Speciality chemicals firm Lanxess expects 2013 to remain challenging after it posted a decline in second quarter sales and earnings and 95% drop in net income year-on-year to EUR9 million. The latter was due to reduced selling prices triggered by a decline in raw material prices, which impacted the Performance Polymers segment, a key purchaser of butadiene. The slow sales were also impacted by the dull automotive and tyre sectors in Europe.

Asia/Pacific represented 24% of Group sales. Sales there fell by 14% to EUR522 million, while sales in China fell even stronger by 21% to EUR236 million.

Compared to the strong second quarter of the previous year, sales were down by 12% to EUR2.1 billion in the second quarter of 2013. EBITDA pre exceptionals declined by 45% against the prior-year period to EUR198 million and was in the middle of the guided range of EUR174-220 million.

In contrast to expectations in May, Lanxess does not see an improvement in business conditions in the second half of the year. Customers continue to destock their inventories, noticeably in Asia, and overall consumer sentiment remains weak.

For the year 2013, the company has substantiated its outlook given in May of EBITDA pre exceptionals of less than EUR1 billion. Lanxess now anticipates EBITDA pre exceptionals of EUR700-800 million, excluding potential inventory devaluations.

“The first half of 2013 does not meet our own high standards,” said Chairman of the Board of Management Axel C. Heitmann. “Trading conditions for our businesses remain tough and the fragile sentiment in Europe is now evident in other markets that are important for us, such as China and Brazil.”

Against the background of the continuing weak demand in the current business year, the target of EUR1.4 billion EBITDA pre exceptionals in 2014 is no longer realistic, even taking into account an expected upturn in demand next year.

Despite the difficult conditions, Lanxess is maintaining its mid-term target of EUR1.8 billion EBITDA pre exceptionals in 2018, although it has become more challenging to reach it.

“The megatrends, above all mobility and agriculture, still remain intact and the growth markets will see better times again. That is why we “The megatrends, above all mobility and agriculture, still remain intact and the growth markets will see better times again. That is why we believe we have in principle the right set-up,” said Heitmann.

Lanxess also says it will continue with its measures of flexible asset management and strict cost discipline in the coming months. In addition, this year’s capital expenditure budget has already been reduced to EUR600 million. It is also taking steps to improve the long-term competitiveness of the Rubber Chemicals business unit.