Lanxess Increases 2008 Earnings Forecast

Specialty chemicals company Lanxess AG has increased its net sales for the third quarter of 2008, however in keeping with the current economic climate these higher sales figures have not equalled greater net income. Quarterly sales of 1.81 billion euros for the period ending September 30 represented an increase of 6.4 per cent. Pre exceptionals EBITA, at 191 million euros, was also up on last year’s 175 million euros in the third quarter. BBIT, pre exceptionals, was 119 million euros, 6.3 per cent higher than the corresponding quarter of 2007. The company’s quarterly net income of 56 million euros represented a decrease of 25.3 per cent.

Following the release of its results, Lanxess reports it is still on a path of growth and the company is thus increasing its earnings forecast for the full 2008 financial year. “Following a very successful third quarter, we are raising our earnings forecast for 2008,” said Axel C. Heitmann, chairman of the Board of Management at Lanxess. The company now expects EBITDA pre exceptionals to come in at between 710 million and 730 million euros.

Lanxess reported sales growth in all segments in the third quarter. Throughout the group, increases in raw material and energy costs were successfully passed on to customers through price increases. Sales in the company’s Performance Polymers segment, the division most involved with the tyre industry, rose by 40.6 per cent in the third quarter of 2008, to 938 million euros. Significant growth in raw material and energy costs prompted ‘considerable’ increases in selling prices, with volumes slightly down and currency effects negative. EBITDA pre exceptionals for the segment improved by 33.7 per cent to 127 million euros. The EBITDA margin was down slightly year on year, dipping by 0.7 percentage points to 13.5 per cent.

The company says it expects the financial market crisis to continue to impact the real economy in the coming months, resulting in a weaker overall economic climate for the remainder of fiscal 2008. The economic prospects for North America and Western Europe will continue to deteriorate, it adds. There should be a moderate stimulus to growth in Asia-Pacific, Central and Eastern Europe and Latin America. However, the global decline in consumer spending is likely to have a dampening effect on these economies as well.

Global chemicals production for the full year 2008 is expected to be below the level of 2007. The global tyre market, says Lanxess, displays regional variations, with continuing stable demand for high-performance rubbers in Asia but declining volumes in North America and Europe.

“In certain fields Lanxess is already feeling the challenges presented by a steadily weakening economy and is countering this development by actively managing capacity usage and continuing to systematically implement efficiency-improvement measures,” commented Heitmann. “For the full year 2008 we plan to achieve an EBITDA margin in line with that of our peer group. We also intend to attain an EBITDA margin in excess of 5 per cent in all of our business units and maintain our investment-grade rating.”

Lanxess says it expects energy costs to continue to rise in the fourth quarter of 2008, while raw material costs are anticipated to decline at the beginning of 2009.