Lanxess post results for “challenging” 2013

German specialty chemicals company Lanxess AG reports that its sales decreased 8.7 per cent year-on-year in 2013, to €9.1 billion, and it says this decline is primarily attributable to lower selling prices in its Performance Polymers business segment due to lower raw material prices, and to the “challenging competitive situation.” On the back of increasing production-related costs and negative currency effects, EBITDA pre-exceptionals decreased 39.9 per cent year on year to €735 million, which was within Lanxess’ guidance range of €710 million to €760 million. Lanxess says a slight increase in volumes was unable to compensate for the decline in earnings. The Group’s EBITDA margin pre exceptionals fell to 8.9 per cent from 13.4 per cent in 2012.

In the fourth quarter of 2013, the company’s net income was impacted by €257 million in impairment charges within its the Performance Polymers segment (which includes the Keltan Elastomers and High Performance Elastomers business units) and the Performance Chemicals segment (Rubber Chemicals business units), as well as by exceptional charges of some €30 million brought forward for the company’s ‘Advance’ efficiency programme. These resulted in a full-year net loss of €159 million, representing earnings per share of -€1.91. In 2012, Group net income amounted to €508 million, with earnings per share of €6.11.

“Behind us lies a challenging year,” said Lanxess chief financial officer Bernhard Düttmann. “Negative effects were the volatile raw material prices and increasing competition, especially in the synthetic rubber business.”

Within the context of the Advance efficiency programme, around 730 Lanxess 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, €110 million of the budgeted €150 million exceptional charges for this programme were incurred. From 2015 onward, Lanxess expects to achieve annual savings of around €100 million. The company has also divested its Perlon-Monofil subsidiary to the Serafin Group.

Financial results - full-year 2013

(Figures in €  million)

  Full year 2012 Full year 2013 Change in percent Q4 2012 Q4 2013 Change in percent
Sales 9,094 8,300 -8.7 2,123 2,014 -5.1
EBITDA
 pre exceptionals 1,223 735 -39.9 239 176 -26.4
EBITDA margin
pre exceptionals (percent) 13.4 8.9 11.3 8.7
Net income 508 -159 <-100 50 -204  <-100
Earnings per share  (EUR) 6.11 -1.91 <-100 0.61 -2.45 <-100

2012 restated according to the revised version of IAS 19

Source: Lanxess AG

Outlook

Lanxess expects the market environment for synthetic rubber to remain challenging in 2014 due to high competition and the balance between capacity and demand. 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 since 5 March. 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.

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