LANXESS achieves solid result in challenging time for chemical industry
Mr Heitmann, Chairman of Board of Management of LANXESS
LANXESS AG significantly increased earnings in the second quarter in comparison to the weak first quarter of 2009 despite the ongoing difficult economic conditions worldwide. The specialty chemicals company posted EBITDA pre exceptionals of EUR 112 million, in line with its published guidance of EUR 100–120 million. The operating earnings figure was down 50 percent year-on-year but rose 70 percent from the first quarter of 2009 due to substantial volume increases, notably in Asia, as well as savings yielded by the “Challenge09” package of measures. Another positive key metric for the second quarter was the EBITDA margin pre exceptionals at 9 percent, up from 6.3 percent in the first quarter of 2009.
Sales in the second quarter fell by 30 percent year-on-year to EUR 1.24 billion but rose 17 percent quarter-on-quarter due to a strong rebound in volumes, especially in Performance Polymers. Net income was positive at EUR 17 million after being negative for two consecutive quarters. LANXESS proved again in the second quarter that it is in a strong financial position by nearly doubling its operating cash flow to EUR 157 million from a year earlier and reducing net debt by 17 percent to EUR 719 million from the end of 2008. The improvement in operating cash flow was supported by a strict focus on working capital management.
“LANXESS has achieved a solid result in the second quarter in view of the challenging environment for the chemical industry,” said Axel C. Heitmann, Chairman of the Board of Management of LANXESS AG. “Our earnings have benefited not only from a pick-up in demand but also from our decision to quickly implement a package of self-help measures to counter the crisis.”
“Challenge09” and “Challenge12”
In order to support future earnings and safeguard the company's financial position, the LANXESS management has agreed with employee representatives and the IG BCE (the German Mining, Chemical and Energy Industry Union) to extend the “Challenge09” package of cost saving measures agreed upon at the start of this year and to introduce an additional package called “Challenge12”.
“Challenge09” mainly comprises a combination of technical process improvements and remuneration decreases for all employees at all managerial levels. In this way, the specialty chemicals company aimed to cut costs worldwide by about EUR 250 million in 2009 and in 2010.
LANXESS now aims to save worldwide EUR 360 million in total between 2009 and 2012 with “Challenge09–12”. The additional EUR 110 million in savings will be generated through flexible asset management as well as employees foregoing remuneration. These measures will not result in any additional expenses in the P&L.
“Challenge12 gives us the necessary flexibility to counter the effects of the crisis also in the next 24 months. This means we are well equipped for the time when the upturn materialises,” said Heitmann.
Performance by segment - Sales in the Performance Polymers segment, which comprises the company's rubber activities and the Semi-Crystalline Products business unit, rose 25 percent quarter-on-quarter to EUR 559 million as demand picked up in Asia, in particular for the Performance Butadiene Rubbers business unit. EBITDA pre exceptionals for the segment rose to EUR 52 million from EUR 8 million in the first quarter as the negative effects seen in the first three months – such as customer destocking and inventory write-downs – levelled off. The segment's earnings also benefited from cost cutting measures. On a year-on-year basis, sales fell 38 percent and EBITDA pre exceptionals fell 59 percent.