Lanxess divests Perlon-Monfil; posts 2013 results with silver lining: Asia’s share in group sales is up

Germany-based speciality chemicals company Lanxess has divested its wholly-owned subsidiary Perlon-Monofil, a maker of PA and PET products, to Munich-based Serafin Group for an undisclosed amount. The transaction closes with immediate effect. Meanwhile, the group has also published its 2013 results,

Perlon-Monofil, a global leader for polyamide (PA) and polyester (PET) monofilament products sold under the brand names Perlon, Atlas and Bayco, has approximately 100 employees and operates a manufacturing plant and technical centre in Dormagen, Germany. It achieved sales of about EUR30 million in 2013.

Lanxess announced its intention to explore strategic options for non-core activities, including Perlon-Monofil, in September 2013. Board Member Werner Breuers said, "Serafin already has a good standing within the monofilaments industry through its unit Nextrusion and will open up new prospects for the further development of Perlon-Monofil in the future."

Nextrusion is based near Augsburg, Germany, and has with its brand Qualifil a leading position in PET monofilaments for paper machine clothing and other technical textiles. It has more than 200 employees and annual sales of EUR40 million. Serafin generates revenues of EUR300 million with 1,400 employees in different business segments.

2013 sales down by 9%; dividend cut by half

Meanwhile, Lanxess reported that its 2013 sales fall by 9% to EUR8.3 billion, due to lower selling prices in the Performance Polymers segment, and a group net loss of EUR159 million, against what it says remains a difficult competitive environment. It expects EBITDA pre exceptionals of around EUR200 million for the first quarter of 2014, slightly better than the EUR174 million posted last year, “that was burdened by several factors including start-up costs”.

Though EBITDA pre exceptionals decreased by 40% year on year to EUR735 million, it was within the guided range of EUR710 million to EUR760 million. But the slight increase in volumes could not compensate for the decline in earnings. The Group's EBITDA margin pre exceptionals fell to 8.9% from 13.4% in 2012.

In the fourth quarter of 2013, Group net income was impacted by impairment charges of EUR257 million in the Performance Polymers segment (business units Keltan Elastomers and High Performance Elastomers) and the Performance Chemicals segment (business unit Rubber Chemicals), as well as by exceptional charges of some EUR30 million brought forward for the “Advance” efficiency programme. These resulted in a net loss for the full year of EUR159 million.

CFO Bernhard Duettmann paints a glim outlook, "Behind us lies a challenging year. Negative effects were the volatile raw material prices and increasing competition, especially in the synthetic rubber business." It is also proposing that a dividend of EUR0.50 per share be paid for 2013, against a dividend of EUR1.00 per share for 2012.

Asia sales remain stable; China provides momentum

Meanwhile, sales in the Asia Pacific region declined by around 3% to EUR 2.1 billion. The Performance Polymers and Performance Chemicals segments achieved operational growth in the low- to mid-single-digit percentage range. Lanxess says it saw a “pleasing development in China”, exceeding the sales threshold of EUR1 billion as in the previous year. The share of the Asia Pacific region in Group sales increased to 26%.

In the reporting year, sales in the Performance Polymers segment declined substantially by around 13% to about EUR4.5 billion. “A persistently difficult market environment coupled with significantly lower and volatile prices for raw materials”, especially butadiene, resulted in a negative price effect of 15%. Currency effects also had a negative impact. Volumes increased by around 4%, due in part to capacity expansions in the Butyl Rubber and High Performance Materials business units.

Earnings were also hampered by inventory devaluations, destocking and start-up costs for the new butyl rubber plant in Singapore, alongside declining selling prices and negative currency effects.

Within the context of the Advance efficiency programme, around 730 employees have already taken up the offer to voluntarily leave the company by the end of 2015 and have accepted either early retirement or severance packages. In 2013, EUR110 million were incurred of the EUR150 million in exceptional charges budgeted for this programme. From 2015 onward, Lanxess expects to achieve annual savings of around EUR100 million.

For future outlook, Lanxess expects the market environment for synthetic rubber to remain challenging in 2014 in light of the competitive and capacity situation. Exchange rates, in particular the US-Dollar, are likely to continue their volatile development. The same applies to raw material costs, albeit at a comparatively moderate level.

Earnings in the first quarter of 2014 will also be impacted by the effects of a strike at the company’s site in Zwijndrecht, Belgium. Butyl rubber production there has been at a standstill for around three weeks.

For the full year 2014, Lanxess is anticipating a slight improvement in EBITDA pre exceptionals, due alone to the absence of one-time items, even if selling prices remain at low levels.

For the current year, the firm is planning capital expenditures at the same level as in 2013. Most of these will go toward the construction of the world-scale plant for Nd-PBR (neodymium-based performance butadiene rubber) in Singapore and for the construction of the plant for EPDM (ethylene-propylene-diene monomer) rubber in China. Both plants are scheduled to come on stream in 2015. In the third quarter of 2014, a world-scale facility for polyamides will start operation at the site in Antwerp, Belgium. As of 2015, capital expenditures should decrease substantially and be used predominantly to expand and maintain existing facilities.


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