Lanxess post lower earnings in Q1

10 May 2013

First-quarter sales were down by 12% year-on-year to €2.1 billion, mainly due to lower volumes and fallen selling prices. EBITDA pre exceptionals moved back by 53% against the prior-year period to €174 million and was thus within the target corridor of between €160 million and €180 million communicated in March. The operating result was diminished by scheduled one-time costs.

The agrochemicals business as well as the company's strong position in the growth region of Asia proved to be stabilising factors in the first quarter.

The Group's EBITDA margin fell from 15.5% to 8.3%. Net income receded by 87% year on year to €25 million.
“We are not immune to a sharp drop in demand, but we are responding to it proactively as always," said Lanxess' Chairman of the Board of Management Axel C. Heitmann. At the start of the year, Lanxess already initiated temporary facility shutdowns in the Performance Polymers segment in line with its proven policy of flexible asset and cost management. Now additional measures are planned in the Performance Chemicals segment.

“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 are also reducing its capital expenditure budget for 2013 to €600 million from the previously planned level of €650-700 million.

Regional sales development
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 €530 million. This region's share of Group sales rose to 25%, from 23% in the prior-year quarter.
EMEA (Europe excluding Germany, Middle East, Africa) was the strongest region, accounting for approximately 30% of sales compared to 29% in the previous year. Business there declined by 11% to €623 million.
Germany's share of Group sales was nearly 18%, compared with 17% a year ago. Sales in Germany fell by 11% to €370 million.

In the five BRICS countries (Brazil, Russia, India, China and South Africa) sales dropped by 11% year-on-year to €492 million. These countries accounted for 24% of Group sales, compared with 23% in the first quarter of 2012.

BU Leather Chemicals
In the Performance Polymers segment, sales moved back by about 18% to €1.1 billion.
Sales in the Performance Chemicals segment, which includes the Leather Chemicals BU decreased by 7% to €520 million. EBITDA pre exceptionals, at €51 million, was €32 million below the prior-period figure.

Outlook
For the second quarter, Lanxess anticipate 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 €220 million," said Heitmann. A mid-double-digit million euro amount of exceptional charges will be incurred for the additional measures.
Heitmann: "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 are a leading specialty chemicals company with sales of €9.1 billion in 2012 and roughly 17,400 employees in 31 countries. The company is currently represented at 50 production sites worldwide.



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