LANXESS narrows full-year 2013 guidance range

In an economic environment marked by continuing uncertainty, LANXESS has narrowed its guidance range for the full year 2013: EBITDA pre exceptionals is expected to be between Euro 710 million and Euro 760 million, within the previously communicated corridor of Euro 700 million to Euro 800 million.
 
In the third quarter of 2013, the company posted a 9% volume increase year-on-year, with all segments contributing. However, this increase did not entirely offset the 11% overall price decline. Prices fell particularly in the rubber businesses belonging to the segment Performance Polymers. Negative currency effects, mainly related to the weakness of the US Dollar, also had an impact. Group sales fell by 5% overall compared with the prior-year quarter to Euro 2.1 billion. Apart from the gradual increase in volumes in all segments, the ongoing strong demand for agrochemicals and positive sales development in the Asia-Pacific region also had a stabilising effect on quarterly results.
 
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"Some of our customers have started restocking their inventories. This is highlighted by the year-on-year and quarter-on-quarter volume increases. But, in our view, it is still too early to speak of a general recovery of the business,” said Axel C Heitmann, Chairman of the Board of Management of LANXESS AG.
 
EBITDA pre exceptionals receded by 26% year-on-year to Euro 187 million. This was largely due to lower selling prices and inventory reduction. In addition, there was a burden of around Euro 10 million in the form of inventory devaluations. The EBITDA margin pre exceptionals declined to 9.1% from 11.8%. Net income fell by 88% to Euro 11 million due to higher depreciation and amortisation as well as exceptional charges of roughly Euro 20 million for the efficiency program ‘Advance’.
 
Operating cash flow improved to Euro 378 million in the third quarter of 2013 from Euro 344 million a year earlier due to a reduction in working capital. Net financial liabilities decreased to around Euro 1.8 billion from the end of the second quarter due to strict working capital management. "We aim to further reduce net financial liabilities by year end,” said Bernhard Duettmann, Chief Financial Officer, LANXESS.
 
LANXESS expects the modest economic momentum to persist in the fourth quarter, with the emerging economies continuing to provide only limited impetus. In Europe, although the situation is expected to ease, the company does not yet anticipate lasting stability. Growth in the US is likely to remain moderate due to the ongoing budget uncertainty.
 
To address the challenging economic situation, the company has begun implementing the efficiency improvement program ‘Advance’, which was announced in September. The program comprises cost savings, a global headcount reduction of about 1,000 by the end of 2015 and portfolio adjustments. In total, some Euro 150 million in exceptional charges will be booked in 2013 and 2014 to cover the program, thereof Euro 80 million in the current financial year. LANXESS expects ‘Advance’ to generate annual savings of roughly Euro 100 million from 2015 onward.