Lanxess Results Show Upward Trend

In the third quarter of 2009 Lanxess AG reports delivering a “strong operating performance”, with EBITDA pre exceptionals of 143 million euros. The specialty chemicals company had expected third quarter operating earnings in the vicinity of the 112 million euros earned in the second quarter. EBITDA pre exceptionals were down 26 per cent year-on-year but rose 28 per cent from the second quarter due to an improved macroeconomic environment worldwide, driven by China, as well as savings yielded by the company’s “Challenge09-12” package of measures, which are expected to cut Lanxess’s costs worldwide by about 360 million euros by 2012. Another key performance metric – EBITDA pre exceptionals margin – was 10.4 per cent; higher than the previous quarter and nearly reaching last year’s level.

Sales in the third quarter fell by 24 per cent year-on-year to 1.37 billion euros but rose 11 per cent quarter-on-quarter. A slight restocking was visible in the third quarter with a number of customers in Performance Polymers bringing forward their purchases ahead of announced price increases for the fourth quarter. Net income, at 23 million euros, was positive for the second consecutive quarter. Operating cash flow rose to 432 million euros in the first nine months of 2009 from 309 million euros a year earlier.

“Lanxess has proved once again that it can successfully deal with the effects of the economic crisis,” said Axel C. Heitmann, chairman of Lanxess AG’s Board of Management. “Our self-help measures coupled with an improved economic climate, in particular in China, has supported us in delivering a very respectable third quarter performance.”

The company’s Asia-Pacific region sales grew 11 per cent to 338 million euros in the third quarter in comparison to the second quarter and rose seven per cent on a year-on-year basis. The region, which represents 25 per cent of Lanxess group sales, was driven by the growing Chinese market. This year China is expected to inherit the distinction of being the world’s largest car producer, and Lanxess states it will benefit from this trend towards greater mobility as a premium supplier to the automotive and tyre industries. The EMEA (Europe excluding Germany, the Middle East and Africa), Germany, Latin America and North America regions all improved sales sequentially in the third quarter yet remained double-digit percentage amounts below the same period a year ago.

The company’s tyre industry sales come from its Sales Performance Polymers segment, which includes the company’s worldwide leading synthetic rubber activities, and sales here rose 17 per cent quarter-on-quarter to 656 million euros. The top-line development was driven by a stronger-than-expected September month due to a pick-up in demand for winter tyres and pre-buying by customers ahead of price increases. EBITDA pre exceptionals for the segment rose 46 per cent quarter-on-quarter to 76 million euros, with the important Butyl Rubber business unit developing “very positively”. On a year-on-year basis, sales fell 30 per cent and EBITDA pre exceptionals fell 40 per cent.

The company’s Butyl Rubber business unit delivers the lion’s share of tyre industry sales to Lanxess, and next year its global headquarters will be relocated from Fribourg in Switzerland to Singapore. This move is being taken in order to better serve the growing demand in the Asia region, says Lanxess.

 Looking forward, the specialty chemicals manufacturer states the global economic environment “remains challenging despite recent improvements”, as the pace of economic recovery varies from region to region. In the coming months, Lanxess expects the Asia region to be the growth engine behind the global economy. The North American and European markets are gradually recovering but still lagging behind economies such as China. The company anticipates the fourth quarter to mirror a seasonal weakening of demand that is typical of many of its customers’ industries. In addition, the fourth quarter could be burdened by a drop in sales after several customers brought forward purchases in the third quarter ahead of price increases. “Taking into account these factors, Lanxess expects to achieve EBITDA pre exceptionals of 400 to 420 million euros for the full year 2009,” said Heitmann. “This target underlines how well we are managing the tough conditions and I am certain Lanxess will emerge strengthened from the economic crisis.”