The chemical company is investigating whether employees have posted the provisions and accruals incorrectly in order to steer the company’s results in such a way that financial targets are met.
(Photo: Reuters)
Zurich The specialty chemicals group Clariant has launched an investigation into the possible manipulation of important balance sheet figures and has therefore postponed its annual financial statements. The share then collapsed by 16 percent on Monday morning.
The review is about the booking of provisions and accruals in the 2020 and 2021 budget years, as the Swiss company announced on Monday. Clariant is examining whether employees have posted the provisions and accruals incorrectly in order to steer the company’s results in such a way that financial targets are met. The possible balance sheet tricks are said to have had no impact on sales and cash flow. However, they are said to have polished up the margins.
The trigger for the now well-advanced review by Deloitte and Gibson, Dunn & Crutcher was information from internal whistleblowers. The internal investigation has been running since September last year. Clariant’s auditor, PWC, has now informed the chemical company that it does not want to audit the balance sheet for 2021 without the result. It is still unclear when Clariant will be able to present audited annual financial statements.
As a result of the investigation, Clariant may be forced to adjust previously released financial reports, it said. The company also has to postpone the general meeting. According to preliminary figures, sales from continuing operations in 2021 increased by 15 percent in local currencies to CHF 4.372 billion. The operating margin (Ebitda) should be between 16 and 17 percent.
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The possible balance sheet tricks are still a mystery to those responsible. Peter Steiner, head of the accounting committee on the board of directors, said a small group of employees are suspected of having posted provisions incorrectly or delayed in order to achieve the margin targets. They would not have gained any personal benefit from it.
Large-scale corporate restructuring
The allegations of balance sheet tricks are a setback in the large-scale restructuring of the group for company boss Conrad Keijzer. He has been CEO since early 2021 and should bring calm to Clariant. CFO Stephan Lynen has been on board since February 2020.
Keijzer spoke of a culture problem: “Apparently there are people at Clariant who believe that it is good to trick the system in order to achieve the goals.” He will continue to work on ensuring that the corporate culture meets the highest ethical standards in the future. “We will get to the bottom of the allegations,” emphasized Keijzer. He was relieved that the trickery was uncovered by employees.
The specialty chemicals group has had turbulent years: in 2017, the planned major merger with the US group Huntsman fell through. After that, the Saudi chemical group Sabic got a big stake in Clariant, which wanted to merge its specialty chemicals subsidiary with the Swiss. This project also failed, and the long-time CEO and later chief supervisor Hariolf Kottmann fell out with the Saudi major shareholder.
With agency material
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