LANXESS shares rally after management reshuffle announced
Tom Brown
27-Jan-2014
(updates throughout)
LONDON
(ICIS)–Shares in Germany-headquartered specialty chemicals
company LANXESS rallied on Monday, despite a bearish market,
following news that chief executive Axel Heitmann is to
step down.
Shares in the company had risen by over 8% at 10:05 GMT, to
€48.74 per share, following a company announcement late on
Sunday that Heitmann is to step down “by mutual agreement”,
to be replaced by Matthias Zachert, currently CFO at German
pharmaceuticals company Merck.
Heitmann, who has headed the company since its spin-off from
chemicals producer Bayer in 2004, is to step down as CEO and
managing board member as of February 28.
Zachert, who has been seen as instrumental in Merck’s
turnaround and served at LANXESS from 2004 until early 2011,
will take up his new role no later than May 15, LANXESS
added.
Merck share values plummeted in morning trading on Monday,
falling almost 10% as of 10:13 GMT to €119.40 per
share.
LANXESS attributed the management reshuffle to a need to
address challenging market conditions.
“LANXESS is facing significant challenges, for example in
terms of market capacities and business portfolio. Therefore,
the Supervisory Board believes it is the right time to hand
over responsibility to a new leadership in order to overcome
these challenges,” the supervisory board said in a
note.
Analysts at UK-headquartered investment bank JP Morgan
Cazenove predicted that Zachert’s arrival may signal an
attempt to re-align market perception of the company and
re-focus its portfolio, as well as potential additional streamlining measures.
“Investors who remember Zachert from his time at
LANXESS in the early days of the post spin-off period may
begin to anticipate a period of re-basing market
expectations, refocusing the portfolio, and possibly a new
cost cutting programme to meet the challenges ahead from new
capacity,” analysts said in an investor note on Monday.
Zachert’s tenure at Merck saw company share
prices rise from around €60 per share in early
January 2011 to over €130 apiece in January this year.
A specialist in synthetic rubber, LANXESS has suffered in the downturn due to its reliance on the automotive sector, described by Heitmann in mid-2013 as “our problem child”. The company derives 25% of its annual sales from rubber and tyre products, and 15% from lightweight automotive components.
LANXESS has been described by Moody’s as one of the most exposed companies to the European auto sector, which experienced its worst year in almost two decades in 2013, according to European Automobile Manufacturers’ Association data.
Moves to cut costs and expand focus on emerging markets and
agriculture and fine chemicals division Saltigo as a less
cyclic counterweight to the company’s core rubber and
plastics business have been announced, with Asia-Pacific
region sales now accounting for 25% of the company’s total,
but have failed to prevent an 88% year-on-year drop in net income for the third quarter of
2013, to €11m, on the back of lower product prices, inventory
reduction and negative currency effects.
LANXESS shares had been trading at over €52 apiece in early
November 2013, but prices fell following the release of
third-quarter results and revised guidance that pre-exceptional
earnings before interest tax, depreciation and amortisation
(EBITDA) would be at the lower end of its €700-800m forecast, around €710-760m.
The full-year guidance indicates a slump in EBITDA of up to
42% compared to 2012’s €1.23bn, potentially below the €722m
posted in 2008 at the onset of the financial crisis.
Additional reporting by Nurluqman Suratman
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