for the chemical, petrochemical, polymer, refinery, and auto motive industries. It also supplies products into environmental markets and sells energy storage materials such as for lithium-ion batteries.

www.catalysis-energy.clariant.com

Additives Key FIguReS 2011 See Performance Chemicals.

The Additives Business Unit is an important supplier of products with func-tional effects for plastics, coatings, and printing inks. The product range in-cludes flame retardants, waxes, and polymer additives for effects in plastics, varnishes, and other applications.

www.additives.clariant.com

Emulsions Key FIguReS 2011 See Performance Chemicals.

The Emulsions Business Unit is one of the leading suppliers of latex/polymer dispersions for paints, coatings, adhesives, sealants, and for the textile, leath-er, and paper industries. These water-based and therefore environmentally compatible products give colors luminosity and durability.

www.emulsions.clariant.com

Detergents & Intermediates Key FIguReS 2011

See Performance Chemicals.

Detergents & Intermediates is one of the most important producers of key raw materials for detergents and household cleaners. It is also an important sup-plier of chemical intermediates used specifically for producing agrochemicals and pharmaceuticals.

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Sales (CHF m) 265 EBITDA before exceptional items

(CHF m) 26

Employees 595

Leather Services is a leading producer of chemicals and services to the leather in-dustry. The Business Unit offers chemical and technical solutions for the complete leather production process, from beamhouse to finishing.

www.leather.clariant.com

See Performance Chemicals.

Paper Specialties is one of the largest manufacturers of products for optical bright-ness, color, coating, and thickness of paper and thus helps improve the optical and functional properties of all types of papers and board with its focused product of-fering.

www.paper.clariant.com Masterbatches

Key FIguReS 2011

(CHF m) 129

Employees 3 091

Clariant Masterbatches is a leading manufacturer of dye and additive concentrates and technical composites for the plastics industry, and supplies the packaging, con-sumer goods, medical, textile, and automotive industries.

www.clariant.masterbatches.com

Oil & Mining Services Key FIguReS 2011

Sales (CHF m) 620

(CHF m) 72

Employees 1 000

The Oil & Mining Services Business Unit is one of the most significant provid-ers of products and services to the oil, refinery, and mining industries. The broad and diverse product range includes chemical solutions for deep wa-ter exploration to refining which help to reduce costs and improve production efficiency.

www.oil.clariant.com or www.mining.clariant.com

Pigments Key FIguReS 2011

Sales (CHF m) 973

(CHF m) 210

Employees 1 928

The Pigments Business Unit is a leading global provider of organic pigments, pig-ment preparations, and dyes, which are used for coatings, printing, plastics, and other special applications. These include high-performance pigments and dyes for ink jet and laser printers.

www.pigments.clariant.com

Textile Chemicals Key FIguReS 2011

Sales (CHF m) 675

(CHF m) 34

Employees 2 096

Clariant’s Textile Chemicals Business Unit supplies specialty chemicals for the pre-treatment, dyeing, printing, and finishing of textiles and improves the properties of garments and other textiles such as high fashion fabrics, home textiles, and special technical fabrics.

www.textiles.clariant.com

Performance Chemicals includes the Business Units, Additives, Detergents & Inter-mediates, Emulsions, and Paper Specialties.

Performance Chemicals Key FIguReS 2011

EBITDA before exceptional items (CHF m) 177

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Index

Letter to Shareholders

Page 02

Profitable growth under way

Page 08

Drivers for profitable growth

Page 36

36 Portfolio Management

42 Global Positioning

46 Innovation, Research & Development

52 Sustainability at Clariant

60 Clariant Excellence

Corporate Governance

Page 70

Compensation Report

Page 86

Consolidated Financial Statements of the Clariant Group

Page 99

99 Consolidated balance sheets

100 Consolidated income statements 100 Consolidated statements

of comprehensive income

101 Consolidated statements of changes in equity 102 Consolidated statements of cash flows 103 Notes to the consolidated financial statements 158 Report of the statutory auditor

Review of Trends

159 Five-year Group overview

Financial Statements of Clariant Ltd, Muttenz

160 Clariant Ltd balance sheets

161 Clariant Ltd income statements

162 Notes to the financial statements of Clariant Ltd 170 Appropriation of available earnings

171 Report of the statutory auditor 172 Forward-looking statements

Financial Review

Page 14

15 Results of operations, financial position, and net assets

19 Segment analysis

26 Extract of cash flow statement

31 Outlook

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Dear Shareholders,

2011 was an important year for Clariant in terms of our transformation from restructuring to sustainable profitable growth. Following the sometimes painful but necessary cutbacks in 2009 and 2010, when we were forced to over-come additional obstacles created by the financial crisis, we posted a successful performance in 2010, aided by a strong economic tailwind. We have made further progress in 2011. Despite the fact that the global financial crisis cooled industrial demand significantly in the second half of the year, Clariant reported another excellent year with sales increases of 16 percent in local currencies or 4 percent in Swiss francs and the best profitability in ten years. The strong growth was driven by price increases and by Süd-Chemie sales, which were consolidated for the eight-month period following the acquisition of the company in April 2011. Overall group sales reached CHF 7.37 billion and EBITDA margin before exceptional items increased to 13.2 percent versus 12.7 percent in 2010.

Profitable growth under way

We will continue to gradually and systematically implement the efforts we began three years ago. We created the foundation for profitable growth in Phase 1 by executing the cash-generating, cost-cutting, and complexity-reducing measures as part of the Project Clariant program. At the end of 2009, Clariant entered Phase 2 with the launch of Clariant Excellence, the company-wide initiative that focuses on continuous improvement and value enhancement. We are now in the process of changing the philosophy that governs our day-to-day business activities and integrat-ing a culture of continuous improvement into all business units based on Operational Excellence, Commercial Excel-lence, Innovation ExcelExcel-lence, and People Excellence. After benefits at a total of CHF 63 million in 2009 and 2010, the company has been able to achieve further benefits of more than CHF 100 million in 2011 through a large number of projects at all levels. 2011 saw the focus shift for the first time to strengthening our Innovation Excellence and taking the first steps in People Excellence.

We will continue these efforts in 2012 in order to achieve new savings of more than CHF 60 million each year through Clariant Excellence. Further cost reductions totaling CHF 60 million are expected by mid-2013 after comple-tion of the produccomple-tion network optimizacomple-tion under the Global Asset Network Optimizacomple-tion (GANO) program as part of Project Clariant.

We entered Phase 3 of our strategy plan in 2011: Its goal being to sustainably increase value based on long-term profitable growth. The emphasis is on continually improving profitability in all business units, focusing on innova-tion, expanding our already strong competitive position in the growth markets of Asia and Latin America, and optimizing our company portfolio.

