Credit Suisse downgrades LANXESS on weakening auto market

12 October 2012 12:15  [Source: ICIS news]

LONDON (ICIS)--Credit Suisse has cut its performance expectations for LANXESS on the back of a softening auto market, a key industry for the German chemicals producer, the Swiss financial services group said on Friday.

Credit Suisse analysts cut its rating for LANXESS from neutral to underperform and its target share price for the company from €65 ($84.42) per share to €60.

LANXESS’ earnings per share (EPS) expectations in 2013 were cut by 5%. EBITDA growth for the company in 2012 was forecast to be 4.7%, compared with management's guidance of 5%+.

The downgrade is the result of a worsening short-term outlook for the company as a result of warning signs from the auto industry. The bank predicts a stock overhang for autos in Europe as a result of weakening demand, leading to bleaker earnings announcements from many of LANXESS’ peers.

“We are concerned about the outlook for H2 given recent negative statements from truck suppliers such as Cummins, Accuride and auto-focused EMS-Chemie,” said Credit Suisse in a trading note.

Credit Suisse backed the company’s current capital expenditure programme as “justified” given the expansion plans of several key clients including Continental and Michelin, but noted that it was likely to impact on earnings in the short-to-medium term.

LANXESS’ performance is strongly tied to the auto industry, with 23% of its sales coming from new cars, and 22% from replacement tyres.

($1 = €0.77)

By: Tom Brown
+44 208 652 3214

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