Specialty chemicals group Lanxess said it is confident for the business year 2010 after ending 2009 with a strong final quarter. The company said its optimism is supported by the continuous positive development of the Asia/Pacific region as well as savings generated from group-wide "Challenge09-12" package of measures.

"We therefore expect a significant year-on-year improvement in earnings, even if there is currently no sign of a self-sustaining upswing," said Axel C. Heitmann, Lanxess chairman of the board, said.

The company was hit hard by the global downturn in 2009. Group sales fell by 23.1% year-on-year to €5,057 million due to weak global demand. Ebitda pre exceptionals, at €465 million, came in at the upper end of the adjusted target corridor of €450 to 470 million. Lanxess posted Ebitda pre exceptionals of €722 million in 2008. The Ebitda margin pre exceptionals for the full year was 9.2% compared to 11.0% in 2008. Net income amounted to €40 million in comparison to €183 million in 2008. The Group reduced costs by some €170 million thanks to the "Challenge09-12" program in 2009.

"Our results in the crisis year show that we passed the stress test," Heitmann said.

Q4 Performance 2009

The fourth quarter of 2009 ran counter to the usual seasonal trend at Lanxess. In the final weeks of the year, the rubber business in particular was buoyed by the positive development in Asia and strong demand for winter tires in Europe and North America. Overall the company recorded fourth-quarter sales of €1,392 million, slightly above the third-quarter figure of €1,373 million. Business declined by 4.8% compared with the final quarter of 2008.

Ebitda pre exceptionals in the fourth quarter of 2009 amounted to €144 million - slightly ahead of the third quarter and well above the €87 million achieved in the fourth quarter of 2008, which was dominated by the effects of the financial crisis. Net income for the quarter was €14 million compared to €23 million in the third quarter of 2009 and a €32 million loss in the prior-year period.

Outlook

Lanxess said it expects the economic landscape to show regional variations in its development in 2010, with Asia showing the most significant improvement. There are again increasing signs of stronger growth, mainly in China and India, especially in the rubber market. The economic climate in Latin America, and in particular Brazil, is also expected to brighten. In North America and Europe, however, there is persistent uncertainty regarding the future economic trend.

The company also said it expects raw material costs to rise again in 2010. Following the sharp decline in raw material prices, input costs began to rise again in the second quarter of 2009, and this trend has continued through the start of 2010. The company is consequently adhering to its price-before-volume strategy.

The gradual recovery, which varies in strength from one region to another, will continue, with seasonal earnings trends returning to normal. "The fourth quarter of 2009 and our good start to the new year give us grounds for confidence," said Heitmann. In light of the continuing risks to economic development, Lanxess will continue with the systematic and successful implementation of its global package of measures entitled "Challenge09-12" that is bolstering earnings. Savings of €140 million are planned for 2010.