Lanxess rubber unit increases profit faster than sales

Cologne, Germany--Lanxess AG posted a loss at its first annual result conference. The company said sales increased by 7 percent, to Euro 6773 million, while the overall net result (EBIT including exceptionals) was a loss of Euro 12 million, compared with a loss of Euro 997 million in 2003.

Dr Axel Heitmann, chairman of Lanxess board of management picked on the group's Performance Rubber unit as the most promising of the company's four business units. He said profits in the business grew faster than sales, suggesting that the company more than recovered its increased raw materials costs through higher selling prices. Dr Ulrich Koemm, member of the management board confirmed that Lanxess was able to improve margins in the rubber business by raising the selling prices of its materials beyond the increase in raw materials costs.

In Performance Rubber, the company reported an EBITDA (before exceptionals) of Euro 117 million, compared with Euro 36 million in 2003. Sales meanwhile, increased by 4 percent, to Euro 1431 million, making the Performance Rubber unit the smallest of Lanxess' four main business units.

Koemm said that returns on the rubber business are not yet at the right level across the whole range of products, but that the company will be reasonable in terms of price increases. "We are not looking for parmaceutical returns" he said, suggesting that if the business is too profitable, that will attract more competitors.

Koemm also ruled out any new rubber factories in China for the time being. He said there is a shortage of C₄ in China and until it is possible to secure local supplies of butadiene, it was easier to ship BR and SBR to China than to ship butadiene to the country.

Heitmann also named the company's Rubber Chemicals unit as one of the group's worst performing businesses. He said the company is employing a strategy of 'value before volume' in this and other businesses. He said the rubber chemicals unit is not profitable, but prices are rising in that business and, "We are on the road to improvement" in that business, he said.