Ladies and gentlemen, welcome to the Clariant Full Year Results 2018 conference call. I am Sherry, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star one on your telephone. For operator assistance, please press star 0. The conference must not be recorded for publication or broadcast. At this time, it is my pleasure to hand over to Mrs. Anja Pomrehn, Head of Investor Relations. Please go ahead, madam.
Thank you. Ladies and gentlemen, good afternoon or good morning. My name is Anja Pomrehn, and I welcome you to Clariant's Full Year 2018 Results Conference Call and live webcast. Joining me are Ernesto Occhiello, the CEO of Clariant, and Patrick Jany, the CFO of Clariant. As a reminder, this conference call is being recorded, and at this time, all participants are in a listen-only mode. There will be a Q&A session later. The slides for today's presentation can be found on our website along with our media release and financial review. I would like to remind the participants that the presentation includes forward-looking statements which are subject to risks and uncertainties. Listeners and readers are therefore strongly encouraged to refer to the disclaimer, which is part of today's presentation. Let me now hand over to Ernesto to go through the highlights of 2018 on slide number three.
Afterwards, Patrick will discuss the results in more detail. Ernesto will then finish the presentation with some Clariant insights and the outlook. Ernesto, please.
Thank you, Anja. Ladies and gentlemen, good day. It is my pleasure to welcome you to Clariant's 2018 Full Year Results Conference Call. In the year 2018, Clariant achieved its guidance for 2018 and delivered a good sales growth and a higher profitability in comparison to the previous year. Furthermore, our operating cash flow rose significantly versus last year's figure. We achieved a very strong step-up in net income in the full year 2018. Let us go through the highlights of 2018 together. For the full year, Clariant continued to grow sales organically by five percent in local currency year-on-year. The sales growth was driven by increases in all business areas, particularly Catalysis. This increase was driven by both higher volumes and prices. The absolute EBITDA before exceptional items increased by five percent in Swiss francs to exceed CHF 1 billion, the highest result since 2004.
This positive development was primarily attributable to Care Chemicals, Catalysis, and Plastics & Coatings. The corresponding EBITDA margin before exceptional items advanced for the ninth consecutive year, reaching 15.4% for full year 2018. The net income again rose in double digits, namely by 18% to CHF 356 million, while the operating cash flow grew by another 24% to CHF 530 million. Based on these solid results, the board of directors decided to propose an increased dividend of CHF 0.55 per share, which is 10% above the previous year. The distribution is proposed to be made from the capital contribution reserve. I will now hand over to Patrick for the discussion of the results in more detail.
Thank you, Ernesto. Ladies and gentlemen, good afternoon. Let us move on to slide number four. In the full year 2018, Clariant's five percent organic sales growth in local currency was driven by higher sales delivered by all business areas. Increased volumes contributed two percent to the advancement, while price improvements positively impacted sales by three percent. Given the negative one percent currency impact, full year sales growth in 2018 was four percent in CHF. In the fourth quarter of 2018, sales increased by three percent in local currency, with a positive contribution from pricing of four percent and a negative volume contribution of one percent . The sales growth in local currency was mainly driven by Catalysis and Natural Resources. Sales declined by three percent in CHF due to the unfavorable currency fluctuations of six percent in this quarter.
On slide five, we see that all regions reported positive sales growth in local currency in the full year 2018. Latin America delivered double-digit growth of 12%. This very robust performance was followed by Asia-Pacific, where sales grew by seven percent , largely due to China and India, and despite the challenging comparison base in the previous year. Sales in North America increased by five percent , while both Europe and the Middle East and Africa reported sales growth by a solid two percent . In the fourth quarter of 2018, the Middle East and Africa region reflected a significant sales expansion of 15%. Driven mainly by Catalysis, while sales in Latin America rose by a robust nine percent , supported by Oil and Mining Services. Sales in North America grew by a solid three percent , while Asia-Pacific only grew by two percent due to a slowing in China.
In Europe, sales actually decreased by two percent , due in part to the strong comparison base in the same period of the previous year and the softening in Germany, which started in the Q3 . Reviewing the figures of the business areas for the full year 2018 in more detail, starting with Care Chemicals on slide six. In Care Chemicals, full year 2018 sales growth was about our expectations at seven percent in local currency year-on-year. This progress was achieved by advancement in both Consumer Care and Industrial Applications. The Consumer Care business delivered attractive sales growth with progressive contributions from all three business lines: Personal Care, Home Care, as well as Crop Solutions. While Home Care sales grew at a double-digit rate, both Personal Care and crop delivered good high single-digit sales growth. Industrial Applications sales grow in the mid-single digits.
