UpdateGermany’s LANXESS narrows 2013 guidance after Q3 profit fall

12 November 2013 12:54  [Source: ICIS news]

(adds quarterly financial detail throughout)

LANXESSLONDON (ICIS)--German specialty chemicals maker LANXESS on Tuesday narrowed its pre-exceptional earnings before interest, tax, depreciation and amortisation (EBITDA) guidance range for the full year, citing a challenging market environment.

The company expects its pre-exceptional EBITDA in 2013 to be between €710m ($947m) and €760m - which is within the previous forecast of €700m-800m.

LANXESS reported an 88% year-on-year decline in its third-quarter net income to €11m, because of lower product prices, inventory reduction and negative currency effects.

Its sales fell by 5% year on year to €2.05bn in the September quarter, while pre-exceptional EBITDA was down by 26.4% at €187m.

LANXESS said a 9% volume increase year-on-year in the third quarter, with all segments contributing, was unable to offset an 11% overall price decline, particularly in the rubber businesses belonging to the Performance Polymers segment, and negative currency effects, mainly related to the weakness of the US dollar.

Meanwhile, ongoing strong demand for agrochemicals and positive sales development in the Asia-Pacific region had a stabilising impact on quarterly results, it added.

In the group’s Performance Polymers segment, “a persistently difficult market environment and lower prices for raw materials, especially butadiene,” led to a 19% fall in selling prices, with sales in the quarter declining 8% to €1.1bn.

Sales in the Advanced Intermediates segment were flat year on year €403m on the back of good demand for products used in the agrochemicals and in the flavours and fragrances industries.

In the Performance Chemicals segment, third-quarter sales decreased 2% year on year to €546m as volume growth of 3% could not compensate for negative currency effects of about 5%.

"Some of our customers have started restocking their inventories. This is highlighted by the year-on-year and quarter-on-quarter volume increases," said Axel Heitmann, chairman of LANXESS.

“But, in our view, it is still too early to speak of a general recovery of the business."

Third-quarter sales in the Asia-Pacific region, accounting for 25% of group sales, rose by almost 5% year on year to €515m, largely on the back of growth in China, while sales in Europe, the Middle East and Africa (EMEA), excluding Germany, representing 29% of group sales, were stable at around €591m.

Sales in Germany, which account for 18% of group sales, fell almost 7% year in year to €364m, while third-quarter sales in the BRICS countries (Brazil, Russia, India, China and South Africa) increased by just under 3% to €497m. BRICS countries accounted for 24% of group sales.

Sales in North America (17% of group sales) and Latin America (12% of group sales) fell by 13% to €342m and 17% to €238m, respectively.

Looking ahead, LANXESS expects the market environment to remain difficult, especially for the automotive and tyre industries.

“Automobile production will probably show only a slight increase in the remaining months of 2013, driven mainly by demand in the US and China. The tyre industry remains likely to see only a modest recovery,” it added.

LANXESS said to address the challenging economic situation, it has begun implementing its ‘Advance’ efficiency improvement programme, announced in September. The company will cut around 1,000 jobs worldwide as part of a drive to achieve €100m efficiency savings from 2015 onwards.

($1 = €0.75)

Additional reporting by Nurluqman Suratman

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

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