Lanxess announces mid-term EBITDA goal
At its media day in New York, German specialty chemicals company Lanxess announced a new mid-term goal for its leading earnings indicator – EBITDA pre exceptionals. The company projects that its EBITDA pre exceptionals will reach 1.8 billion euros in 2018, and says its previous 2015 EBITDA pre exceptionals goal of 1.4 billion euros will now be reached a year ahead of schedule. This key performance indicator has increased by an average of 20 per cent per annum since 2004, and for 2012 Lanxess reconfirms its guidance for EBITDA pre exceptionals to increase by five to ten per cent year-on-year.
“We have transformed Lanxess into a growth company,” said Axel C. Heitmann, chairman of the Lanxess AG Board of Management, at the group’s media day. “In order to achieve our new mid-term goal, we will stick to our proven dual-track strategy of organic and external growth.”
The company says its strategy is based on five elements, all of which it views as “proven elements of success”: Premium products focused on megatrends, flexible asset and cost management, a global reach with emphasis on emerging markets, innovation and technology, and an entrepreneurial and performance-oriented business culture.
A focus on premium products has been critical, shares Lanxess; the company says it avoids business in which it cannot achieve an appropriate price for its products. Through a strict adherence to this strategy, the specialty chemicals company says it has successfully managed the price volatility of raw materials and other input costs. In the last two and a half years, Lanxess has passed on roughly 1.8 billion euros in added raw material and energy costs.
Focusing on emerging, high-growth markets will remain essential to Lanxess’ long-term growth. Since 2005, the company has grown by nearly 70 per cent in the Asia-Pacific region, and by almost 40 per cent in North and Latin America combined.
As Lanxess’ premium product strategy remains at the forefront of its growth, the firm will continue to focus on the same four key megatrends: mobility, urbanisation, agriculture and water. The mobility megatrend centres on ‘green mobility’, and to this end Lanxess offers synthetic rubber for tyres and lightweight materials for use in vehicles. “Our strength in ‘green mobility’ is reflected in our strong results,” noted Heitmann: Products related to green mobility accounted for 17 per cent of Lanxess’ total sales in 2011, a figure of 1.5 billion euros. In the first half of 2012, sales of these products rose roughly 20 per cent year-on-year to 878 million euros, and the company aims to increase its total green mobility revenue to 2.7 billion euros in 2015.
Lanxess states it will continue to pursue a disciplined dual-track growth strategy, which will maintain roughly a two-to-one ratio of organic to external growth, thus prioritising capital expenditure projects over acquisitions. In the last two years, the company has announced about 1.4 billion euros in capex. In emerging markets, more capex has gone into greenfield investments. A prime example of this is the company’s neodymium-based performance butadiene rubber (Nd-PBR) plant in Singapore – the largest of its kind in the world – which serves Lanxess’ Asian clients with rubber for green tyres. For an investment of roughly 200 million euros, the company forecasts annual sales of 300 to 350 million euros as of 2017.
The German company says its successful growth strategy is “complemented by its prudent financial policies, which include a careful approach to acquisitions, a reliance on a long-term debt maturity profile and the retention of its solid investment-grade ratings.” Specifically, Lanxess states a commitment to maintaining a ratio of net financial debt to EBITDA pre exceptionals in a band between 1 and 1.5 over a normal business cycle. “Our long-term financing, combined with forward-looking financial risk management, has provided us with sufficient liquidity to finance our working capital and business operations at all times,” said Lanxess chief financial officer Bernhard Duettmann. “And it will continue to do so in the future.”
At the end of the second quarter of 2012, Lanxess had a liquidity reserve of more than 1.8 billion euros in liquid assets and undrawn credit facilities. Rating agencies have maintained the company’s BBB investment-grade ratings, maintained since 2007.