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Acquisition of Süd-Chemie – a great opportunity for Clariant

The takeover of Süd-Chemie in 2011 is of great significance in the transformation of the company. Through this transaction, we acquired two attractive high-margin businesses. Our newly acquired segments – Functional Materi-als and Catalysis & Energy – posted EBITDA returns of just under 13 and approximately 22 percent, respectively, in 2011. In view of the ongoing economically turbulent times, it is remarkable that Süd-Chemie was able to gener-ate a very stable margin even during the last global recession of 2008 – 2009. Süd-Chemie also has an excellent track record in future technologies and innovations. Overall, Clariant has increased Group sales and earnings by about one fifth through this acquisition. The integration of Süd-Chemie is progressing as planned. We project that integration-related synergies and Clariant Excellence initiatives from the integration will lead to an additional rise in EBITDA of CHF 90 to 115 million by 2013.

Solid balance sheet structure

Even after this major acquisition, Clariant has a solid balance sheet structure that will enable us, to effectively increase our own investments in the future of the company in the coming years. The willingness of the capital market to participate in the financing package that Clariant put together in the course of the takeover was cru-cial in this regard. This was not a foregone conclusion since the deal involved a total financing volume of about CHF 2.5 billion. We strengthened our equity base through a capital increase that raised the equity ratio to 33.3 per-cent, slightly above the previous year’s 30.5 percent level. We also refinanced all our commitments with long-term financing at attractive conditions. We will work hard in 2012 and in subsequent years to reduce our net financial debt rapidly and substantially.

Our vision for 2015

Clariant has set ambitious goals for the years through to 2015 in expectation of a moderate upward trend in the global economy and stable exchange rates. By implementing the measures from the strategy initiatives Project Clariant and Clariant Excellence, we aim to improve the profitability of the company and all business units. We will also increase investments in the Group’s technology and innovation, as well as expand the innovation pipeline significantly by implementing Innovation Excellence. The focus will be on broader expansion into the fast-growing emerging market regions. The company will in particular increase its market share in China, India, and Brazil. The profitability of the current portfolio will be analyzed on a continuous basis. We will also make targeted acquisitions in the future to strengthen the product pipeline and the company’s regional presence, but we will also consider divestments.

By implementing these basic strategic goals for 2015, Clariant aims to increase Group sales to more than CHF 10 billion. The EBITDA margin before exceptional items is projected to rise to above 17 percent, and Return On Invested Capital (ROIC) is expected to be higher than the industry average.

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A challenging 2012

The fiscal year 2012 will play a major role in these developments. An accurate forecast for this year is difficult to make, given the high level of economic uncertainty. We will monitor the conditions very closely and respond rapidly, where necessary. Should the expectations of most economic experts prove correct – namely, that the world economy, driven by impetus from the emerging markets, will return to solid growth in the course of the year – then Clariant is also confident that it will be able to increase sales and earnings for 2012. We are confident we will improve the performance of the company after a slow start in 2012, given the current economic slowdown. The integration of Süd-Chemie has increased the percentage of the Group’s less cyclical activities markedly to about 50 percent. This makes us stronger and more able to resist economic fluctuations.

A bitter note in 2011 was the performance of the Clariant share price, which was disappointing for us. After a sharp rise in 2010, the stock market still categorizes us as a highly cyclical company. We must address this issue in prov-ing the sustainability of our performance. We will continue focussprov-ing our efforts to increase the value of the Clariant Group. We would like to thank our shareholders for their trust, especially in these difficult times.

We would also like to express our gratitude to all employees of the Clariant Group around the world for their excellent work and high level of commitment. They have played a key role in getting our company back on track to success. 2012 will be another year full of challenges. We are well equipped and will step up our efforts to make Clariant a specialty chemicals company that is a global leader in innovation, productivity, and competitiveness.

Yours sincerely,

Jürg Witmer Hariolf Kottmann

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Jürg Witmer

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yolanda garcia, R&D Department Special Dyes Using 92 percent less water and remarkably little energy to achieve a higher standard of quality in a vast array of colors. environmentally minded and fashion aware: thanks to advanced denim’s Pad/ Sizing-ox dyeing process, an innovative solution of the textile Chemicals Business Unit, dyeing jeans has become far more environmentally compatible.

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2011 objectives achieved despite difficult

environment

Clariant has made significant progress in 2011 in consistently pursu-ing its strategic goal of sustainable profitable growth as it expanded its EBITDA margin before exceptional items from 12.7 percent in 2010 to 13.2 percent in 2011. After adjustment for negative cur-rency effects, Group sales were up by 16 percent and EBITDA before exceptional items rose by 8 percent year on year. The significant cooling in industrial demand in the second half of the year due to the global financial crisis should, of course, be taken into account here. A crucial factor in this regard is that the company was able not only to safeguard the achievements of the tough restructuring process of 2009 to 2010 but also to expand them at almost all levels and in all Business Units. The efforts of the past few years have increasingly started to pay off. Savings resulting from optimization of the produc-tion network through Global Asset Network Optimizaproduc-tion (GANO), for example, totaled about CHF 60 million up to 2011.

Operating margin development since 2000

This shows that none of the companies in the Clariant Group is rest-ing on its laurels; rather, all are workrest-ing systematically to realize the long-term goal of sustainable profitable Group-wide growth. After all, the targets for the fiscal year 2015 are high: Group sales are ex-pected to increase to more than CHF 10 billion, assuming moderate economic growth and stable currencies, while the EBITDA margin (before exceptional items) is projected to climb to above 17 percent.

Profitable growth under way

Clariant was able to sustain the 2010 performance and to reap

further rewards from the restructuring measures of recent years in

2011. However, increases in profitability and organic and external

growth were slowed by a gloomy economic environment.

DISCIPLIneD anD FaSt StRategy exeCutIon IS StaRtIng to be ReFLeCteD In MaRgIn PRogReSS1

% 2011 9.7 2010 9.8 2009 4.1 2008 6.6 2007 6.3 2006 6.9 2005 6.3 2004 7.4 2003 7.2 2002 7.4 2001 6.4 2000 10.7 0 3 6 9 12

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Efforts to establish stable cash generation also focus on the area of working capital management. The 19.6 percent ratio of net working capital to sales as of 31 December 2011 met the Group’s target of 20 percent. Return on invested capital (ROIC), another important Group indicator, was affected in 2011 by the consequences of the major ac-quisition of Süd-Chemie. The value at year-end of 13.1 percent was thus significantly below the previous record level of 18.1 percent from 2010, however still above long-term industry average.

Strategic Review

On a clearly defined growth path as planned

The transformation process launched in 2008 is progressing as planned. This will take the Clariant Group from the restructuring initiatives of the past few years to a new level as a specialty chemi-cals company that is a global leader in innovation, productivity and competitiveness with sustainable profitable growth. The company is following a clearly defined three-phase strategy to this end. A positive factor in the year just ended was that Clariant was able

to pass on significantly higher raw material costs in their entirety. Clariant also made good on its promise to strengthen its portfolio and future potential through external growth by acquiring Süd- Chemie in April. The key operating data for the Süd-Chemie trans-action demonstrate that this acquisition will have a very positive effect on Clariant. The two newly acquired businesses, Functional Materials and Catalysis & Energy, posted in 2011 EBITDA returns of just under 13 and approximately 22 percent, respectively, which is already a very good sign. Clariant will benefit fully from this acquisition in 2012 since Süd-Chemie will then be consolidated for the first time on a full-year basis. Clariant also projects that inte-gration-related synergies and Functional Excellence initiatives from integration will lead to additional growth in EBITDA of CHF 90 to 115 million by 2013. The first significant effects are expected to emerge as early as the new fiscal year.