In the Q4 of 2018, sales in Care Chemicals increased by one percent in local currency and decreased by four percent in CHF due to unfavorable currency fluctuations. The sales growth was supported by the Consumer Care business, while Industrial Applications had a slightly negative growth. The full year 2018 Care Chemicals EBITDA margin before exceptional items increased to 19% from 18.4% in 2017 to therefore reach the upper range of our 2018 margin guidance of 18%-19% for the business area. This positive development was primarily the result of the good top-line growth, operating leverage, and an improved product. In the Q4 of 2018, the EBITDA margin before exceptional items softened to 17.7%. This margin reduction was mainly attributable to the decline of the aviation business in Europe during this period, as well as some temporary capacity outages in Asia.
Moving on to Catalysis on slide seven. Sales in the business area Catalysis expanded by 11% in local currency in the full year 2018. Organic sales, excluding the fully consolidated Sud-Chemie India joint venture as of the Q2 of 2017, rose by a good eight percent in local currency, primarily due to the very strong demand in syngas and a good progression in specialty catalysts, while petrochemical sales remained flat year-on-year. This sales development benefited from robust demand in Asia, primarily attributable to China, as well as in the Middle East and Africa and Latin America. In the Q4 of 2018, Catalysis saw a pickup in demand for petrochemical catalysts and some forward product shifts from the Q1 2019, which underpinned the nine percent sales growth in local currency.
The full year 2018 EBITDA margin before exceptional items developed as anticipated and decreased to 23.1% from 25.8% in the previous year. This was mainly due to the product mix, which remained largely unchanged throughout 2018. The proportionally higher sales from syngas compared to the last year, as well as a negative contribution to business line Biofuels & Derivatives, lowered the EBITDA before exceptional items, hence resulting in a margin which was moderately below our guidance of the year. Adjusting for Biofuels & Derivatives, the EBITDA margin would have actually been within our guidance range. In the Q4 of 2018, the more favorable product mix towards the end of the year, with a higher percentage of sales contribution from petrochemical catalysts, resulted in increased EBITDA margin before exceptional items to an excellent 29.1%.
On slide eight, we see that sales in Natural Resources rose by eight percent in local currency in the full year 2018, reflecting accelerating sales growth in the second half of the year. The Oil and Mining Services business reported double-digit sales growth for the full year in a slowly improving market environment. The business unit saw a marked demand recovery, particularly in Latin America and Asia. Functional Minerals delivered single-digit sales growth in local currency, primarily driven by foundry. From a geographic perspective, the positive development in Functional Minerals was most pronounced in Europe and in Asia. For the Q4 of 2018, sales in Natural Resources climbed by a strong 11% in local currency and remained unchanged in CHF due to unfavorable currency fluctuations.
Both the Oil and Mining Services as well as the Functional Minerals businesses contributed to the growth, double-digit and single-digit respectively. In the full year 2018, the EBITDA margin before exceptional items lessened to 12.8%, from 15.3% in the previous year, due to the unabated price consciousness in the oil market and the lower contribution from Functional Minerals purification business compared to the previous year. In the Q4 of 2018, the EBITDA margin before exceptional items decreased to 12.9% amid an ongoing competitive environment in the oil industry and a strong comparable Q4 last year. The Oil and Mining Services has seen it drop and has improved its cost base. As anticipated, the second half of the year already showed an improvement in the margin versus the first half.
Slide nine reflects the development in Plastics & Coatings, where sales grew by one percent in local currency for the full year of 2018 against a very strong comparison base. In Masterbatches, the sales growth in local currency was underpinned by increased demand in Latin America and Asia. Sales rose mainly in consumer goods and automotive. Moreover, healthcare packaging reported an attractive sales development in 2018. Sales in Pigments remained flat, but still grew in Latin America and Asia, driven by China and Japan. On a business line level, Coatings and Plastics reported continued sales growth. Additives sales remained very strong, supported by all business lines and by solid demand in almost all regions, North America, China, and Europe in particular. In the Q4 of 2018, sales in Plastics & Coatings were three percent lower in local currency and eight percent lower in CHF due to unfavorable currency fluctuations.
