* Clariant Q1 net profit 120 million Swiss francs
* Beats average estimate of 101 million Sfr in Reuters poll
* Q1 sales 1.717 bln Sfr vs 1.817 bln
* Shares up 3 percent
(Adds details, quotes, analyst comment)
By Caroline Copley
ZURICH, May 6 (Reuters) - Swiss specialty chemicals maker Clariant AG posted better-than expected first quarter profit as its focus on cost savings and price hikes offset lower sales due to a strong Swiss franc. The group, which makes colour and additive concentrates for the automobile and textile industries, posted a first-quarter net profit of 120 million francs ($124.9 million), beating an estimate of 101 million francs, according to a Reuters poll.
Lower production costs helped earnings before interest and tax (EBIT), before exceptional items, jump 26 percent to 230 million francs ($239.4 million), but sales fell 6 percent as a strong Swiss franc, that has risen strongly in the past year, took its toll.
"Profitability assumptions are likely to be revised up by the market," said Vontobel analyst Patrick Rafaisz.
"The strong performance on the operating level confirms our investment case. Clariant has well positioned itself to finally generate significant economic value for shareholders."
By 0715 GMT shares in Clariant had risen 3 percent, compared with a flat European chemicals sector index.
Chief Financial Officer Patrick Jany said the group was confident it could pass on higher costs of raw materials, which it expects to rise by a mid-teens percent this year.
"We are very positive that looking at the full year, we will be able to offset the impact of higher raw materials by price hikes," Jany told a conference call.
Analysts at Wegelin said the results were convincing.
"The improved margins, despite an unfavourable exchange rate and higher raw material prices should show that they've regained market power," they wrote in a note.
Clariant's forecast-beating earnings add to a string of positive results from European chemical makers, driven by demand from emerging markets and an ability to pass on higher prices to customers.
French specialty chemicals group Rhodia, which is being bought by Belgium's Solvay reported a record first quarter, while earnings at German chemicals giant BASF jumped 40 percent to 2.7 billion euros.
Clariant said its recent 1.9 billion euro acquisition of German group Sued-Chemie would help it target new markets.
The group reaffirmed its outlook for stable growth in 2011, driven by demand from markets in Asia and Latin America. a mid-teens increase in raw material costs this year ($1=.9607 Swiss Franc) (Editing by Hans Peters)