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LANXESS posts strong growth in third quarter

Published on 2007-11-14. Author : SpecialChem

Leverkusen -- The specialty chemicals group LANXESS has reported an improvement in performance for the eleventh straight quarter. EBITDA pre exceptionals rose 6.7 percent in the third quarter of 2007 to EUR 175 million (Q3 2006: EUR 164 million). The EBITDA margin pre exceptionals was EUR 10.3 percent (Q3 2006: 9.7 percent), the first time it has ever been in double-digit territory at the start of the traditionally weaker second half. The operating result (EBIT) climbed by 22.4 percent to EUR 104 million (Q3 2006: EUR 85 million), and Group net income more than doubled in the period July through September 2007 from EUR 36 million to EUR 75 million.

"That is our strongest third quarter yet and provides a basis for further sustained growth," commented LANXESS Management Board Chairman Axel C. Heitmann.

Sales advanced slightly to EUR 1,705 million, up from EUR 1,691 million in the same period of 2006. After adjusting for portfolio changes and currency effects, sales were 6.0 percent higher. LANXESS succeeded in raising prices by 1.6 percent and volumes by 4.4 percent. Capital expenditures came to EUR 59 million in the third quarter of 2007, slightly below the year-earlier figure of EUR 66 million. LANXESS still expects capital expenditures for the year as a whole to be in the region of EUR 300 million. Net financial liabilities were reduced to EUR 491 million, down from EUR 511 million on December 31, 2006.

LANXESS's headcount declined from 16,481 to 14,659 employees as of September 30, 2007. This was mainly due to the transfer of the former Lustran Polymers business unit to the joint venture INEOS ABS (Jersey) Limited formed with the British chemicals group INEOS and the divestment of the Borchers Group.

Business trends by region

In Germany, LANXESS lifted sales 5.3 percent to EUR 421 million (Q3 2006: EUR 400 million). Sales in the EMEA region (Europe [excluding Germany], Middle East, Africa) edged up 0.8 percent to EUR 532 million (Q3 2006: EUR 528 million). With LANXESS benefiting from strong growth in eastern European markets, a sales company was established in Bratislava, Slovakia, in October 2007.

In the Americas region, sales were EUR 427 million, 4.0 percent below the previous year's level of EUR 445 million. After adjusting for portfolio and currency effects, sales rose by 8.1 percent from the prior-year period. All segments contributed to this good performance in both North and Latin America.

In the Asia-Pacific region, sales rose 2.2 percent in the third quarter to EUR 325 million (Q3 2006: EUR 318 million). Adjusted for currency effects and the activities divested in the previous year, sales advanced by a substantial 6.0 percent. As a result, this region's share of total sales increased from 18.8 percent to a record 19.1 percent. Here the growth engine was again China, where sales posted double-digit gains.

Segment information

As in previous quarters, business in the Performance Polymers segment developed very well, with sales advancing 3.6 percent to EUR 667 million (Q3 2006: EUR 644 million). Higher prices and volumes in nearly all business units contributed to this very good performance. The Butyl Rubber business unit did particularly well, posting an above-average rise in volumes in the third quarter. Overall, this segment's EBITDA pre exceptionals improved by 21.8 percent to EUR 95 million (Q3 2006: EUR 78 million) thanks to the favorable trend in all business units. The EBITDA margin pre exceptionals moved ahead by 2.1 percentage points to EUR 14.2 percent.

Sales also moved ahead in the Advanced Intermediates segment, advancing 8.8 percent to EUR 298 million compared with EUR 274 million a year earlier. The Basic Chemicals business unit benefited especially from the positive performance of agricultural intermediates. Volume growth reinforced this business unit's position in the challenging North American market. The Saltigo business unit experienced volume growth in the agrochemicals and specialties businesses, while sales of pharmaceutical intermediates declined. The segment's EBITDA pre exceptionals was unchanged from the third quarter of 2006 at EUR 41 million. The EBITDA margin pre exceptionals declined from 15.0 percent to 13.8 percent.

Business in the Performance Chemicals segment was solid in the third quarter of 2007. Sales decreased by 6.6 percent to EUR 493 million (Q3 2006: EUR 528 million) due to the divestment of the Textile Processing Chemicals business unit and negative currency effects, but rose by 3.4 percent after adjustment for these factors. Most of this improvement came from the positive trend in the Leather, Rhein Chemie, Rubber Chemicals and Ion Exchange Resins business units. EBITDA pre exceptionals slipped 5.6 percent compared with the previous year to EUR 67 million (Q3 2006: EUR 71 million) because of the divestment of the Textile Processing Chemicals business unit. By contrast, the EBITDA margin pre exceptionals increased slightly to 13.6 percent (Q3 2006: 13.4 percent).

From the fourth quarter of 2007, the Engineering Plastics segment will no longer include any operating business following the divestment of the Lustran Polymers business unit. Third-quarter sales in this segment came to EUR 224 million, up 3.2 percent from the third quarter of 2006. However, EBITDA pre exceptionals was well below expectations at just EUR 2 million.

Outlook for the full year

In the fourth quarter of 2007, LANXESS expects global economic growth to continue, with regional variations. Whereas expansion is slowing in the United States, the global chemical economy will be supported by robust demand in Asia-Pacific and Latin America, coupled with a stable business environment in Europe. Against this background, LANXESS continues to predict EBITDA pre exceptionals for the full year in the EUR 700 million to EUR 720 million range compared with EUR 675 million in 2006, despite a significantly lower earnings contribution from Lustran Polymers.

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.


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