The softening in Asia and Europe, already witnessed in the third quarter of 2018, was the main reason for the slowdown in the Q4 . The full year of 2018 EBITDA before exceptional items in Plastics & Coatings grew by another six percent CHF to CHF 412 million year-on-year, despite a strong previous year. This profitability improvement was primarily attributable to Additives in Masterbatches and some income from Stahl. In the Q4 of 2018, the EBITDA before exceptional items of CHF 71 million was at a comparable level versus the same period of last year. Let us now move on for the discussion of the financials on Slide 10. In the full year 2018, the EBITDA before exceptional items of the group rose five percent in CHF to exceed CHF 1 billion, the highest result since 2004.
The absolute profitability improvement was attributable to the positive contributions from Care Chemicals, Catalysis, and Plastics & Coatings. The corresponding EBITDA margin before exceptional items advanced to 15.4%. This represents a margin expansion for nine years in succession. Moving on to Slide 11. In the Q4 of 2018, the EBITDA before exceptional items decreased by two percent in CHF to CHF 253 million as a result of a slowdown in China and Europe. The corresponding EBITDA margin before exceptional items advanced to 15.5% from 15.3% due to the excellent profitability in Catalysis, which more than compensated for the profitability softness in Care Chemicals and Natural Resources. The EBITDA in the Q4 was impacted by various effects which largely offset each other, including those of a new sales recognition process, high inflation adjustments in Latin America, devaluation of inventories, particularly in Care Chemicals and Natural Resources, and Stahl.
The excellent net income expansion can be seen on Slide 12. Net income climbed 18% to CHF 356 million in 2018, primarily as a result of the improvement in absolute EBITDA, lower one-off costs, as well as a lower effective tax rate. Clariant's net income has increased on average by more than 13% per annum between 2014 and 2018. Please turn to Slide 13 for the discussion of the operating cash flow development in 2018. The operating cash flow increased significantly to CHF 530 million. This represents a 24% increase versus the previous year due to the progression in absolute EBITDA and a significantly improved net working capital management. The strong development is particularly noteworthy given the one-off tax settlement amounting to CHF 83 million paid in the first half of 2018.
Adjusted for this tax settlement, 2018 operating cash flow would have totaled CHF 613 million, almost reaching the level attained in 2016. I will focus on Clariant's dividend development since 2014 and the proposed dividend in 2019 on Slide 14. The continued improvement in performance allows the board of directors to propose a dividend of CHF 0.55 per share to the annual general meeting to be held on the 1st of April 2019. This reflects an increase of 10% compared to the previous year, and an increase of approximately nine percent per annum since 2014. This distribution is proposed to be made from the capital contribution reserves, which is exempt from Swiss withholding tax. Going forward, Clariant's dividend policy remains unchanged, and that is to increase or at least maintain the absolute dividend in CHF. With this, I hand back to Ernesto.
Thank you, Patrick. Ladies and gentlemen, after going through the financials of last year, I would like to focus a bit more on the future. On September 18th, 2018, Clariant announced a step change into higher value specialties by not only announcing the collaboration opportunity between Clariant and SABIC, which will lead to the creation of a new business area, High Performance Materials, and the divestment of the remaining Plastics & Coatings business area, but also by announcing an updated strategy for the various Clariant businesses. I want to explain to you what Clariant will further address to foster the progression. For this, let us move to Slide 16. Clariant is a focused and innovative specialty chemical company, and our aim is to provide more than just customer-oriented products.
We strive to provide the best customer experience and fast, reliable customer fulfillment within the industry by setting the right priorities, because it is our aspiration to make the customers more successful. Starting with today, I will always provide you with an example of how Clariant addresses customer experience and fast, reliable customer fulfillment, which is a step beyond just being customer-oriented. Let me start by giving you the first example from Personal Care, which reflects how we address customer experience. Please move to Slide 17. One of the essential requirements to be successful in Personal Care is the ability to identify natural and renewable ingredients which match the trend of naturality, health, and safety. Many of our customers try to follow this trend.
However, the reality is that whenever an existing synthetic ingredient is exchanged with a natural one, often the entire formulation of the respective product must be adapted. In effect, by exchanging one ingredient for another, it is often necessary to add another synthetic ingredient due to the formulation change in order to achieve the same performance, the same texture, as well as a comparable feel of the end product. Consequently, at the conclusion of the process, one synthetic ingredient was exchanged for a natural one. However, in order to achieve an equivalent texture and feel of the newly formulated end product, it was necessary to compensate with one or even more additional synthetic ingredients. As a result, there is often no decline in the number of synthetic ingredients in the end product.
