18 September 2013 14:31 [Source: ICIS news]
(Correction: In the ICIS story headlined "Germany's LANXESS 2013 EBITDA to fall to €700-800m, says CEO", dated 18 September 2013, please read in paragraph five ...EBITDA and margins for the first half of the year... instead of ...EBITDA and margins for the year....In paragraph six, please read ...were €118m in the first half of 2013 compared to €161m over the same period in 2012... instead of ...were €118m in 2013 compared to €161m in 2012...In the same paragraph, please also read ...first-half advanced intermediates EBITDA.... in place of...Advanced intermediates EBITDA... A corrected story follows.)
COLOGNE, Germany (ICIS)--The CEO of LANXESS on Wednesday said the Germany-based specialty chemicals company's earnings are likely to be significantly lower this year than in 2012 as a result of weak polymers demand and a sluggish European recovery.
Speaking at the group’s new headquarters in Cologne, CEO Axel Heitmann predicted that earnings before interest, taxation, depreciation and amortisation (EBITDA) for 2013 are likely to be between €700-800m ($933-1,067/tonne), excluding exceptional items and potential inventory devaluations.
The figure is significantly below the €1.23bn posted last year, and will potentially fall below the €722m EBITDA posted in 2008, the year of the onset of the global financial crisis. LANXESS posted full-year EBITDA of €1.15bn in 2011 and €918m in 2010.
The company is also to cut its total capital expenditure budget for 2013 to €600m, below a total of €696m in 2012 and €679m in 2011.
The projected fall is largely due to a sharp fall in earnings and profit margins from its performance polymers segment for the year. EBITDA and margins in the first half of the year fell from €512m and 18.2% in 2012 to €206m and 8.9% in 2013, Heitmann said.
Earnings from the group's performance chemicals division were €118m in the first half of 2013 compared to €161m over the same period in 2012, with margins to drop by 3.2 percentage points year on year to 10.9%. First-half advanced intermediates EBITDA is expected to be stable year on year at €145m, with margin erosion of 0.4 percentage points to 17.6%
The company derives 25% of its earnings from the rubber and tyre market and 15% from the automotive sector through the provision of light-weight car parts. Heitmann estimates that EU tyre production will have fallen by 7% in 2013 compared to the previous year.
“In Europe, there is a huge demand crisis. People reduce their consumption, they consider twice whether they should buy a new car or set of tyres, or whether they should buy a car at all,” said Heitmann.
"This is understandable with the very high unemployment rate [in parts of Europe]. These are important negative influence factors,” he added.
The company is also pursuing a €100m cost-cutting initiative that is likely to lead to 1,000 job cuts. It has also reached an agreement with German employees and trade unions to cut employee fixed income by 3%, calculated from next year.
Management fixed income is also to be cut by 6%, Heitmann added, with salary reductions to lead to savings in the “significant double-digit” million euros.
The company is to book €150m in one-off charges related to the cost-saving programme over the course of 2013 and 2014.
According to LANXESS CFO Bernhard Duttmann, €80m of those costs will be booked this year, of which €40m has already been absorbed, with the other €40m to be spread out over the next two financial quarters.
($1 = €0.75)
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