InterviewTechnology gives us a solid base for growth – LANXESS CEO

09 May 2012 13:17  [Source: ICIS news]

LANXESS Chairman Axel HeitmannLONDON (ICIS)--LANXESS’s focus on developing its technology will provide a solid platform for future growth, the group’s CEO, Axel Heitmann, said on Wednesday.

In its first-quarter financial report released on Wednesday, the Germany-based specialty chemical, synthetic rubber and plastics producer showed it had increased its research and development (R&D) spend by 45% year on year to €45m ($58m).

The R&D expenses predominantly focused on what LANXESS calls “green mobility” – the company’s vision to develop technology that allows more mobility with less fuel consumption, while also being less harmful to the environment.

Heitmann added that the company will continue to increase its R&D expenses in 2012 compared with 2011, when it spent €144m.

“We lifted our R&D spend in 2011 and we have lifted it again in the first quarter to imporve technology for the next generation of products,” he said.

The R&D will focus on the growth of green mobility in all regions of the world, Heitmann said. Not just in emerging markets, where mobility is growing fastest, but also in the western hemisphere, where new legislation is coming into place that calls for more high-performance tyres, and also where consumers are looking to improve their carbon footprint, he added.

“LANXESS is really well positioned for growth,” he said.

On Wednesday, LANXESS saw its net profit in the first quarter of 2012 grow 16.3% year on year to €193m, as the company passed higher raw material prices along to the market.

First-quarter sales rose 15.2% to €2.39bn compared with the same period last year. LANXESS said that sales in the first quarter were influenced by an 8.8% year-on-year rise in selling prices across the group, which offset a 3.1% fall in volumes. In addition, positive currency effects of 2.4% supported sales.

The specialty chemicals group’s total earnings before interest, taxes, depreciation and amortisation (EBITDA) pre-exceptionals for the period grew 14.6% year on year to €369m.

Heitmann said all LANXESS’s segments – Performance Polymers, Advanced Intermediates and Performance Chemicals – contributed to the group’s EBITDA growth with the three segments passing through higher prices.

“We expect EBITDA pre-exceptionals to increase 5-10 % year on year in 2012 [from €1.15bn in 2011],” said Heitmann.

“It has been an extraordinary quarter – we have made an excellent start to the year, with double-digit growth in sales, EBITDA, net income and EBITDA guidance,” he added. “You also have to take into account that 2011 was already a record year for us.”

Heitmann said the group would be looking to improve its EBITDA using a combination of external and organic growth.

“We have priority to [focus on] organic growth. In principle two-thirds of additional EBITDA streams should come from organic growth, with the remaining third coming from external growth,” he said.

The chairman said the company wants to spend €600m on capital expenditure (capex) in 2012, predominantly on capacity expansions, with some also going towards maintenance.

“The lion’s share will be spent on capacity expansions in emerging markets,” he said. However, Heitmann  added that the company wants to spend about a third of this capex in Germany as part of its strategy to improve its domestic performance.

Looking ahead, Heitmann said LANXESS expects the performance in the second quarter to be similar to that of the first quarter.

“There was an element of restocking in the first quarter, but we are optimistic [for the second quarter] that with our technology-driven portfolio we can offset all the uncertainties and concerns [about the global economy],” he said.

On 30 March, investment bank JP Morgan Cazenove more than doubled LANXESS’s share price target to €90 from €40, because of a positive outlook in its business segments and an expected strong first quarter. JP Morgan said strength in the specialty chemicals company’s business segments and its move into high performance plastics had improved LANXESS’s outlook for 2012.

At 11:36 GMT, LANXESS’s shares were trading at €59.83, up 2.94% on the previous close on the Xetra DAX.

($1 = €0.77)


By: Franco Capaldo
+44 (0)20 8652 3214



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