With the example of Genadvance, we have made an effort to identify one of the next best-selling concept in advance of our customers. Genadvance addresses naturality and identifies specific formulations and product formats which allow us to effectively remove and/or reduce the number of synthetic ingredients present in a product and exchange them for natural ingredients without adding other synthetic ingredients. With our outstanding formulation know-how, we can actually reduce the number of synthetic ingredients and exchange them exclusively with natural ingredients without compromising on performance or even improving it. Concurrently, Genadvance has a superior ecological and sustainability profile, which I will elaborate in more detail on the next slide 18. Genadvance Hydra, for example, is a natural moisturizer with an exceptional improved after feel, especially on damaged hair. It is 100% naturally derived, silicone-free, and it is biodegradable within only 10 days.
Its biodegradability is therefore 2x - 3x faster versus traditional products for this application. Furthermore, while the traditional conditioner consists of up to 95% water, a Genadvance conditioner soap bar barely contains any water. There is a significantly lower water requirement during the production process. With that, we can create formulation and formats that meet unusual needs. These formulation innovations and the advantages that the products not only require significantly less water during the production process, the new formats, such as bars and powders, also reduce the volume and packaging needed. This is particularly convenient for customers who travel, given the reduced packaging size, the lighter weight, and the fact that the end product is no longer in liquid form. Thus, the product can be taken in your hand luggage when boarding a plane.
On slide 19, you can again see the significantly enhanced performance of another Genadvance product line, Genadvance Repair, as well as our formulation expertise using natural ingredients. With the application of our technology expertise, the performance of the original formulation was exceeded while using 20% less active ingredients. Overall, this can lead to up to 25% cost saving in the production process, hence making it financially and also ecologically very attractive. Remaining with the topic of personal care, I have just now elaborated on one example of customer experience, by which we strive to identify and capture the next bestseller concept, which will provide our customers with a competitive advantage. However, we also want to accompany our customers into the next business cycle by being a step ahead of the market developments and demand requirement.
Let me explain to you why we think that we are going to be successful on this topic. Firstly, we try to put ourselves into the shoes of our customers to anticipate what they are looking for and what requirements they intend or need to fulfill with their own customers. Secondly, we maintain a regional organization within Personal Care, which examines and anticipates requirements at the respective regional level. Thus, we have more people in the market at the regional level who are keeping their eyes and ears open to identify potential customer needs. That effort will allow us to translate future trends into products at a much faster rate. This leads me to the second example of customer experience, which I would like to share with you now. Agility and the ability to facilitate a fast market introduction of rewarding, innovative, and quality products with first-class reputation and capabilities.
To discuss this topic in more detail, please turn to slide 20. Agility and the ability to facilitate a fast market introduction is a key concept when operating in the area of Personal Care, as the market is driven by customer pulsation. It is imperative to reduce development of formulation time. Rather than waiting until we receive a mandate from a customer and then start formulating, we already have various product formulations available under Essence by Clariant. We have detected a trend towards transparency within the industry and delineated an entire platform development, which we can provide to certain end users of our products, the bloggers. These bloggers are increasingly being used by our customers as a proof point to determine if a product formulation or even format is going to be successful, as these channels are widely used by our customers and consumers.
We are on one of the first, if not the first, ingredient supplier to use these social channels to establish the value proposition of several of our products, as they reflect our formulation experience and capabilities. The impact and the reach of such blogger messages is fast. When our customers see such positive feedback from the bloggers, they will approach us wanting to have a product very quickly, as time and speediness is vital for their business. As we already do have different formulation and formats available prior to the posting of the blogs on social media, we are in position to provide a specific product formulation very quickly. In addition, we already have different product formats available, which will not only provide our customer with a competitive advantage, but will also help us to generate value for ourselves as well as for our customers.
If you are interested in watching some of these vlogger videos, please click on the links at the bottom right of this slide to access some of these videos, or alternatively, type in Essence plus Clariant. Let us progress to our outlook. For this, please move on to slide 22. As just elaborated, Clariant is a focused and innovative specialty chemical company with the aim of making our customers more successful. We therefore confirm our 2021 guidance to achieve above market growth, higher profitability, and stronger cash generation. With that, I turn the call back over to Anja.
Thank you, Ernesto. Thank you, Patrick, for taking us through the achievements and the progression of the full year 2018 and the Q4 results, as well as for providing us with some exciting insights to Clariant's way forward, which offer great opportunities and excellent possibilities for the years ahead. We would now go into the Q&A session. Operator?
We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to only answer while asking a question. Anyone who has a question may press star and one at this time. The first question is from Christian Faitz, Credit Suisse. Please go ahead.
