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LANXESS Achieves Best Quarterly Earnings in its History

Published on 2008-08-14. Author : SpecialChem

Leverkusen -- Specialty chemicals company LANXESS AG considerably improved both its operating result and sales in the second quarter of 2008. The group's central steering parameter, EBITDA pre exceptionals, climbed by 5.7 percent in the period April through June, to EUR 223 million (Q2 2007: EUR 211 million).The EBITDA margin pre exceptionals edged ahead by 0.4 percentage points to 12.6 percent. LANXESS generated net income of EUR 53 million in the second quarter, against a net loss in the prior-year period related to the divestiture of the Lustran Polymers business unit. The fact that raw material price increases were passed on to the market in full had a particularly positive effect.

Sales of the LANXESS Group rose by 2.2 percent, from EUR 1,727 million in the prior-year period to EUR 1,765 million in the second quarter of 2008. Adjusted for portfolio changes and negative currency effects operational sales climbed by 14 percent.

"LANXESS generated very good earnings in the second quarter of 2008 and resolutely maintained its course of profitable expansion. The Group is optimally positioned to stand up well in an increasingly difficult market environment," said Axel C. Heitmann, Chairman of the Board of Management of LANXESS AG. Heitmann attributed this to his company's focus on high-performance, innovative products and to the divestment of highly cyclical businesses as part of its systematic portfolio management.

Capital expenditures rose by 3.1 percent to EUR 66 million (Q2 2007: EUR 64 million).

Further EBITDA growth in the first half of 2008

In the first six months of 2008, EBITDA pre exceptionals of LANXESS improved by 3 percent to EUR 443 million (H1 2007: EUR 430 million). The EBITDA margin grew by 0.9 percentage points to 13.4 percent. Net income climbed by EUR 124 million compared to the first half of 2007, to EUR 156 million. The prior-year figure of EUR 23 million was largely shaped by exceptional charges relating to the sale of the Lustran Polymers business unit. Sales came in at EUR 3.3 billion, just below the previous year's figure of EUR 3.4 billion. On an adjusted basis, however, half-year sales rose by a substantial 11.1 percent.

Positive second-quarter performance in all regions

The Group's positive business performance was also reflected in regional trends. Adjusted for portfolio changes and currency effects, LANXESS increased sales in all regions.

Sales gained strongly in the Asia-Pacific region, with LANXESS's business benefiting primarily from the activities of the Performance Polymers segment. Reported sales in this region came in at EUR 323 million (Q2 2007: EUR 310 million), up 4.2 percent. On an adjusted basis, sales rose by an even more substantial 43 percent. The region's share of total Group sales increased slightly to EUR 18.3 percent (Q2 2007: 18.0 percent). LANXESS achieved growth rates well into double digits in China, India and Japan.

Second-quarter sales in the Americas region increased by 9.3 percent from EUR 430 million to EUR 470 million. On an adjusted basis, the Group posted a 12.3 percent sales increase, with business in Brazil contributing decisively to the uptrend. Growth rates also exceeded 10 percent in both North America and Latin America, providing a strong stimulus. This region's share of Group sales climbed from 24.9 percent a year ago to EUR 26.6 percent in the second quarter of 2008.

Reported sales of the LANXESS Group in the EMEA region (Europe [excluding Germany], Middle East, Africa) increased 4.2 percent to EUR 591 million in the second quarter of 2008 (Q2 2007: EUR 567 million). When adjusted for currency and portfolio effects, however, sales in the region rose by 18 percent year on year. This positive performance was attributable especially to Western Europe, notably Belgium, France and Italy; Eastern Europe, especially Slovakia, Hungary and the Czech Republic; the Middle East; and South Africa. The EMEA region accounted for 33.5 percent of total Group sales, compared to 32.8 percent in the second quarter of 2007.

Sales in Germany fell 9.3 percent to EUR 381 million (Q2 2007: EUR 420 million), but rose slightly by 0.6 percent on an adjusted basis. Germany's share of LANXESS Group sales thus came to 21.6 percent, against 24.3 percent in the prior-year period.

Performance by segment

EBITDA pre exceptionals for the Performance Polymers segment improved by a significant 36.6 percent to EUR 127 million (Q2 2007: EUR 93 million), helped by the company's success in passing along raw material price increases to the market in full. Also contributing to the clear earnings improvement were the first-time inclusion of Petroflex and the very positive trend in volumes. The EBITDA margin came in at 14.0 percent, against 13.9 percent for the prior-year period. Sales of the segment climbed by a substantial 35.3 percent to EUR 908 million (Q2 2007: EUR 671 million). The Petroflex group accounted for 19.7 percentage points of this increase, generating sales of EUR 132 million. All four business units in this segment increased both selling prices and volumes.

The Advanced Intermediates segment posted a strong 10 percent increase in sales, to EUR 320 million (Q2 2007: EUR 291 million). EBITDA pre exceptionals was virtually unchanged from the year-ago quarter at EUR 49 million (Q2 2007: EUR 50 million). The main reasons for this trend were negative currency effects and higher raw material and energy costs, though these factors were offset by selling price adjustments. The EBIDA margin pre exceptionals slipped accordingly by 1.9 percentage points to 15.3 percent.

Sales in the Performance Chemicals segment rose slightly to EUR 523 million, up 0.6 percent (Q2 2007: EUR 520 million). Nearly all business units raised their selling prices. EBITDA pre exceptionals shrank by 12.4 percent to EUR 78 million (Q2 2007: EUR 89 million), mainly because of negative currency effects. The EBITDA margin came in at 14.9 percent, against 17.1 percent for the same period of 2007.

Outlook for the full year 2008

LANXESS believes that global economic growth will continue to slow for the remainder of 2008. In North America, particularly, the economy is likely to deteriorate further, especially in the construction and automotive sectors. The outlook for the global automotive and tire markets remains robust, however, thanks especially to the momentum in the growth regions of Asia-Pacific, Central and Eastern Europe and Latin America. The global chemical economy will continue to develop favorably, supported by stimuli from these growth markets. Prices for energy and petrochemical raw materials are likely to remain high and volatile. The strength of the euro against other currencies, especially the U.S. dollar, will also affect business trends.

LANXESS continues to expect operational sales growth for the full year 2008. EBITDA pre exceptionals is expected to come in at over EUR 700 million. The EUR 719 million EBITDA pre exceptionals reported for the full year 2007 included a EUR 20 million earnings contribution from the Lustran Polymer activities prior to their divestiture at the end of September 2007. LANXESS is adhering to its basic 2008 targets of achieving an EBITDA margin in line with the industry average, an EBITDA margin of at least 5 percent in all business units, and maintaining an investment-grade rating.

Forward-Looking Statements

This news release contains forward-looking statements based on current assumptions and forecasts made by LANXESS AG management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. The company assumes no liability whatsoever to update these forward-looking statements or to conform them to future events or developments.

Source: LANXESS


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