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2013-08-06

LANXESS: 2013 to remain challenging

  • Q2 sales EUR 2.1 billion, down 12 percent
  • Q2 EBITDA pre exceptionals EUR 198 million, down 45 percent
  • Q2 net income EUR 9 million, down 95 percent
  • Outlook for 2013: EUR 700-800 million EBITDA pre
  • 2014 EBITDA pre target of EUR 1.4 billion no longer realistic
  • Strategy update underway, results in September

LANXESS expects the business year 2013 to remain challenging after the German specialty chemicals company posted a decline in second quarter sales and earnings.

 

Compared to the strong second quarter of the previous year, sales were down by roughly 12 percent to EUR 2.1 billion in the second quarter of 2013. EBITDA pre exceptionals declined by 45 percent against the prior-year period to EUR 198 million and was in the middle of the guided range of EUR 174-220 million. Net income declined by 95 percent year-on-year to EUR 9 million.

 

In contrast to expectations in May, LANXESS does not see an improvement in business conditions in the second half of the year. Customers continue to destock their inventories, noticeably in Asia, and overall consumer sentiment remains weak.

 

For the year 2013, the company has substantiated its outlook given in May of EBITDA pre exceptionals of less than EUR one billion. LANXESS now anticipates EBITDA pre exceptionals of EUR 700-800 million, excluding potential inventory devaluations.

 

“The first half of 2013 does not meet our own high standards,” said LANXESS’ Chairman of the Board of Management Axel C. 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.”

 

Against the background of the continuing weak demand in the current business year, the target of EUR 1.4 billion EBITDA pre exceptionals in 2014 is no longer realistic, even taking into account an expected upturn in demand next year.

 

Despite the difficult conditions, LANXESS is maintaining its mid-term target of EUR 1.8 billion EBITDA pre exceptionals in 2018, although it has become more challenging to reach it.

 

“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,” said Heitmann.

 

 

Strategy update

 

LANXESS will continue with its proven counter-measures of flexible asset management and strict cost discipline in the coming months. In addition, this year’s capital expenditure budget has already been reduced to EUR 600 million. Important steps to improve the long-term competitiveness of the Rubber Chemicals business unit have already been taken in the second quarter.

 

“We have proven successfully in the past that we are able to handle difficult trading conditions. We are currently working on an update of our strategy as well as further measures. These include short-term as well as long-term cost savings, additional efficiency improvements and structural changes. We will present results in mid-September,” said Heitmann.

 

 

Results of the second quarter

 

Sales were down by roughly 12 percent to EUR 2.1 billion in the second quarter of 2013. This was due to a strong decrease in selling prices triggered amongst others by a decline in raw material prices, which impacted above all the Performance Polymers segment, a key purchaser of butadiene. Furthermore, the continuing weak demand in the automotive and tire industries affected the sales development of the Group. Demand for agrochemicals, especially in Europe, remained positive and contributed to the solid development of the Advanced Intermediates segment.

 

EBITDA pre exceptionals declined by 45 percent against the prior-year period to EUR 198 million. Earnings included inventory write-downs due to falling butadiene prices. The Group’s EBITDA margin fell from 14.9 percent to 9.2 percent and net income declined by 95 percent year-on-year to EUR 9 million. This included the announced one-off restructuring costs of about EUR 40 million in the Performance Chemicals segment.

 

 

Financial data

 

As expected, net financial liabilities rose compared with the end of 2012, namely by 36 percent to more than EUR 2 billion at the end of the second quarter 2013, mainly as a result of dividend payouts as well as interest and annual performance payments to employees. Operating cash flow was positive at EUR 93 million due to a reduction in working capital, lower income tax expenses and tight cash management.

 

 

Regional sales development

 

The difficult trading conditions were reflected in the regional sales development.

 

EMEA (Europe excluding Germany, Middle East, Africa), accounting for 29 percent of Group sales, saw sales decline by 4 percent to EUR 624 million.

 

Asia/Pacific represented 24 percent of Group sales. Sales there fell by 14 percent to EUR 522 million, while sales in Greater China fell even stronger by 21 percent to EUR 236 million.

 

Sales in Germany declined by 9 percent year-on-year to EUR 362 million and represented 17 percent of Group sales.

 

LANXESS generated some 17 percent of Group sales in the North America region. Sales there receded by 19 percent to EUR 357 million.

 

Sales in Latin America fell by 17 percent to EUR 276 million. The region’s share of Group sales was 13 percent. Sales in Brazil fell by 17 percent to EUR 200 million. 

 

In the five BRICS countries (Brazil, Russia, India, China and South Africa) sales dropped by 17 percent year-on-year to EUR 495 million. These countries accounted for 23 percent of Group sales.

 

 

Business development in the segments

 

In the Performance Polymers segment, sales moved back by 17 percent to EUR 1.2 billion and EBITDA pre exceptionals fell by 63 percent to EUR 94 million. Here, lower raw material prices led to a negative price effect. In addition, volumes were down on account of lower demand from the automotive and tire industries. Idle costs for plants operating at lower capacities also affected earnings.

 

The Advanced Intermediates segment saw a stable development in light of the solid demand for agrochemicals. Sales fell 2 percent in the second quarter to EUR 393 million. EBITDA pre exceptionals fell by 6 percent to EUR 74 million. Demand from the automotive and paints industries remained weak.

 

LANXESS is sharpening its focus on the agrochemicals sector and is expanding its capacities by 20 percent for the intermediate chemical cresol in Leverkusen. In September, the business unit Saltigo will move its headquarters along with around 100 employees to Leverkusen and thereby closer to its production. Thus, LANXESS strengthens Leverkusen as the leading production site for its agrochemicals portfolio.

 

Sales in the Performance Chemicals segment decreased by 4 percent to EUR 561 million, while EBITDA pre exceptionals, at EUR 67 million, was 14 percent below the prior-period figure. Demand for inorganic pigments and water treatment products remained strong, while the business units with an automotive and tire industry exposure posted weaker results. In the second quarter, the business unit Rubber Chemicals took measures to restructure its operations in Belgium and South Africa, which resulted in the already-mentioned one-off costs. The company’s leather chemicals operations was also impacted by a drop in production at its South African chrome ore mine due to a strike.

Q2 2013 Key Data

(EUR million)

 

Q2 2012

Q2 2013

Change in percent

Sales

2,424

2,141

-11.7

EBITDA pre exceptionals

361*

198

-45.2

EBITDA margin pre exceptionals (percent)

14.9

9.2

 

Net income

174*

9

-94.8

Earnings per share (€)

2.09*

0.11

-94.8

*        restated according to the revised version of IAS 19

 

 

LANXESS is a leading specialty chemicals company with sales of EUR 9.1 billion in 2012 and roughly 17,500 employees in 31 countries. The company is currently represented at 52 production sites worldwide. The core business of LANXESS is the development, manufacturing and marketing of plastics, rubber, intermediates and specialty chemicals. LANXESS is a member of the leading sustainability indices Dow Jones Sustainability Index (DJSI) World and FTSE4Good as well as the Carbon Disclosure Leadership Index (CDLI).

Contact

Daniela  Eltrop

Daniela Eltrop
Spokesperson Financial and Business Media

Phone: +49 221 8885 4010

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