Lanxess revises full-year, 2014 projections following Q2 decline

Although it retains a positive view of long-term developments, Germany’s Lanxess AG has admitted its current performance falls short of the company’s own expectations. Board of Management chairman Axel Heitmann spoke frankly upon the release of the specialty chemicals firm’s second quarter 2013 results – figures that include a 95 per cent year-on-year drop in net income.

“The first half of 2013 does not meet our own high standards,” stated Heitmann. “Trading conditions for our businesses remain tough and the fragile sentiment in Europe is now evident in other markets that are important for us, such as China and Brazil.” 

Second quarter sales amounted to 2.14 billion euros, 11.7 per cent lower than in the second quarter of 2012. According to the company, continued weak demand from the tyre and automotive industries affected sales development alongside factors influencing its Performance Polymers segment. EBITDA pre-exceptionals dropped 45.2 per cent to 198 million euros – Lanxess says this was in the middle of its guided range of 174 to 220 million euros – and the EBITDA margin contracted from 14.9 per cent to 9.2 per cent. Net income, which stood at 174 million in the second quarter of 2012, plummeted 94.8 per cent to 9 million euros. Shareholders who enjoyed earnings per share of 2.09 euros a year earlier made do with 0.11 euros this time round.

“Even when comparing our performance to the very strong prior-year quarter, it is clear that we are unable to operate independently of the negative developments in our most important markets and customer industries,” Heitmann said in his address to the company’s Board of Management. He then outlined a series of measures Lanxess is undertaking to improve its results. These include temporary plant shut-downs, flexible plant management, strict cost discipline throughout the company, a reduction in the company’s capital expenditure budget to around 600 million euros, and measures to make the international sites run by the Rubber Chemicals business unit more competitive over the medium to long term.

In May, Lanxess voiced its expectation of a slight improvement in business during the second quarter; at the time Heitmann said Lanxess anticipated “an economic improvement in the second half of this year” and projected EBITDA pre-exceptionals of below 1 billion euros for full-year 2013 while confirming its mid-term EBITDA targets of 1.4 billion and 1.8 billion euros in 2014 and 2018, respectively. Lanxess has now adjusted its projected figures to reflect where it sees the market heading. 

“In contrast to expectations in May, Lanxess does not see an improvement in business conditions in the second half of the year,” the company wrote on 6 August. “Customers continue to destock their inventories, noticeably in Asia, and overall consumer sentiment remains weak.” Lanxess now anticipates EBITDA pre-exceptionals of 700 to 800 million euros for full-year 2013, excluding potential inventory devaluations. It also says continued weak demand in the current business year means its previous EBITDA target for 2014 is “no longer realistic”, even if the upturn in demand it anticipates next year takes place. The 2018 target remains in place, however Lanxess cautions that reaching it will be “more challenging” than previously anticipated.

“The megatrends, above all mobility and agriculture, still remain intact and the growth markets will see better times again. That is why we believe we have in principle the right set-up,” commented Heitmann. 

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