Lanxess takes action against weak demand

Lanxess posted lower earnings in the first quarter of 2013 as expected due to a weak market environment, particularly in the tire and automotive industries.

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 the target corridor of between EUR 160 million and EUR 180 million communicated in March.

The operating result was diminished by scheduled one-time effects 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.

The Group’s EBITDA margin fell from 15.5 percent to 8.3 percent. Net income receded by 87 percent year on year to EUR 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 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.

Financial data

As expected, 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 LANXESS 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. This region’s share of Group sales rose to 25 percent, from 23 percent in the prior-year quarter.

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