LANXESS
LANXESS posted lower than expected earnings in the first quarter of 2013 due to a weak market environment, particularly in the tyre and automotive industries.
However, the company plans to rally against the weak first quarter results. “We are not immune to a sharp drop in demand, but we are responding to it proactively as always,” said Chairman of the Board of Management Axel C. Heitmann.
First-quarter sales were down by 12 percent year-on-year to EUR 2.1 billion, mainly due to lower volumes and fallen selling prices. EBITDA pre exceptionals moved back by 53 percent against the prior-year period to EUR 174 million and was thus within March’s forecasted target corridor of between EUR 160 million and EUR 180 million.
The operating result was affected by scheduled one-time costs of about EUR 30 million for the start-up of the new butyl rubber plant in Singapore and the conversion to Keltan ACE technology at the EPDM rubber plant in Geleen, Netherlands.
The agrochemicals business as well as the company’s strong position in the growth region of Asia proved to be stabilizing factors in the first quarter.
At the start of the year, LANXESS had already initiated temporary facility shutdowns in the Performance Polymers segment in line with its policy of flexible asset and cost management.
“These measures are not merely designed to achieve short-term savings. We aim to raise the competitiveness of our international sites in this segment for the medium and long term," said Heitmann.
LANXESS is also reducing its capital expenditure budget for 2013 to EUR 600 million from the previously planned level of EUR 650 million to EUR 700 million.
Net financial liabilities rose in the first quarter compared with the end of 2012, namely by 21 percent to roughly EUR 1.8 billion mainly as a result of the increase in working capital. Operating cash flow was negative at EUR 160 million due to the weak operating result coupled with the higher working capital.
“We currently see a rise in net debt in the first half of the year which is typical for us. Our financing position, however, is sound and remains secure for the long term. We are also exercising strict spending discipline,” commented Chief Financial Officer Bernhard Duettmann.
Sales declined by double-digit percentages in all regions except for Asia-Pacific, where sales remained roughly at the same level year-on-year at EUR 530 million. Said region’s share of Group sales rose two percent to 25 percent.
EMEA (Europe excluding Germany, Middle East, Africa) was the strongest region, accounting for approximately 30 percent of sales compared to 29 percent last year. Business there declined by 11 percent to EUR 623 million.
Germany’s share of Group sales was nearly 18 percent, compared with 17 percent a year ago. Sales in Germany fell by 11 percent to EUR 370 million.
In the Performance Polymers segment, sales moved back by about 18 percent to EUR 1.1 billion. Here, a drop in selling prices as a result of lower raw material prices led to a negative price effect. In addition, volumes were down on account of lower demand from the automotive and tyre industries. EBITDA pre exceptionals fell by 56 percent to EUR 112 million. Earnings were diminished due to the above-mentioned one-time effects of about EUR 30 million.
The Advanced Intermediates segment saw stable development in light of the sound demand for agrochemicals. Sales edged up 1 percent in the first quarter of 2013 to EUR 433 million. Higher prices for raw materials were passed on fully to the market. Compared with the strong prior-year period, however, volumes moved back as a result of weak demand from the construction and paint industry. EBITDA pre exceptionals rose by EUR 1 million against the prior-year quarter to EUR 71 million.
Sales in the Performance Chemicals segment decreased by 7 percent to EUR 520 million. Volumes declined as a result of the weak demand from the construction industry due to the long winter and from the business units linked to the tyre industry. Selling prices were stable. EBITDA pre exceptionals, at EUR 51 million, was EUR 32 million below the prior-period figure.
For the second quarter, LANXESS anticipates a slight improvement in business. “The weak demand from the tyre and automotive industries persists, but customer destocking is slowing down. We currently anticipate EBITDA pre exceptionals in the second quarter to improve sequentially but to be below EUR 220 million,” said Heitmann.
Heitmann added: “The market environment will remain weak and volatile with low visibility persisting. We nevertheless expect an economic improvement in the second half of this year. Asia, particularly China, will perform substantially better, whereas market conditions in Europe will remain difficult.”
LANXESS now anticipates EBITDA pre exceptionals of below EUR 1 billion for the full year 2013 and confirms its mid-term EBITDA targets of EUR 1.4 billion and EUR 1.8 billion in 2014 and 2018, respectively.