Focus on management of net working capital

Clariant has also taken important steps in 2011 with regard to its balance sheet. It was possible to finance the Süd-Chemie takeover on the capital markets in a very short time, even given the total investment volume of about CHF 2.5 billion. This involved raising equity through a capital increase as well as bringing in outside capital. In this case, the maturity pattern of the loans was markedly improved by utilizing various financing instruments, such as issuing bonds or certificates of indebtedness, which also resulted in favor-able conditions for Clariant in an extremely volatile environment. The investor confidence indicated by this underlines the fact that the capital markets have fully acknowledged the company’s successes. Nonetheless, there is still work to be done. Although the equity ratio was solid at 33.3 percent at the end of 2011 and the gearing ratio of 58 percent was also respectable, Clariant will work hard in the com-ing years to reduce net financial debt, which has risen to CHF 1.7 billion as a result of the acquisition.

FIve-yeaR CoMPaRISon:

tRenD In RatIo oF net woRKIng CaPItaL to SaLeS % 2011 19.6 2010 15.9 2009 21.1 2008 23.8 2007 25.5 0 5 10 15 20 25 30

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Restructuring phase largely completed

Phase 1 of the strategic realignment of the Clariant Group was car-ried out primarily in 2009 and 2010 and involved implementing an extensive restructuring program. Under the Project Clariant heading, a large number of steps were taken, focusing on cash generation, cost cutting and making Group structures leaner.

Solid success has been achieved, as indicated by the trend in the key company indicators:

Cash generation:

›

The ratio of net working capital to sales was reduced to 19.6 per-cent by the end of 2011, down from 23.8 perper-cent at the end of 2008. The internal long-term group target for this value was set at below 20 percent.

Cost cutting (excl. acquisition of Süd-Chemie):

›

The total number of employees in the Clariant Group was reduced by about 20 percent.

As part of Global Asset Network Optimization (GANO), the closure of 20 sites worldwide was announced and is scheduled to be fully implemented by mid-2012. Finalization of these measures will lead to further reductions in costs totaling CHF 60 million by mid-2013.

Reduction of complexity:

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The number of Business Units was streamlined, and the global ser-vice organization was consolidated at eight locations.

›

A decision was made to realign Research and Development (R&D) with new research headquarters in Frankfurt and branches in core regions. This has already been implemented for the most part.

CLaRIant on the RoaD to SuStaInIng PRoFItabLe gRowth

Restructuring

Profitable growth Result: establish a solid base for profitable growth

Result: growth of profitable business portfolio

›

Cash generation

›

Cost cutting

›

Complexity reduction Implementation of restructuring

›

Improve profitability of existing portfolio

›

R&D and Innovation

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Growth in emerging markets

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Strengthen portfolio by selective acquisitions Continuous improvement

Result: Sustainable productivity improvement Clariant Excellence program

›

Operational Excellence

›

Commercial Excellence

›

People Excellence

›

Innovation Excellence

Cost focus Portfolio focus

Continue program/ Sustain achievements

2009 2010 2011 2012

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The restructuring phase is largely complete, although some of the announced efficiency improvements will take until 2012 to imple-ment.

Clariant Excellence – a culture of continuous improvement

At the end of 2009, Clariant signaled the start of Phase 2 by launch-ing the company-wide Clariant Excellence initiative. With LeanSig-ma processes at its core, Clariant Excellence is designed to enhance competitiveness by improving efficiency and creating value. The company is creating a culture of continuous improvement based on four pillars of Operational, Commercial, People, and Innovation Ex-cellence. Clariant has also put in place internal control mechanisms to maintain what has already been achieved. More than 3 000 em-ployees were designated as “belts”, i.e., project managers or project staff, trained specifically for tasks in connection with the Excellence Program, and entrusted with its implementation within the Group. Süd-Chemie employees will also be included in this process from 2012.

After saving a total of CHF 63 million in 2009 and 2010, the company has been able to achieve further benefits of more than CHF 100 mil-lion in 2011 through a large number of projects at all levels. In 2011, the focus was for the first time on strengthening our Innovation Ex-cellence and taking the first steps in People ExEx-cellence. The stated goal is to make Clariant a global innovation leader and to be able to rely on a well trained and coordinated team of employees.

In 2012 and the coming years, we will continue these efforts in or-der to achieve new savings of more than CHF 60 million each year through Clariant Excellence. These figures are specifically supported by a number of initiatives that have already been launched: For ex-ample, the Clariant Production System (CPS) was introduced in 2010 to achieve optimum productivity and financial performance in the production units of all Business Units. The goal is to achieve pro-ductivity increases ranging between 8 and 10 percent. The Clariant Commercial System (CCS) was also established in 2010. This is an initiative to optimize sales and marketing processes and is designed

to improve the operating margin by an additional one to two percent-age points. Finally, Clariant also launched the Clariant Supply Chain System (CSS) initiative in early 2011 to enhance customer service, cash and working capital along the entire value chain.

The sustainable value enhancement phase has begun

We entered Phase 3 of our strategy plan in 2011: sustainably in-creasing value based on long-term profitable growth. The focus is on four strategic pillars:

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Ongoing improvement in the profitability in all Business Units

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Focus on innovation

›

Expansion and exploitation of Clariant’s strong competitive position in the Asian and Latin American growth markets

›

Optimization of the company portfolio.

CLaRIant exCeLLenCe Innovation excellence: Promoting new ideas and solutions for profitable growth

Commercial excellence: Empowering sales and marketing to offer the best customer service and value

operational excellence: Striving for optimum efficiency across all of our operating processes

People excellence: Enabling our people to achieve a culture of continuous improvement LeanSigma

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Christian Steib, technical Marketing Manager

Soccer is one of the most beautiful games in the world. and for most boys probably the universe. in its additives Business Unit, Clariant has developed licocene®_{, a}

poly-mer that has revolutionized the manufacture of artificial turf. the turf is fully recyclable and extremely hard wearing. Clariant donated the first artificial pitch with this technology in germany to the feuerbach children’s center in Stuttgart in 2011.

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business performance review 2011

Summary statement for business year 2011

For Clariant 2011 was marked by the acquisition of Süd-Chemie AG, the slowdown in economic growth over the course of the year, and highly negative currency effects. Group sales totaled CHF 7 370 million, slightly higher compared to 2010. After adjustment for acquisitions (particularly Süd-Chemie) and negative currency effects, the company has achieved an organic growth of 2 percent. Profitability as a percentage of the operating result (EBITDA) before exceptional items improved to 13.2 percent from 12.7 percent. These good results were achieved on the back of the success of the Project Clariant and Clariant Excellence initiatives that were launched in 2009. Clariant reached its goal of setting the company on a profitable growth path. It will continue to pursue this strategy systematically based on the sound operational and financial foundation already es-tablished in order to attain the ambitious objectives for 2015, which include increasing the EBITDA margin before exceptional items to about 17 percent, provided that there is a stable economic environ-ment. Clariant will take further important steps in this direction in 2012, although there are still uncertainties regarding precise fore-casts due to the effects of the global financial crisis on the world economy.

