Lanxess Confirms FY Guidance Amid Challenging Environment

06.11.2012 -

Lanxess is confirming its full-year 2012 guidance despite the challenging business environment. The specialty chemicals company expects full-year EBITDA pre exceptionals growth to be at the lower end of the 5-10% range previously guided.

Lanxess profited in the third quarter from ongoing strong demand for agrochemicals. This, however, did not completely offset weakening demand in the tire and automotive industries.

Group sales declined by 8% year-on-year to €2.2 billion due to lower volumes and raw material-driven price decreases. Positive currency and portfolio effects could only partially offset this decline.

EBITDA pre exceptionals decreased by 18% year-on-year to €255 million in the third quarter due to lower volumes, expenses for scheduled plant maintenance and resulting idle costs. The EBITDA margin pre exceptionals fell to 11.8% in the third quarter from 13.3% a year earlier and the net profit decreased by 39% year-on-year to €94 million mainly due to lower volumes and a lower financial result.

"The third quarter result is in line with our expectations and is, at the same time, being compared to a very strong quarter a year earlier," said Axel C. Heitmann, Chairman of the Board of Management of Lanxess. "We are reacting to tougher conditions by implementing our proven counter measures such as flexible asset management and strict cost discipline."

Net financial debt at the end of the third quarter was roughly €1.6 billion, down 8% from the second quarter of 2012 due to a reduction in working capital. Operating cash-flow more than doubled year-on-year to €344 million also due to the reduction in working capital.

Performance by region

EMEA (Europe excluding Germany, Middle East, Africa) remained the largest sales region in the third quarter, with 28% of overall Group sales. Sales fell by 9% year-on-year to €596 million. Sales in Italy and Spain fell, while sales in Russia grew.

Sales in Germany fell by 4% year-on-year to €392 million in the third quarter and represented 18% of Group sales.

Sales in North America decreased by 2% year-on-year to €391 million and represented 18% of Group sales in the third quarter.

Sales in Asia-Pacific fell by 5% year-on-year to €493 million in the third quarter and represented 23% of Group sales. This development was mainly due to a business decline in Greater China.

Sales in Latin America fell by 19% year-on-year to €287 million, and represented 13% of Group sales.

Sales in the BRICS countries (Brazil, Russia, India, China, South Africa) fell 18% year-on-year to €485 million. These markets represented 23% of Group sales.

Performance by segments

Sales in the Performance Polymers segment were 17% year-on-year lower at €1.2 billion. Selling prices declined by 12%year-on-year due to falling raw material prices, above all butadiene, while volumes fell by 11%. EBITDA pre exceptionals decreased 29% to €152 million in the third quarter due to lower volumes in the replacement and OEM tire markets. Expenses for scheduled maintenance and resulting idle costs also burdened earnings.

In contrast to standard-grade synthetic rubbers, demand for high-performance rubbers such as neodymium-based performance butadiene rubber (Nd-PBR) and solution styrene butadiene rubber (SSBR) remained resilient. These rubbers are essential in producing "Green Tires" that reduce fuel consumption and help to reduce CO2 emissions.

November 1 saw the launch of mandatory tire labeling in the European Union (EU). Tires will be graded from A to G according to their fuel efficiency and wet grip. Rolling noise is also measured. The new legislation provides more transparency for consumers by highlighting the added value of "Green Tires". Tire labeling will also come into force on December 1, 2012, in South Korea.

Third quarter sales in the Advanced Intermediates segment rose 9% year-on-year to €403 million, driven by higher selling prices, positive volumes and currency effects. EBITDA pre exceptionals rose 10% year-on-year to €75 million, with both business units Advanced Industrial Intermediates and Saltigo profiting from the ongoing robust demand from the agrochemicals sector.

Sales of the Performance Chemicals segment rose 6% year-on-year to €555 million in the third quarter due to positive currency effects and portfolio changes resulting from three recent acquisitions in the USA. EBITDA pre exceptionals remained unchanged at €75 million in the third quarter. Inorganic Pigments saw business improve in the Asian construction industry. Rubber Chemicals and Rhein Chemie saw volumes decline from their customers in the automotive industry.


Lanxess expects that the economic environment will not worsen further in the fourth quarter. Therefore, the company expects full-year EBITDA pre exceptionals growth to be at the lower end of the 5-10% range previously guided. The company achieved EBITDA pre exceptionals of €1,146 million in 2011.

For the fourth quarter Lanxess expects the automotive sector in Europe to remain weak, while growth in North America and China will continue, albeit at a slower rate. Demand from the tire industry will continue to remain weak, while agrochemicals will continue to show a stable performance. The construction industry in Europe will see no improvement but will show a slight recovery in North America. Lanxess will adhere to its "price-before-volume" strategy. Raw material and energy prices are expected to remain stable in the fourth quarter.