Germany's LANXESS suffers analyst earnings downgrade

09 April 2013 17:32  [Source: ICIS news]

LONDON (ICIS)--German specialty chemical company LANXESS has had its full year earnings forecasts for 2013 and 2014 slashed by analysts, as it battles against poor trading conditions in European rubber chemical markets, an investment bank said on Tuesday.

Equity analysts JP Morgan Cazenove said it is cutting its earnings per share (EPS) estimate for full year 2013 by 54% to €3.05 and EPS for 2014 by 28% to €5.29, following the recent Q1 profit warning issued by LANXESS.

On 21 March, LANXESS warned that earnings before tax, depreciation and amortization (EBITDA) would fall to a range of €160m-180m ($208m-234m) for the first quarter of 2013, compared with Q1 2012 EBITDA of €369m.

The company blamed poor trading conditions in European automotive rubber markets.

In a research note, the analysts said: “LANXESS has encountered a perfect storm in the butadiene [BD] rubber markets. Weak demand and customer destocking has led to an average year on year price decline of 22% in Q1 2013 for [BD]-based products.”

As global capacity increases come on stream in 2013 and 2014, in the midst of lacklustre demand growth, there is little hope for LANXESS to push through increased prices, the investment bank added.

LANXESS is unlikely to be able to achieve the Bloomburg full year consensus EBITDA target of €1.071bn, despite a contribution of €210m in sales from its new butyl rubber plant coming on stream in Singapore in 2013, said the analysts, adding that they expect this target to fall further.

JP Morgan Cazenove added: “Consensus expectations for the major tyre manufactures have been varied, and the well-publicised weakness in European automotive and construction markets, as well as the lack of visibility into [the second quarter], will likely be a significant overhang on performance after a bumper 2012, which saw a 65% rise in LANXESS’s share price.”

At 16:29GMT LANXESS’s share price on the German Xetra stock exchange stood at €51.13, 0.27% below the previous day’s close.

($1 = €0.77)

By: Will Beacham
+44 20 8652 3214

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