LANXESS raises guidance for 2008

18 December 2008

LANXESS AG have continued on their path of growth and are increasing their earnings forecast for the full year 2008. The company now expect EBITDA pre exceptionals to come in at between E710 million and E730 million.

Thanks to their leading market positions and regionally diversified product portfolio, LANXESS are confident of achieving operational sales growth for the current year as a whole. ‘Following a very successful third quarter, we are raising our earnings forecast for 2008', said Axel C Heitmann, chairman of the board of management of LANXESS AG. Third-quarter 2008 business performance The operating result (EBITDA) pre exceptionals rose by a substantial 9.1% against the same period of last year, to E191 million (Q3 2007: E175 million). The EBITDA margin pre exceptionals grew by 0.2% year on year to 10.5% despite the continued weakness of the US dollar. Sales improved by 6.4% to E1,814 million (Q3 2007: E1,765 million). Adjusted to reflect for portfolio and currency effects, LANXESS recorded strong operational sales growth of 13.6%. Group net income in the third quarter amounted to E56 million, against E75 million in the previous-year period. The decline was attributable to the weaker financial result, which was boosted in the prior-year quarter by gains from the divestment of non-core businesses. All segments grew sales in the third quarter. Throughout the group, the increases in raw material and energy costs were again successfully passed on to the market through selling price increases. Sales of the Performance Chemicals segment advanced by 5.5% to E520 million (Q3 2007: E493 million). Adjusted for negative currency effects of 4.9%, the segment achieved organic sales growth of 10.4%. This improvement in sales resulted from a substantial 11.2% increase in selling prices and a 0.8% negative volume effect. Despite the adverse exchange-rate effects, EBITDA pre exceptionals came in at E65 million, almost matching the high previous-year level of E67 million. The EBITDA margin moved back by 1.1% to 12.5%. Operational sales of LANXESS rose in all regions. In the region EMEA (Europe, Middle East, Africa) excluding Germany, sales expanded by a portfolio- and currency-adjusted 23.4%. Unadjusted third-quarter sales rose by 8.8% to E579 million (Q3 2007: E532 million). The growth driver was again western Europe, with business in Belgium, the United Kingdom and the Netherlands developing particularly well. Sales in eastern Europe also posted a tangible improvement. The region EMEA excluding Germany remains at the focus of the Group's business activities, accounting for 31.9% of group sales in the third quarter. In Germany, sales were up by a portfolio-adjusted 3.7% in the third quarter of 2008. Before adjusting for portfolio changes, business was down by 7.8% to E388 million (Q3 2007: E421 million). Germany's share of group sales thus dropped from 24.7 to 21.4%. After adjusting for portfolio and currency effects, LANXESS sales in the Americas advanced by 6.7%. Unadjusted sales growth came to 24.1%, with sales of E530 million (Q3 2007: E427 million). This was due especially to sales contributions from the Petroflex group. The Americas region share of group sales expanded by 4.2% year on year to 29.2% due to the consolidation of the Petroflex group. Sales in the Asia-Pacific region expanded by a substantial 31.4% after adjusting for currency effects and for divested or newly integrated businesses. On an unadjusted basis, sales declined by 2.5% to E317 million (Q3 2007: E325 million). LANXESS once again achieved double-digit growth rates in China, India, South Korea and Japan. The region's share of group sales was 17.5%, down slightly from the prior-year figure of 19.1%. LANXESS expects the financial market crisis to continue to impact the real economy in the coming months, resulting in a weaker overall economic climate for the remainder of fiscal 2008. The economic prospects for North America and western Europe will continue to deteriorate. There should be a moderate stimulus to growth in Asia-Pacific, central and eastern Europe and Latin America. However, the global decline in consumer spending is likely to have a dampening effect on these economies as well. Global chemicals production for the full year 2008 is expected to be below the level of 2007. The prospects for key customer industries, most notably the construction and automotive sectors, continue to worsen. The global tire market displays regional variations, with continuing stable demand for high-performance rubbers in Asia but declining volumes in North America and Europe. ‘In certain fields LANXESS is already feeling the challenges presented by a steadily weakening economy and is countering this development by actively managing capacity usage and continuing to systematically implement efficiency-improvement measures', commented Heitmann. ‘For the full year 2008 we plan to achieve an EBITDA margin in line with that of our peer group. We also intend to attain an EBITDA margin in excess of 5% in all of our business units and maintain our investment-grade rating', the LANXESS CEO stressed. LANXESS expect energy costs to continue to rise in the fourth quarter of 2008, while raw material costs are anticipated to decline at the beginning of 2009. As in the past, LANXESS will provide an outlook for the new fiscal year when the annual report is published in spring 2009.

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