Hey, thank you. Good afternoon, Anja. Good afternoon, gentlemen. A couple of questions from my side, please. First of all, your de-icing activities in Q4 were hampered by weather, obviously. Do you see a better performance in this quarter, from what you can say so far? Second of all, with respect to China, what are your salespeople in the field saying about the order book after the end of the New Year Celebrations? Because I guess also for you, China has been rather exceptionally weak, December, January into the New Year Celebrations. Third question in Catalysis. I would not expect the Q4 margin to be sustainable, but looking at your current business setup, is a more sustainable margin somewhere in between the Q4 and the full-year margin? Thank you.
Thank you very much, Christian. I'll take your questions in their order. Indeed, I think the de-icing business in Q4 was a bit weaker, particularly in Europe. It's actually quite good in the U.S., but as you know, the margins typically are higher in Europe. Therefore, we had, compared to the previous year, an unfavorable EBITDA effect, although sales were more or less at the same level. If you look now into Q1, obviously we don't guide on Q1. It's not over yet, so we still hope for a lot of cold weather going forward. I would say it hasn't started bad. You know that the Q1 last year, 2018, was actually very good. We have a high previous year basis. For now, I think there's no reason to believe that we would be substantially deviating from that.
Looking at China, obviously we had a negative sales evolution in Q4 2018, minus three percent in the single quarter, which is a stark contrast of the quite high growth rates we had at the beginning of the year. As you remember, they were mainly driven by syngas, accumulation of syngas sales, which came into Q1, Q2 in terms of deliveries. It was a bit too high, I would say, in the first half, consequently came down in Q3, Q4. Looking at 2019, I think we'll have to wait until life restarts in China after New Year. It has just finished out, basically, and you need a few weeks for the industry to restart. That level of demand after restarting after Chinese New Year will be determining, really, the pace of the year in China.
It is, for us, not totally clear in terms of numbers. We'll have to wait. Typically, you have to wait until end of February, early March, to get the pace. We'll have to wait for that. I would not think that we will see a major disruption here. We have seen in Q4, if you refer more to what we know, slowdown in some industries, automotive-related and construction, but it was not an overall general winding down of business. Yeah. We'll be able to tell you more in Q1, but I think it won't be a major disruption. Looking at then Catalysis and its level of profitability. You know that Q4 is the highest level of profitability for catalysts during the year. Q4 is the peak in sales and profitability.
This was even enhanced this year by some petrochemicals orders being pushed forward into 2018. That helped a bit Catalysis by the end of the year. Overall, we totally maintain our guidance, as you know, for the Catalysis business on its own on 24%-26%. If you look at our 2021 guidance, further progress in innovation and the new biofuel derivatives, you know that we have margin guidance, which is between 26% and 30%. Yeah. From that point of view, we look forward the next three years of further margin improvement in Catalysis.
Okay, great. Thank you very much, Patrick.
You're welcome.
Next question is from Patrick Rafaisz, UBS. Please go ahead.
Thank you. I'll also take three questions, please, if I may. The first one would be on the corporate costs in Q4, which were very low compared to the previous quarter's run rate. Can you explain a bit what happened here, and if anything changed on the underlying run rate going forward? Second question, around cash flow and net working capital. I would have expected a bigger reversal after the massive outflow in net working capital 2017. Is that result in line with your plan, or would you have hoped to see a bit more as well, and how do you think about 2019? Last question, around Catalysis, actually around the licensing income for your second-generation bioethanol. Is there anything happening in terms of contract activity or revenues that were recorded in 2018 and Q4? Thank you.
Thank you, Patrick. Starting with the corporate cost. I think corporate costs in Q4 particularly were a bit lower than usual, indeed. However, on the yearly level, we had the CHF 90 we actually guided for. You know that in 2018, for the first time, we have transferred the cost of our second-generation biofuel operations away from corporate research and corporate cost and moved them as an activity now within Catalysis. That explains that we come down from the above CHF 100 levels to the CHF 90 levels we're in today. On the full year, we are totally in our guidance. Q4 has always some, here and there, some little one-offs. It was a bit lower, maybe, than you would have expected. I wouldn't take the Q4 as a run rate, but I would take the yearly figure as a run rate, right?
Q4 had a bit of income from Stahl and other elements. I would take the full-year figure as a solid figure looking forward. Looking at the cash flow, we actually were quite happy about cash flow, frankly speaking. It is, in terms of net working capital, in percent of sales, at 17.3% level, which is the best in many years. From that point of view, we are quite happy about the effort that the businesses did to revert from the quite dismal December 2017. From that point of view, quite happy, particularly in the work in receivables, which is a good level of control, particularly when you know that the economy, in some areas, is slowing down a bit with a bit of uncertainty. It's, in my view, very important to collect your outstandings swiftly. That's what the people have done.