General conditions

Global economic growth slows significantly at end of 2011

According to data from the International Monetary Fund (IMF), the global economy grew 4 percent in 2011, but was unable to sustain the dynamic growth of 2010. Moreover, economic growth weakened significantly in the second half of the year. The devel-opment of the global economy was driven primarily by the emerg-ing markets, while the industrial nations lost momentum. The gross domestic product of the emerging countries rose 6.4 percent in 2011, whereas the IMF reported growth of only 1.6 percent for the industrialized world. In the wake of the euro crisis, Europe (+ 1.6 percent) is wrestling with the unresolved problems of the debt-ridden southern European states. Impetus for growth was also lacking in the US economy (+ 1.5 percent) due to a high govern-ment deficit. The emerging markets were exposed to much lower economic risks. Although experiencing inflationary tendencies the emerging economies in Asia, in particular, continue to grow at a high rate. China’s economy experienced 9.5 percent growth in 2011, according to IMF figures, while India advanced by 7.8 percent. The economies of the two other BRIC countries – Russia (+ 4.3 per-cent) and Brazil (+ 3.8 perper-cent) – also posted robust expansion. The massive revaluation of the Swiss francs against major curren-cies was stopped with the intervention of the Swiss National Bank, which set a floor of the value of the Swiss franc at an exchange rate of at least CHF 1.20 per Euro. On a year on year comparison how-ever the Swiss currency has appreciated significantly compared with most local currencies that are crucial for Clariant.

Chemical industry in 2011: Positive year with weaker finish

The chemical industry as a whole and specialty chemicals in particu-lar also exhibited positive growth trends, driven by a still positive economic environment. Global chemical production increased by

Financial Review

Given the challenging economic conditions the results

achieved in 2011 are a good performance and reflect

the sustainable profitability increase achieved by Clariant.

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about the same magnitude, proportionately, as the global economy. Impetus for growth came primarily from the EMEA (Europe, Middle East & Africa) region, North America, and Asia. Growth was based in large part on the extremely dynamic development in some areas in the first six months of the year. In the second half of the year, however, the slowdown in industrial production across all regions triggered by economic conditions manifested itself in declining de-mand. Europe was affected and experienced stagnating growth as of the third quarter after a definite uptrend at the beginning of the year. Momentum in the emerging Asian markets also slowed. By the end of the year, Japan’s chemical industry reported definite signs of recovery after the sharp downturn caused in the aftermath of the tsunami in March.

The price levels for both raw materials and finished products also rose significantly, but stabilized after a peak in the mid of 2011. In the second half of 2011 a significant de-stocking could be observed in several industries (Leather, Plastics, Coatings). Because of the slowdown in industrial production, which was more pronounced to-ward year-end, the last six months of the year were characterized by stagnation in annualized chemical production.

Changes in the reporting structure

On 16 February 2011 Clariant AG announced a series of transac-tions, pursuant to which it acquired the specialty chemical company Süd-Chemie AG at an aggregate enterprise value of approximately CHF 2.5 billion. Süd-Chemie AG was acquired partially in exchange for cash and partially in exchange for newly issued Clariant shares. The last step in the acquisition of Süd-Chemie AG was concluded with the squeeze-out of the remaining Süd-Chemie AG minority shareholders, the successful completion of which was announced on 1 December 2011. Clariant now controls 100 percent of the shares in Süd-Chemie AG.

Since 1 May 2011, the sales and results of Süd-Chemie’s Catalyst business and its Adsorbent & Additive unit have been included in the Clariant Group’s consolidated financial statements. On 1 July 2011 these businesses were renamed Catalysis & Energy (catalysts) and Functional Materials (adsorbents and additives). Clariant therefore has twelve instead of ten Business Units, and Clariant’s external re-porting structure now includes nine segments instead of the seven that existed in 2010.

Results of operations, financial position,

and net assets

Analysis of sales, margins, and costs Key FIguReS

CHF m 2011 2010 Change in %

Sales 7 370 7 120 4

Gross profit on sales 1 968 1987 –

EBITDA before exceptional items 975 901 8

Margin (%) 13.2 12.7 –

EBIT before exceptional items 717 696 3

Margin (%) 9.7 9.8 –

EBIT 507 366 39

Financial result – 173 – 123 41

Income before taxes 334 243 37

Net income 251 191 31

Basic earnings per share 0.86 0.81 6

Earnings situation shaped by organic and external growth, efficiency increases, and currency translation charges

After the dynamic growth of 2010, Clariant was still able to post a solid performance in 2011 despite differing demand in the indi-vidual Business Units. It is important to emphasize that the less cyclical Business Units – Catalysis & Energy, Functional Ma-terials, Oil & Mining Services, Industrial & Consumer Special-ties, and Additives – reported much stronger growth than Mas-terbatches, Pigments, Textile Chemicals, Leather Services and Paper Specialties, areas in which business is cyclical in nature. The last three segments were also negatively impacted by structural

“ Clariant was able to further improve its result and has established

a sound financial foundation.”

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problems. Due to the positive economic environment, especially in the first half of the year, the Clariant Group realized significant improvements in local currencies. In addition, the consolidation of the newly acquired businesses of Süd-Chemie translated into appre-ciable external growth. Thanks to their strong growth, the emerging markets generated additional momentum in the industrialized coun-tries, although the latter grew at a significantly lower rate. Profit-ability was further improved by the efficiency improvements initiated in the previous periods.

Sales in local currencies increased by 16 percent – organic growth at 2 percent

Group sales totaled CHF 7 370 million in 2011, slightly above the fig-ure reported for 2010. This represents a 4 percent increase over the previous year. In local currencies, much stronger Group sales growth of 16 percent has been achieved. The lower rise in sales in Swiss francs is the result of the substantial appreciation of the Swiss franc against the major world currencies. While sales volumes decreased below the prior-year level by the end of the year after a sharp rise in the first half, increases in selling prices had a positive effect on sales revenue. This made it possible to fully compensate the rise in raw material prices. External growth also played a very important role. It was driven primarily by the recently acquired activi-ties of Süd-Chemie AG, which contributed CHF 948 million in sales during the eight months of consolidation. Adjusted for this factor and for negative currency effects, Clariant would have posted an organic sales increase of 2 percent in local currencies.

The individual Business Units reported very different levels of de-mand for their products in 2011. The less cyclical Business Units – Catalysis & Energy, Functional Materials, Oil & Mining Services, Industrial & Consumer Specialties, and Additives – posted dynamic growth in local currencies in the low double-digit range. The more cyclical Business Units – Masterbatches, Leather Services, Textile Chemicals, Paper Specialties, and Pigments – experienced weaker year on year demand, even in local currencies. In Swiss francs there was a downward trend in all Business Units except for Oil & Mining Services.

