Low raw mats prices a Q3 drag for Lanxess

Current low prices for butadiene rubber have been singled out as a key reason why sales within Lanxess’ Performance Polymers business declined eight per cent year-on-year to €1.1 billion in the third quarter of 2013 despite a 14 per cent rise in volumes. Lanxess says lower raw material prices, especially butadiene, led to selling prices dropping 19 per cent. Sales were also hampered by negative currency effects. EBITDA pre exceptionals for the Performance Polymers business decreased 45 per cent to €84 million.

Overall, the third quarter presented Lanxess with what it says was “an economic environment marked by continuing uncertainty”. On the back of an 11 per cent overall price decline, group sales fell five per cent year-on-year during the quarter to €2.1 billion despite a nine per cent volume increase. As a result, Lanxess has narrowed its full-year 2013 guidance range and now expects EBITDA pre exceptionals to be between €710 million and €760 million, rather than between €700 million and €800 million as previously stated.

“Some of our customers have started restocking their inventories. This is highlighted by the year-on-year and quarter-on-quarter volume increases,” reported Axel C. Heitmann, chairman of the Lanxess AG Board of Management. “But, in our view, it is still too early to speak of a general recovery of the business.”

Company EBITDA pre exceptionals dropped 26 per cent year-on-year to €187 million, largely due to lower selling prices and inventory reduction. Inventory devaluations also added a further €10 million burden. The EBITDA margin pre exceptionals declined to 9.1 per cent from 11.8 per cent in the third quarter and net income fell 88 per cent to €11 million due to higher depreciation and amortisation as well as exceptional charges of roughly €20 million for the company’s ‘Advance’ efficiency programme.

Lanxess expects a continued “modest economic momentum” in the fourth quarter, with emerging economies continuing to provide only limited impetus. Although anticipating an easing of the situation in Europe, the company says it does not yet anticipate lasting stability. Growth in the United States is likely to remain moderate due to the ongoing budget uncertainty.

The German specialty chemicals firm also expects difficulties to remain within the market environment, especially for the automotive and tyre industries. It opines that vehicle production will probably only slightly increase in the remaining months of 2013, driven mainly by demand in the US and China, and it believes the tyre industry is likely to enjoy only a modest recovery.

The aforementioned ‘Advance’ efficiency improvement programme was announced in September and aims to bring about annual savings of around €100 million from 2015 onwards by reducing the company’s global workforce by about 1,000 by the end of 2015 and through portfolio adjustments amongst non-core businesses. This year approximately €80 million in exceptional charges will be booked to cover the programme, and a further €70 million or so in 2014.