It's a nice measure and nice effort. Are we at the best in our turning capital? No, certainly not. I would say that having a net working capital reduction in absolute numbers in a year where you grow the group by 5.3% is actually quite nice. We have over-absorbed the growth, which would have led to an increase, and we have actually over-reversed this with a reduction. I really would like to stress it's actually quite a nice result. Looking forward, we probably will have a growth in net working capital according to sales. I think, however, we can still be better, particularly, I would say, in inventory. A lot of work in some of our businesses still, and will be focusing even more on supply chain, particularly inventory management.
I wouldn't say we're at the end and our net working capital management is optimum, but I wouldn't understate the achievement that the people did in end of 2018. More to come. When you look at the catalyst business, and on the license income, particularly, you were mentioning, there hasn't been too much income, basically nothing, I think, in 2018 in terms of licenses. We are, however, very actively looking at diverse prospects. If you look at 2018, you really have the cost element shifting down from corporate costs and therefore pushing a bit down Catalysis in terms of ratios because there wasn't too much income in 2018. Looking forward, we expect to probably have some success in signing some licenses before the plant is operating by mid-2020. There could be something this year.
More importantly, I think we have a strong feedback from the market that once the plant is operating, there's a real demand for this. We will see how much can be shifted or signed before we can actually show the first of its kind plant operating. I think we are very optimistic in terms of actual demand for the development of the business plan post 2020 when we are on stream in the market.
Thank you.
Next question is from Peter Clark, Societe Generale. Please go ahead.
Good afternoon. Thank you and welcome. The first question, I heard what you said on aviation, I'm looking at the Q1 comp, you pointed out it obviously had a strong quarter. A lot of that was U.S., which you again alluded to as lower margin than Europe. I'm just wondering at the Consumer Care margin, given you had other issues in Q4, how you see that develop as we start the year. Secondly, on the working capital, again, hearing the comments on working capital, but on the cash itself, the inflow, the operating cash inflow, I think post-financing in the second half last year was actually pretty much where you targeted. Actually, it was very similar to the second half of 2016.
Looking at 2019, bearing in mind what you're saying on working capital, there might be more to go, how you see the operating cash flow to sales ratio. Is it going to be something that's going to be much more like 2016 and 2018 so you can still develop on that number a bit? Thank you.
Yeah. Thanks for the question, Peter. The aviation business in Q1 was strong in Q1 of 2018. You're absolutely right. Was particularly strong more on the U.S. side, helped the margins. We'll have to see, obviously, how Q1 finalizes. As I mentioned, the start of the season, which means now Q4 we are reporting on, was effectively the same pattern that the U.S. was stronger than Europe and therefore not favorable to our margins, which you can also see in the slight lowering of the margin in Care Chemicals in Q4. I wouldn't go now on Q1 margin of Care Chemicals. We wait how the quarter goes, but I would say that don't have a reason to be particularly alarmed.
The Care Chemicals business is, as you know, driven as well by Personal Care, by Crop Solutions, which have had a finance advance in 2018, we look forward to actually continue with this growth of those businesses. I think we guided or we reported on high single-digit growth in 2018, both for the Personal Care and the Crop Solutions segments, which, as you know, are margin intensifying. I think Care Chemicals will have a natural progression of its margin also in 2019. The exact impact on aviation, we have to see when the season is over. When we now look at the cash pattern, indeed, I think that the cash 2017 is an anomaly in the second half, as we reported on. If you take 2016 and now the 2018, you have a good view on the cash post seasonality.
First half, second half, it comes most on the second half of the year. We look forward to have those level of cash generation looking forward. We're not at the end of the journey, as I was mentioning before, cash generation has to come to two improvements. One is absolute EBITDA, and the other one is further improving the working capital, particularly in inventory. Certainly, the pattern of 2016 and 2018 is a good base to extrapolate your simulations for the years to come, and we're optimistic we can increase the cash flow going forward as well.
Thank you.
Next question is from Thea Badaro, Goldman Sachs. Please go ahead.
Hello. Thank you. Thank you for taking my questions. Three if I may. The first is, I was wondering if you could potentially quantify the impact of the outage of some of the plants you had in CareChem. My second question is on Industrial Applications in CareChem again. It seems that in the Q4 , you're negative growth. Coming into the first quarter, I'm wondering if you're seeing any trends that's changing or is it becoming worse? My last question is actually an update on your, I think it's your PDH plan in the Catalysis division. Is that still ramping up, and should we expect that to contribute to growth in 2019? Thank you.