SaLeS by RePoRtIng SegMent CHF m

Industrial & Consumer Specialties 2011 1 473 2010 1 526 Masterbatches 2011 1 124 2010 1 260 Pigments 2011 973 2010 1 168 Textile Chemicals 2011 675 2010 821

Oil & Mining Services 2011 620

2010 604 Leather Services 2011 265 2010 326 Performance Chemicals 2011 1 293 2010 1 415 Functional Materials1 2011 456 2010 –

Catalysis & Energy1 2011 491

2010 –

gRouP SaLeS – FIve-yeaR oveRvIew CHF m 2011 7 370 2010 7 120 2009 6 614 2008 8 071 2007 8 533 0 2 000 4 000 6 000 8 000 10 000

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Clariant was able to increase sales in local currencies in all key regions in 2011. North America posted especially strong increases and reported 27 percent growth. The EMEA (Europe, Middle East & Africa) region also reported positive results, selling 16 percent more than in the previous year. Sales revenues in the Asia/Pacific region climbed 16 percent, whereas the Clariant subsidiaries in Latin America – after significant growth the previous year – saw a comparatively moderate 9 percent rise in 2011. Overall, around 46 percent of Group sales were generated in the emerging and develop-ing markets, which are expected to have the strongest growth rates in the future. The regional sales distribution of businesses acquired from Süd-Chemie also had a positive impact in this regard.

SaLeS by RegIon CHF m 2011 2010 Change in CHF in % Change in LC2 in % EMEA1 _{3 671} _{3 529} ₄ ₁₆ North America 958 860 11 27 Latin America 1 144 1 199 – 5 9 Asia/Pacific 1 597 1 532 4 16

1_{Europe, Middle East & Africa} 2_{LC = Local Currencies}

2011 SaLeS StRuCtuRe by CuRRenCy % Euro 44 US dollar 32 Japanese yen 4 Swiss franc 0 Emerging markets 20

2011 CoSt StRuCtuRe by CuRRenCy % Euro 49 US dollar 25 Japanese yen 2 Swiss franc 7 Emerging markets 17 2011 SaLeS by RePoRtIng SegMent

Local Currencies, Growth in %

Industrial & Consumer Specialties 10

Masterbatches 2

Pigments – 6

Textile Chemicals – 6

Oil & Mining Services 17

Leather Services – 6

Performance Chemicals 4

Functional Materials1 ₇

Catalysis & Energy1 ₁₇

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Gross margin below prior year due to volume and currency effects

The high level of demand in most industries brought about a capacity utilization of approximately 70 percent in 2011, as in 2010. Signifi-cant savings were realized as the result of the efficiency improve-ments successfully implemented in prior years – Project Clariant and Clariant Excellence. In the case of Clariant Excellence the savings totaled more than CHF 100 million compared with CHF 50 million in 2010. Nonetheless, these positive factors were not sufficient to compensate for negative currency and volume effects. Gross margin therefore declined overall from 27.9 percent in 2010 to 26.7 percent in 2011. Due to sluggish global economic growth, raw material pric-es stabilized in the course of the year but were still 13 percent higher than in 2010. The higher raw material costs were completely ab-sorbed, as planned, by an increase in sales prices. Price adjustments totaling 7.5 percent in local currencies were implemented in 2011.

Selling, general, and administrative expenses (SG&A costs) as a percentage of sales were lowered slightly to 15.9 percent (from 16.5 percent in 2010) as the result of high cost efficiency, despite increased project costs. In absolute figures, this corresponds to a change to CHF 1 176 million from CHF 1 177 million. This figure includes significant one-time project costs for the integration of ac-quired Business Units. The focus on innovations in conjunction with the Innovation Excellence initiative and the integration of Süd-Chemie led to a CHF 41 million increase in research and development costs to CHF 176 million. Given these changes and the impact of highly negative currency trends totaling CHF 41 million, the operat-ing result (EBITDA) before exceptional items increased slightly by 8.2 percent to CHF 975 million, compared with CHF 901 million in

2010. The EBITDA margin before exceptional items increased to 13.2 percent compared to the prior-year figure of 12.7 percent. Re-structuring costs and impairments were substantially reduced and amounted to CHF 161 million in 2011, down from CHF 331 million the year before. This reflects the sharply reduced costs for optimization of the global production network (Project GANO) and measures to integrate Süd-Chemie.

The financial result was adversely affected by the higher level of indebtedness resulting from the Süd-Chemie acquisition. On bal-ance the result was a decrease in the net financial result to CHF – 173 million from CHF – 123 million. Operating income before exceptional items at CHF 717 million is above the previous year (CHF 696 million) but was reduced by currency effects totaling CHF 170 million. Clariant posted pretax profit of CHF 334 mil-lion, compared with CHF 243 million in 2010. The tax rate rose to 24.9 percent from 21.4 percent the previous year. Profit after taxes accordingly increased to CHF 251 million from CHF 191 million. This results in earnings per share of CHF 0.86 based on 264 586 754 shares, compared with CHF 0.81 in 2010.

Given the significant improvement of Clariant’s performance and the sustainability of its earnings, the Board of Directors proposes to repay 0.30 CHF of the nominal value of each registered share, as a result of a reduction of the nominal value from 4.00 CHF to 3.70 CHF per registered share. In 2010 there was no distribution due to the high restructuring expenditures. The motion will be subject to approval by the 17th Annual General Meeting on 27 March 2012.

ebItDa beFoRe exCePtIonaL IteMS – FIve-yeaR oveRvIew CHF m 2011 975 2010 901 2009 495 2008 783 2007 812 0 250 500 750 1 000

ebItDa MaRgIn beFoRe exCePtIonaL IteMS – FIve-yeaR oveRvIew % 2011 13.2 2010 12.7 2009 7.5 2008 9.7 2007 9.5 0 2 4 6 8 10 12 14

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Segment analysis

Performance of the Business Units

Industrial & Consumer Specialties

Key FIguReS InDuStRIaL & ConSuMeR SPeCIaLtIeS

CHF m 2011 2010

Sales 1 473 1 526

EBITDA before exceptional items 251 243

Margin (%) 17.0 15.9

EBIT before exceptional items 215 206

Margin (%) 14.6 13.5

No. of employees 1 801 1 790

›

Sales increase in local currencies of 10 percent

›

EBITDA margin further increased to 17 percent

The Industrial & Consumer Specialties (ICS) Business Unit reported an increase of 10 percent in sales in local currencies in 2011, but a decrease of 3 percent in Swiss francs compared with the prior-year period. Total sales in this segment reached CHF 1 473 million (2010: CHF 1 526 million). There was particularly high demand for chemicals for the construction industry and industrial lubricants. Significant growth again resulted from business in China, where ICS further solidified its market position by opening a new ethoxylation plant in Daya Bay (south of Guangzhou, China).

In the regional markets the Business Unit generated double-digit sales growth in Asia and North America as well as in Latin America, Middle East & Africa (MEA) region. Growth was somewhat weaker in Europe.

