ERJ staff report (TP)
Cologne, Germany – Lanxess is facing a difficult time over the next three years as its management seeks to realign the company and counter ongoing market challenges, new chairman Matthias Zachert has warned.
“We are currently facing major challenges – especially as the competitive environment for our business with synthetic rubber has changed. And this is clearly reflected in our results for fiscal 2013,” Zachert told shareholders at the group's annual results meeting on 22 May.
In 2013, sales fell by 8.7 percent against the prior year to €8.3 billion. EBITDA pre exceptionals decreased by 39.9 percent to €735 million. The group's net loss of €159 million was mostly attributable to impairment charges.
Lanxess’ start to the business year 2014 was "subdued". First-quarter sales were down by 2.5 percent year-on-year to €2 billion. EBITDA pre exceptionals rose by 17.8 percent to €205 million. Net income came in at the prior-year level of €25 million.
“We were able to increase our operating result, but business still remains at a rather low level,” said Zachert.
Realignment has started
Administrative structures are to be optimised and decision-making processes streamlined. Customer and market orientation in the business units are to be improved. The profitability of sites will be analysed with a view to temporary or permanent shutdowns of some plants. Lanxess will also explore options to make its rubber activities more competitive and to balance its business portfolio.
To help finance the realignment and generally strengthen the financial position of the company, Lanxess has increased its share capital by 10 percent, excluding the subscription rights of the shareholders.
At the beginning of May, the new shares were offered to institutional investors immediately by means of a private placement, using an accelerated bookbuilding process. The new bearer shares were placed at a price of €52 per share. The placement resulted in total proceeds of around €430 million.
Lanxess anticipates the economic environment will continue to slowly recover during the remainder of the year. The main impetus is expected to come from the established economic regions. However, the group believes the challenging competitive environment for its synthetic rubber businesses will continue.
In the second quarter of 2014, Lanxess anticipates EBITDA pre exceptionals to come in at between €220 million and €240 million. For fiscal 2014, the group expects EBITDA pre exceptionals to be between €770 million and €830 million.
Cash outflows for capital expenditures will be at the level of the previous year, when Lanxess spent €624 million. After the completion of the major growth projects in Singapore and China, it plans to reduce capital expenditures well below €600 million in 2015. In 2016, Lanxess expects to invest between €400 million and €450 million.
“I would like to already prepare you today for the fact that the next two to three years won’t be easy,” concluded Zachert.
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Press release from Lanxess