Thank you for your question. Indeed, you've seen that Care Chemicals had a very good year in terms of margin. We're now above 19%, which is nice, Q4 was a bit lower, driven on the one hand about the aviation business, which was talked about in the earlier questions, but also by outages in Asia, particularly, I would say, sensitive in our plant in China for Personal Care and Industrial Applications here specific for the Chinese market, as we had an interruption from our supplier in terms of infrastructure, steam, and energy. We are now fully back up, and it's running fine, it didn't help really to have this happening in the Q4. Temporary, I would say that can always happen.
If you look at the last three, four months, actually, we have had quite a few outages in that part of the world, which didn't help. We look at that part as an upside for 2019 when you look forward to continued good demand as we see it in China for consumer-related Personal Care products. Now, where we have seen a decrease is not on the Personal Care and Crop Solutions side, but more on the Industrial Applications side, which are more GDP-dependent. As you've noted, we have reported a growth in our Consumer Care businesses. I was alluding before on a high single digit for Personal Care and Crop in particular. Home Care was actually even higher. I think it was double digit. A very nice evolution there. Industrial Applications is more GDP-dependent and therefore in Q4 had a slight negative growth.
Aviation was lower from the margin, more or less same level of sales. It really came from paintings, paints and coatings, construction, lubricants, all the other areas where we have seen a softening of demand in Europe and in China in particular. Looking forward for China, we'll have to see how business rebounds or starts really after Chinese New Year. It's a little bit too early to make a firm call, we'll be happy to report on that our Q1 results. Again, we see that probably more as a softening of the pace, but not as a general wind down. Compared to your third question on, it's actually on polypropylene plant, our new plant in Louisville for the catalysts. We have now, as you know, saw the technical problems during 2018.
We see a negative impact on the EBITDA, double digit in Catalysis in 2018, we look forward to erase that impact in 2019. Until 2021, it is one of the factors which contributes to the increased margin in Catalysis as we turn a cost block into actually decent sales with very good margins looking forward.
Thank you. Should we be expecting that in 2019 or just sometime between 2019 - 2021?
You'll see a positive effect on the P&L already in 2019, the full potential will obviously take more than just 12 months, I would say, to then fully impact the P&L. Hopefully we won't be talking about negative impact in 2019.
Okay, great. Thank you.
Next question is from David Semens, JPMorgan. Please go ahead.
Hi. It's Chetan Udeshi, actually. Just a few questions. One is on the pull forward of some demand from Q1 into Q4 that you talked about in Catalysis. Is that something we should be keeping in mind in terms of modeling Q1 in terms of materiality of that impact? Just so we know. The other question is, can you update us on the CapEx that you guys aimed to spend in 2019? I think you might have the first leg of the spending on the new Romanian plant, so that would be helpful.
Yeah. Looking at the Catalysis now, you know, catalyst is a lumpy business, so if you look at it on the quarterly view, you always have the advantage or the disadvantage of having some demand shifting from one month end to the other. What happened in Q4, we actually had a few pull forward, which is always a good sign when the customer demands the products. It means that the underlying demand is not bad. It certainly helped Catalysis because there were more petrochemicals orders, if I'm correct, therefore helping us with margin. If you now extrapolate that to 2019, I think we are confident that we will grow in 2019 as well. How much those deliveries will ultimately impact the pace of growth in Catalysis, we'll have to come back to you and see how the order book develops during the year.
I would say we look forward to actually decent growth in Catalysis for 2019, as well as in other businesses as well. From that point of view, I think it is fine. Looking at the CapEx, we expect to have some more significant CapEx in this year. As you rightly mentioned, the big investment now for our bioethanol plant is coming up for this year. We also have some different expansions in Care Chemicals and, as you know already, our doubling of capacity in Additives. We are guiding on above CHF 300 million. We always guided CHF 300 million-CHF 350 million, you know when we have big projects. I would see that on the upper end of that range, because we do have big projects in 2019.
Thanks. If I can follow up with, you guys haven't given any data on the SABIC's High Performance Materials business. Can we get a sense of how it has been doing in general in Q4 and into 2019? Most of the years in general have been weaker in markets. Some of those margin numbers that you guys had given in 2017, 20%, is that realistic in the current environment? That would be helpful.
As you can imagine, we cannot comment on this because this is a SABIC business, therefore, we are not privy to information or wherever we have some information, we are not allowed to share it.
Okay.
The last question is from Markus Mayer, Baader Helvea. Please go ahead.
