2013 Exhibitions
With its first-quarter sales down by 12% year-on-year to EUR2.1 billion, mainly due to lower volumes and selling prices, German speciality chemicals firm Lanxess says it countered this by initiating temporary facility shut downs in the Performance Polymers segment. It says that additional measures are planned in the Performance Chemicals segment and it will reduce its capital expenditure budget as well. Though sales declined by double-digit percentages in all regions, sales in Asia Pacific remained roughly at the same level year-on-year at EUR530 million. This region’s share of Group sales rose to 25%, from 23% in the prior-year quarter.
EBITDA pre exceptionals moved back by 53% against the prior-year period to EUR174 million and was thus within the target corridor of between EUR160 million and EUR180 million communicated in March. The operating result was diminished by scheduled one-time effects of about EUR30 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 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 EUR25 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. “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 EUR600 million from the previously planned level of EUR650 million to EUR700 million.
As expected, net financial liabilities rose in the first quarter compared with the end of 2012, namely by 21% to roughly EUR1.8 billion mainly as a result of the increase in working capital. Operating cash flow was negative at EUR160 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.
EMEA (Europe excluding Germany, Middle East, Africa) was the strongest region, accounting for approximately 30% of sales but business there declined by 11% to EUR 623 million. In the five BRICS countries (Brazil, Russia, India, China and South Africa) sales dropped by 11% year-on-year to EUR492 million. These countries accounted for 24% of Group sales, compared with 23% in the first quarter of 2012.
In the Performance Polymers segment, sales moved back by about 18% to EUR1.1 billion. Here, a drop in selling prices as a result of lower raw material prices led to a negative price effect. In addition, volumes were down on account of lower demand from the automotive and tyre industries.
The Advanced Intermediates segment saw stable development in light of the sound demand for agrochemicals. Sales edged up 1% in the first quarter of 2013 to EUR433 million. Higher prices for raw materials were passed on fully to the market. Compared with the strong prior-year period, however, volumes moved back as a result of weak demand from the construction and paint industry. EBITDA pre exceptionals rose by EUR 1 million against the prior-year quarter to EUR 71 million.
Sales in the Performance Chemicals segment decreased by 7% to EUR520 million. Volumes declined as a result of the weak demand from the construction industry due to the long winter and from the business units linked to the tire industry. Selling prices were stable. EBITDA pre exceptionals, at EUR 51 million, was EUR 32 million below the prior-period figure.
For the second quarter, Lanxess anticipates 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 EUR220 million,” said Heitmann. A mid-double-digit million euro amount of exceptional charges will be incurred for the additional measures.
He added, “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 predicts demand for agrochemicals to remain strong and anticipates a moderate recovery in the construction industry. The megatrends of mobility, agriculture, urbanisation and water remain intact.
Lanxess now anticipates EBITDA pre exceptionals of below EUR1 billion for the full year 2013 and confirms its mid-term EBITDA targets of EUR1.4 billion and EUR1.8 billion in 2014 and 2018, respectively.