EBITDA before exceptional items increased by 3.3 percent to CHF 251 million. The Business Unit therefore increased the EBITDA mar-gin to 17 percent from the already high level of 15.9 percent a year earlier, despite negative currency effects. This rise was due to an

improved product mix, an optimized cost structure, and higher sell-ing prices, which fully compensated for the increased raw material costs.

ICS will continue to focus on innovative solutions and businesses that create a high level of added value. Of special interest is the Personal Care business, in which Clariant has introduced numerous innovations. ICS will strengthen its position in this market through an exclusive long-term partnership with KitoZyme, a leading manu-facturer of bio-polymers, which are tailored to the global needs of Personal Care customers requiring natural and sustainable skin and hair care substances. The takeover of Octagon Process LLC in mid-March 2011 significantly expanded ICS’ North American activities in the area of de-icing chemicals and generated additional growth potential.

Masterbatches

Key FIguReS MaSteRbatCheS

CHF m 2011 2010

Sales 1 124 1 260

Margin (%) 11.5 12.0

Margin (%) 9.1 9.5

›

Adversely affected by currencies and cost effects

›

EBITDA margin of 11.5 percent nevertheless high

›

Focus on growth opportunities in emerging markets

Although the Business Unit was still able to achieve a sales increase at the beginning of the year, demand then weakened from Q2 on-wards. As a result, sales in local currencies only grew by 2 percent while sales in Swiss francs fell significantly, by 11 percent to CHF 1 124 million. The decline in demand, which was not noticeable until the second quarter, worsened steadily in the second half of the year as plastics processing companies responded to rising raw material costs and uncertain economic conditions by reducing or delaying orders.

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Sales growth was strongest in the Middle East region, especially in Saudi Arabia and Turkey. China and Indonesia also contributed posi-tively to growth in Asia. Sales only grew moderately in North Amer-ica and Latin AmerAmer-ica, and in Europe they fell below the year-earlier level, primarily due to weak economic growth in southern Europe. The EBITDA margin in 2011 fell to 11.5 percent, down from 12 per-cent in 2010, since the increases in selling prices and productivity were not sufficient to absorb the negative currency effects and rising costs of underutilized capacities. The Business Unit’s raw material costs remained high but were fully compensated by higher selling prices. EBITDA before exceptional items totaled CHF 129 million and was below the high CHF 151 million level of the previous year. The Business Unit is focusing on growth opportunities in emerging markets. It will benefit from expansion in the Middle East region with new production facilities in Turkey, for example, as well as from expansion of existing sites in Saudi Arabia and Pakistan. Additional capacities have also been created in China and Brazil in order to serve customers in the Asia/Pacific and Latin American regions. The Business Unit’s focus in Europe is on expansion in Eastern Eu-rope and optimization of the existing production network in West-ern Europe. In North America two plants were combined in order to create a new state-of-the-art production facility in Chicago that produces both liquid and granular masterbatches.

Pigments

Key FIguReS PIgMentS

CHF m 2011 2010

Sales 973 1 168

Margin (%) 21.6 20.2

Margin (%) 18.9 17.3

›

Significant downturn in demand in second half of the year

›

EBITDA margin at 21.6 percent thanks to high cost efficiency

After a strong post-recession upsurge in demand was being felt in 2010, sales of the Pigments Business Unit declined 6 percent in local currencies in 2011. In Swiss francs the decrease was 17 percent, to CHF 973 million. There are three major reasons for this: Increased purchases in Q1 before price increases. De-stocking given the slow-down in the economy. Volumes were also reduced by the stronger focus on areas with high added value.

The lower demand was felt in most business sectors. The effects were especially pronounced in the printing industry, where the Business Unit increasingly refocused efforts away from low-margin products. In markets with high added value such as the non-impact printing market, customers reduced their inventories. Sales in mar-kets with high added value such as non-impact printing inks, paints, and coatings fell from a high level in 2010 as the result of customers re-adjusting their inventories.

Despite the significant market headwinds, EBITDA margin reached 21.6 percent, up from prior-year value of 20.2 percent thanks to the significantly improved cost structure resulting from the restructuring and efficiency improvement actions taken over the course of the pre-vious two years. EBITDA in absolute terms declined CHF 26 million from previous year due to lower sales volumes and unfavorable rate of exchange. It is expected that the benefits from the realized effi-ciency gains will continue in 2012 as the exits from the plants closed in 2010 and 2011 are largely completed, supported by ongoing effi-ciency and competitiveness improvements derived by implementing measures under the Clariant Excellence initiative.

The integration of the Italtinto business, specialized in supplying integrated tinting systems to the paint industry, is progressing ac-cording to plan, enabling Business Unit Pigments to execute its strat-egy of capturing value further down the value chain. Initial market responses and new orders were very promising, and customers are showing considerable interest in our tinting system technology.

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Textile Chemicals

Key FIguReS textILe CheMICaLS

CHF m 2011 2010

Sales 675 821

Margin (%) 5.0 8.4

Margin (%) 1.9 5.6

›

Massive currency effects depress performance

›

Accelerated relocation of production to Asia

Performance in the Textile Chemicals Business Unit differed greatly from one key region to the next in 2011. Sales growth in local cur-rencies reached a healthy level in North America and remained un-changed in Europe since there was still strong demand for technical textiles. In Latin America and China, on the other hand, sales expe-rienced a double-digit drop as demand continued to be weakened by strong fluctuations in cotton prices and flagging demand in the cloth-ing sector. Overall, the Business Unit reported a decrease of sales in local currencies in 2011 of – 6 percent. In Swiss francs, however, sales declined 18 percent. In the second half of the year the losses turned to the double-digit range.

Textile Chemicals, which still has an extensive production operation in Muttenz, Switzerland, was heavily impacted by the stronger Swiss franc. It therefore accelerated relocation of production to Asia. The headquarters of the Business Unit was moved to Singapore in Au-gust 2011. Production will now be transferred to China and India in early 2012, much earlier than originally planned, and this change will significantly increase the Business Unit’s competitiveness. EBITDA before exceptional items dropped significantly by 51 percent to CHF 34 million since it was not possible to fully compensate for the massive currency effects and decline in volume through cost re-ductions. Higher raw material costs, however, were balanced out by higher selling prices. Corresponding the EBITDA margin fell consid-erably from 8.4 percent to 5.0 percent.

The Textile Chemicals Business Unit will continue to focus on products that create added value for its customers. More than 25 product, process, and effect innovations were recently presented at the industry’s leading trade show, ITMA 2011, in Barcelona. These included a new durable and more environmentally compatible flame-resistant finish for technical textiles and innovative acid dyes that do not contain heavy metals and have high light resistance, even in dark colors.