Yeah. Good afternoon, gentlemen. Good afternoon, Anja. Three questions as well. First of all, I'm coming back to the Care Chemicals and the Oil and Mining Services business. There have been several force majeure globally for, in particular, ethanol-based value chain, and there have been also logistical issues in Europe in Q4. Have you seen any kind of negative effect from these supply interruptions from higher spot market prices, these higher raw material costs or supply issues? The first question. The second question is, again, on this High Performance Materials. Can you at least give a range where you might sign this compensation? Is this more something you should expect for April, May, or is it more something for the Q3 ? Lastly, again, on Oil and Mining Services, you're stating ongoing competitive environment for the oil chemicals. When should we expect that this is changing?
You have, of course, more long-term contracts, one year plus. Gradually, we should see improvement from higher product prices as a positive effect on the margins. Is this a fair assumption that we already see this in the first half of 2019 or is this more back-end loaded for second half of this year? Thank you.
Let me address the HPM question first. Reply here is that we confirm our guidance. That is, that we do expect to sign within Q2 of 2019. I turn it to Patrick for the other questions.
Thank you, Ernesto. On your first question on Care Chemicals and difficulties of supply given outages and so on. I think the only outage we really saw was the one we described earlier on in China because of the industrial park. We haven't been affected by the Rhine water levels or other stuff. I think, clearly, raw materials per se have risen during 2018. This was a common thread throughout the year, but we have been able to compensate that with price increases, so no real impact on the P&L. It has had sometimes some logistical difficulties. You had, for instance, in the U.S., increased logistical costs because there was a lot of trucks on the road. That happens, but not a major disruption which really would have impacted too much our results from that point of view.
Looking forward, we would probably look at a more relaxed situation from that point of view, a smoothening out of eventual potential tightness here and there in the logistics chain, and probably a smoother 2019 than 2018 from that point of view. I'm glad you mentioned Oil and Mining because that's certainly a business which is growing as we had guided it. It has shown a very nice performance now in terms of growth in the second half of 2018. We had guided for it at the early of the year, one year ago. I think our guidance for 2019 is a continuation of growth in Oil and Mining with profitability as guided before, ramping up on a half-year basis. Even in 2018, actually, if you look at the second half, we are slightly more profitable than the first half, I think around 50 basis points or something.
If you look forward to 2019, we would continue to guide as we have already that the first half of 2019 should be more profitable than the second half of 2018, and the second half of 2019 will then be again more profitable. Which allows us really to progress in terms of margin and to confirm our guidance in 2021 that we are back to this 16%-17%, which is the level where we were, and now we have to go back.
We are progressively. First of all, we saw the return of demand, new contracts with good margin being concluded, and we see, therefore progressively an improvement in the margins of that business as well, because we restructured quite significantly actually, the business which impacted the one-off cost, but also the margin of Natural Resources in the fourth quarter because we spent a bit of money in cleaning out here the business, particularly in the U.S., and that will favor our margins looking forward. Overall, Oil and Mining on the path to recovery, driven by higher sales, which progressively translate into higher margins. If you look at 2019, we'll have growth in Natural Resources. We just mentioned we'll have growth in Care Chemicals as well and in Catalysis as we previously described.
Overall, I would say we are looking forward for a further year of progress in terms of sales, profitability and cash flow generation as well.
Might I ask a clarification question on the first one? On the ethylene oxide price really changed. I know that your equity integrated in Gendorf, I suppose you are still buying on the spot market. Spot market pricing has been up quite substantially in the Q1 . Therefore, I'm puzzled why you have not seen any kind of effect there and that you said you were able to pass on the higher input cost.
Yeah.
Maybe you can clarify this for me.
We actually have almost zero on the spot market. You are totally right. In Gendorf, we are backward integrated. We do our own ethylene oxide, backward integrated into a refinery, which is not too far away from there. Then on the other places Spain, Brazil, U.S., China, we have long-term contracts with local providers, which is pretty close to our own plant. The prices are typically multi-year contracts based on formula prices and move on a quarterly basis and do not reflect spikes in the spot market.
Okay.
To emphasize that as of next year, our investment in Gendorf will become active and therefore we are going to have additional capacity of ethylene oxide locally.
Okay. Thank you so much.
Ladies and gentlemen, this concludes today's conference call. I do apologize that we do not have time to respond to all questions in the queue. However, the investor relations team is available for additional questions that you may still have, and we will see many of you during the company throughout the coming weeks. Many thanks again for joining the call today. Have a good day and bye-bye.
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