Clariant IRO more busy than worried amid Swiss franc turmoil

It’s been two weeks since the Swiss National Bank created a wave of shock on the foreign exchange markets by ending the franc’s peg to the euro. For local IR teams, including specialty chemicals firm Clariant, it seems the timing of the announcement, made at midday, triggered more amazement than the decision itself.

‘The central bank spent a lot of money to keep the peg where it was, and everybody here had a gut feeling that at some point it would get really expensive,’ explains Marco Ferraro, IR officer at the Muttenz-headquartered company. ‘However the timing came as a surprise: as an IR department, you’re so sensitive about publishing anything that has relevance on stock markets during trading hours.’

The timing, although odd, proved opportune for Ferraro’s team, which was in the middle of a pre-close period update call with analysts when the announcement was made. ‘We were able to explain that our cost position is fairly low in Switzerland, that the franc’s re-evaluation will mostly have a translational effect and less of a transactional one,’ he says, also recognizing that, understandably, ‘panic sets in. Those analysts never had to look at it that way and now all of a sudden they get phone calls from their clients asking what’s going on.’

While Clariant’s share price has gone down, the decrease was mostly in line with the devaluation of the euro against the Swiss franc. ‘If you transfer our stock prices into euros, it’s almost completely flat,’ he continues. Because the firm has a fairly large euro exposure, the former peg was ‘comforting’ in the sense that the company ‘didn’t have to worry about big fluctuations – now that’s not the case anymore’.

The firm is tackling the first phase of its crisis management, which is to review its business case and discuss potential repercussion with different divisions. ‘First, all the projections have to be done internally – this takes a while, obviously. We will then translate that into a communication plan for the financial markets,’ he explains. ‘We need to come up with a clear message of what the impact is.’

‘We take care of internal business, we make sure operational and leadership strategies are in place to confront the environment we are in, but we can’t control external factors,’ he says, adding that cheaper raw material costs – due to current low oil prices – should have a positive impact on the bottom line, despite the fact that the firm has its own oil and mining business.

‘We haven’t had any angry investor call us,’ he jokes. Several long term oriented funds have ‘all of a sudden’ been enquiring about investing these past few weeks, a further proof they believe that ‘our business’ underlying growth is not shaken by the externals,’ he says.

Ferraro goes on to explain that the Swiss attitude to commerce has been well illustrated by finance minister Eveline Widmer-Schlumpf’s declaration that ‘Swiss businesses will handle the situation’. ‘Yes, the local businesses are not happy with the move, but they’re very much ‘let’s get to it’ and very driven in that way,’ he adds. ‘The Swiss economy, with few raw materials and high exports and tourism, has always been a very unique situation in Europe, so they will have to adjust.’