20 September 2012 10:29 [Source: ICIS news]
LONDON (ICIS)--Investment bank JP Morgan Cazenove on Thursday said LANXESS investors should be encouraged by the Germany-based chemicals group’s new mid-term earnings targets.
The Germany-based company set a goal of generating €1.8bn ($2.3bn/year) in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) by 2018.
LANXESS added that it is on track to achieve its earlier target of €1.4bn in EBITDA by 2014 - a year earlier than scheduled. For 2012, the company maintained its projection of a 5-10% gain in EBITDA to between €1.2-1.26bn.
“Its previous target of €1.4bn EBITDA has been brought forward a year early from 2015 to 2014, while a new ambitious target of €1.8bn EBITDA by 2018 is released. 2012 guidance of 5%-10% growth is reaffirmed,” said JP Morgan Cazenove.
“Despite the shares’ remarkable 70% rally year to date, and some 10% in the last month – which may prompt inevitable top slicing – in our view, the investment case and management confidence is likely to maintain investor support,” it added.
LANXESS plans to ramp up sales in green tyres and lightweight plastics for the automotive sector – an area it calls “green mobility”.
Tyres on a car are responsible for about 30% of the vehicle’s fuel bill, and LANXESS claims that its new synthetic rubbers can reduce fuel consumption of a tyre by 25%.
JP Morgan Cazenove said the group's sales in green mobility rose 20% year on year in the first half of 2012, with emphasis on green tyres. “Sales in this area were 17% of the total in 2011 at €1.5bn, with this set to rise to €2.7bn in 2015 suggesting a high level of confidence in the benefits to be derived from fuel and energy saving tyres which use a range of high performance synthetic butyl rubber,” the investment bank added.
CEO Axel Heitmann said LANXESS would also stick to its dual-track strategy of organic and external growth.
“The move from a targeted €1.4bn EBITDA in 2014 (a year early) to €1.8bn in 2018 suggests a CAGR [compound annual growth rate] of 6.4%, with the company’s conservative track record suggesting this may be well underpinned nearer the time by a stronger outcome - as new product development and benefits from areas such as tire labeling providing comfort that targets are attainable,” JP Morgan Cazenove said.
($1 = €0.77)
Additional reporting by Stefan Baumgarten and Joseph Chang
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