Oil & Mining Services

Key FIguReS oIL & MInIng SeRvICeS

CHF m 2011 2010

Sales 620 604

Margin (%) 11.6 12.6

Margin (%) 10.8 11.9

No. of employees 1 000 886

›

Growing demand for oil services

›

High level of investment to ensure future growth

Buoyed by the rise in global oil production in line with general eco-nomic trends, sales in the Oil & Mining Services (OMS) Business Unit soared, increasing by 17 percent in local currencies and continu-ing to grow throughout the entire year. In Swiss francs, OMS posted 3 percent growth to CHF 620 million. Sales growth was strongest in the Middle East and in North America, where the acquisition of Prairie Petro-Chem had a positive impact. The rise in sales was also in the double-digit range in all other regions except Europe. The in-crease was especially strong in Latin America, where Brazil recov-ered from a weak phase in the second quarter.

Sales growth was driven by the Oil Services business, which ac-counts for about two-thirds of total sales. It experienced strong growth in most regions. In North America, Oil Services benefited from continuing investments in non-conventional oil and gas

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devel-opment projects. In LATAM, for example, the Business Unit signed an extensive new agreement, which will help it to expand its excel-lent market position in Brazil.

The Mining Services segment suffered from the weakening global demand for minerals. The Business Unit counteracted this effect by introducing new products and technologies in cooperation with min-ing companies.

The EBITDA margin before exceptional items was adversely affected by unfavorable currency effects and lies with 11.6 percent below the prior-year level of 12.6 percent. This was due primarily to the higher sales and administrative costs associated with massive in-vestments in the oil and mining businesses in an effort to promote future growth in these areas. The effects of higher raw material costs, on the other hand, were minimized by higher selling prices. EBITDA before exceptional items was accordingly CHF 72 million (2010: CHF 76 million).

Leather Services

Key FIguReS LeatheR SeRvICeS

CHF m 2011 2010

Sales 265 326

Margin (%) 9.8 13.2

Margin (%) 8.3 11.7

No. of employees 595 602

›

High leather prices lead to decline in sales

›

Stronger focus on innovative, more environmentally friendly products

Despite continuing strong demand from the automotive and luxury goods industries, sales in the Leather Services Business Unit de-creased by 6 percent in local currencies compared with 2010. Seg-ment sales in Swiss francs totaled CHF 265 million (– 19 percent). The upholstery segment was largely responsible for the weak de-mand. The trend toward the use of alternative materials in place of leather grew in that segment since prices for rawhide remained high in 2011.

From a regional perspective, sales growth in local currencies was slightly negative in Europe, while growth in the Americas slackened slightly despite the strong growth in Brazil, the main market. Sales in Asia declined since they continued to be affected by high prices for rawhide. In Japan, sales to tanneries that supply the automotive industry recovered in the second half of the year to almost the same level as before the earthquake.

Leather Services raised its selling prices and was thus able to com-pensate for higher raw material prices. However, the Business Unit also suffered from negative currency effects in addition to volume decreases due to high prices for rawhide. The EBITDA margin there-fore decreased to 9.8 percent from the prior-year level of 13.2 per-cent. In absolute figures, this is reflected in a 40 percent decline in EBITDA before exceptional items to CHF 26 million.

The Business Unit will continue to focus on segments with high add-ed value and on the introduction of new services and products that create added value such as the new chromium-free tanning technol-ogy (EasyWhite Tan). It will place special emphasis on innovation activities and expand its future product portfolio, especially in its line of more environmentally friendly products.

Performance Chemicals

Key FIguReS PeRFoRManCe CheMICaLS

CHF m 2011 2010

Sales 1 293 1 415

Margin (%) 13.7 14.2

Margin (%) 10.9 11.4

›

High growth momentum in Additives

›

EBITDA margin almost maintained at high level of 13.7 percent Performance Chemicals comprises four smaller Business Units in the Clariant Group in terms of sales: Additives, Detergents & Intermedi-ates, Emulsions, and Paper Specialties. Driven by a significant boost

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in demand in the Additives business, sales of Performance Chemi-cals in local currencies rose in 2011 by 4 percent. In Swiss francs, however, it posted a 9 percent decline to CHF 1 293 million. The local currencies growth momentum in Additives, which was in a double-digit percentage range, was based on the strong demand for non-ha-logenated flame retardants and waxes. Detergents & Intermediates and Emulsions saw single-digit sales growth, while sales in Paper Specialties were below the 2010 level. The Additives, Detergents & Intermediates, and Emulsions Business Units were able to raise their prices and fully compensate for higher raw material costs. The strong appreciation of the Swiss franc had a negative impact on the profitability of all four Business Units.

Additives posted good operating performance in all key regions, with especially strong growth in the Asia/Pacific region and in North America. Future demand will be met by a new plant that will go into operation in mid-2012. The Detergents & Intermediates Business Unit reported healthy demand for intermediates used in agrochemi-cal and pharmaceutiagrochemi-cal products, which balanced out the slight decrease in demand for household and cleaning products. Demand in Paper Specialties began to decline in the second quarter after customers curbed their production output due to lower paper con-sumption. Profitability was also reduced by the strong Swiss franc and the high cost basis in Switzerland. Relocation of production from Switzerland to Spain and the United States was therefore acceler-ated so that it could be completed by the end of 2011. The Emulsions Business Unit was able to compensate for high commodity prices. Latin America posted significant sales growth due to recovery in demand in Brazil, whereas demand in the Middle East weakened. The Performance Chemicals EBITDA margin was slightly below the previous year at 13.7 percent due to negative currency effects. EBITDA before exceptional items was relatively stable at CHF 177 million.

Functional Materials

Key FIguReS FunCtIonaL MateRIaLS1

CHF m 2011

Sales 456

EBITDA before exceptional items 59

Margin (%) 12.9

EBIT before exceptional items 32

Margin (%) 7.0

1_{May – December}

›

Reorganization completed by 1 July 2011

›

High level of sales growth and performance

Sales and results for the Functional Materials Business Unit have been included in the Clariant Group’s consolidated figures for eight months of 2011. Functional Materials – formerly the Adsorbents & Additives division of Süd-Chemie – initially included the following business lines: Adsorbents & Additives, Foundry Products & Spe-cial Resins, Protective Packaging, and Water Treatment. From 1 July 2011 the Functional Materials Business Unit was reorganized so that it now includes three business lines: Adsorbents, Performance Packaging, and Water Treatment. Comparison with 2010 figures is therefore only possible up to a point due to the reorganization of activities.

The Functional Materials Business Unit succeeded in improving sales in local currencies by 7.4 percent over the prior-year. In Swiss francs, sales amounted to CHF 456 million. The EBITDA margin be-fore exceptional items was 12.9 percent, maintaining the high level of the previous year. EBITDA before exceptional items grew to CHF 59 million in 2011.

Analysis of the individual businesses reveals differing growth trends. The Performance Packaging business line saw a rise in both sales and EBITDA, driven by the strong demand for packaging used

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for diagnostic and pharmaceutical products. The EBITDA margin in the Adsorbents business declined since it was not possible to com-pensate fully for the higher raw material prices and transport costs through higher selling prices. EBITDA also fell in the Water Treat-ment line due to the unfavorable business mix and the increase in the cost of raw materials. The Functional Materials Business Unit will focus to raise prices further, especially in the Adsorbents and Water Treatment segments, in order to absorb price-increase trends in raw materials and transport costs, and improve margins.

Catalysis & Energy

Key FIguReS CataLySIS & eneRgy1

CHF m 2011

Sales 491

EBITDA before exceptional items 107

Margin (%) 21.8

EBIT before exceptional items 67

Margin (%) 13.6

1_{May – December}

›

Sales growth in all four operating areas

›

EBITDA margin significantly above 2010 margin

Sales and results for the Catalysis & Energy Business Unit have been included in the Clariant Group’s consolidated figures for the last eight months of the year under review. Catalysis & Energy – the former Catalyst division of Süd-Chemie – initially comprised the Catalyst Technology and Energy & Environment business lines. From 1 July 2011, Catalysis & Energy was reorganized into a primarily functional organization that comprises the business line Battery Ma-terials and the three functional areas: Sales & Key Account Manage-ment; Operations, and Research & Development.

The Catalysis & Energy Business Unit has been able to maintain the positive operating performance of 2010 without interruption. Sales in local currencies terms in 2011 increased by 17 percent compared to 2010. After conversion to Swiss francs, sales totaled CHF 491 mil-lion. As the result of stronger business activities, EBITDA in Swiss francs amounted to CHF 107 million. The start-up losses in the new Battery Materials business continued to have a negative effect on performance. The EBITDA margin was high at 21.8 percent. After a mixed start in early 2011, the business in catalysts for the chemical and petrochemical industries picked up in the second quarter and improved continuously. The fourth quarter, as usual, was the year’s strongest in this segment. The Catalyst business ben-efited from continuing strong momentum in the sales of catalysts for air purification and for hydrogen production. Battery Materials also contributed to this healthy business growth. Four sub-licensing agreements for the highly innovative cathode material LFP (Lithium iron phosphate) were signed in order to bring more rapid market penetration. Preparations at the new LFP plant in Candiac, Canada, were already underway for the start of production, scheduled for 1 January 2012.

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Condensed consolidated balance sheet

CHF m 31.12.2011 31.12.2010 Change in %

aSSetS

Non-current assets 5 178 2 416 114

Intangible assets 1 762 269 555

Property, plant, and equipment 2 494 1 669 49

Financial assets 28 18 55

Other non-current assets 702 341 106

Deferred income tax assets 192 119 61

Current assets 3 901 3 494 12

Inventories 1 151 800 44

Trade receivables 1 134 985 15

Other assets and receivables 417 993 – 58

Cash and cash equivalents 1 199 716 67

Non-current assets held for sale 2 11 – 82

total asset 9 081 5 921 53

equIty anD LIabILItIeS Equity Shareholders’ equity 2 933 1 759 67 Non-controlling interests 93 47 98 total equity 3 026 1 806 68 Liabilities Non-current liabilities 2 904 2 153 35 Financial debts 1 835 1 305 41

Retirement benefit obligations 538 443 21

Deferred income tax liabilities 289 85 240

Provision for non-current liabilities 242 320 – 24

Current liabilities 3 151 1 962 61

Financial debts 1 139 240 374

Provision for current liabilities 364 310 17

Trade and other payables 1 325 1 170 13

Current income tax liabilities 323 242 33

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Balance sheet structure changed significantly due to expansion

As of 31 December 2011, the Clariant Group’s total assets of CHF 9.081 billion were significantly higher than the value a year earlier of CHF 5.921 billion. The increase was based on first-time consolida-tion of the assets and goodwill of the companies acquired in 2011, namely Süd-Chemie, Prairie Petro-Chem, Octagon Process, and Ital-tinto. Exchange rate effects also resulted in significant changes in various balance sheet items.

Cash and cash equivalents totaled CHF 1.199 billion at the end of 2011, compared with CHF 716 million twelve months earlier. The change within the reporting period is based on the issue of two bonds totaling CHF 300 million in May and July 2011, the issue of two certificates of indebtedness totaling EUR 365 million and CHF 400 million from an acquisition bridge facility, as well as outflows of liquidity associated with the acquisitions mentioned above. By con-trast, the total cash position including near cash assets decreased to CHF 1.234 billion year on year, from CHF 1.419 billion, due to ac-quisitions.

Clariant Group's total equity increased to CHF 3 026 million at the end of 2011 mainly due to the capital increase totaling CHF 1 111 million required for the Süd-Chemie acquisition. The equity ratio of 33.3 percent was above the prior-year level of 30.5 percent.

The Süd-Chemie transaction was also responsible for most of the increase in net financial debt from CHF 126 million at the end of 2010 to CHF 1 740 million as of 31 December 2011. This item in-cludes current and non-current liabilities, cash and cash equivalents, and near cash assets. The gearing ratio, which compares the level of net financial debt to equity, therefore rose to 58 percent from 7 percent as of 31 December 2010.

Broadly based financing

Clariant also had a very sound financial basis as of the end of 2011. The company relies on different types of financing instruments. In May the company issued two bonds in the Swiss franc domestic bond market: one with a nominal value of CHF 150 million that was increased by CHF 50 million in July, with a coupon of 2.75 percent and a four-and-a-half-year maturity (2015); and the other with a nominal value of CHF 100 million, a coupon of 3.125 percent and a six-year maturity (2017). By issuing two certificates of indebtedness in October 2011 totaling EUR 365 million with maturities ranging be-tween three and four-and-a-half years, Clariant continued to improve the maturity profile of its borrowed funds.

Extract of cash flow statement

CHF m 2011 2010

Net income 251 191

Reversals of non-cash items 551 362

Cash flow before changes in net working capital and provisions 419 251

operating cash flow 206 642

Cash flow from investing activities – 741 – 961

Cash flow from financing activities 1 033 – 62

net change in cash and cash equivalents 483 – 424

Cash and cash equivalents at the beginning of the period 716 1 140

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Strong operating cash flow

Despite the Group’s solid operational performance, cash flow from operating activities decreased in 2011 to CHF 206 million from CHF 642 million because of the pronounced increase in net working capi-tal. The ratio of net working capital to sales therefore increased to 19.6 percent from 15.9 percent, significantly undercutting the key target value of 20 percent. Investments in property, plant, and equipment rose markedly to CHF 370 million from CHF 224 million as investments were increased and included the new Süd-Chemie Business Units. The cash flow from investments totaling CHF – 741 million was influenced by CHF – 1 137 million spent on acquisitions of Süd-Chemie, Prairie Petro-Chem, Octagon Process, and Italtinto, while the cash flow from financing activities of CHF 1 033 million reflects the financing occured during 2011. Given these effects, the total cash balance (including near cash assets) of the Clariant Group on 31 December 2011 stood at CHF 1 234 million (2010: CHF 1 419 million).

Research & Development

A guarantor for profitable growth

Clariant has defined global technology and innovation leadership as an important strategic goal in its core activities. Research and development (R&D) is therefore a high priority in the Group. The de-velopment of a large number of new and advanced technologies puts Clariant in a position to find chemical solutions for many of their in-dustrial customers’ problems quickly and efficiently and to increase added value for the business partners and for Clariant. Through the realignment and concentration of R&D in 20