Lanxess third-quarter results decline due to economic impact

In the third quarter of 2023, Lanxess's business data was once again affected by the continued weakness of the economy. Sales were 1.601 billion euros, a decrease of 26.7% compared with 2.185 billion euros in the same period last year. EBITDA within the scope of regular business fell from 240 million euros to 119 million euros, a decrease of 50.4%.

The main reasons for this are low demand in almost all industries, coupled with customers continuing to reduce inventories. The associated lower sales volumes and high idle costs resulted in lower earnings, which was particularly evident in the Specialty Additives and High Quality Intermediates business units. In contrast, the Consumer Protection Division's profit decline was relatively small.

The Group's EBITDA rate within the normal business scope was 7.4%, compared with 11.0% in the same period last year. Net income in the third quarter fell to -€131 million from €80 million in the same period last year.

Matthias Zachert, Chairman of the Board of Directors of LANXESS, said: "Demand in the global chemical industry continues to be weak, and we do not see any signs of recovery in the second half of the year. On the contrary, demand in the fourth quarter so far appears to be weaker than expected."

On November 6, LANXESS announced an unexpectedly weak start to the fourth quarter. Active destocking by agro-industrial customers and production restrictions at the Flavors and Fragrances business unit at the Botlek (Netherlands) production base due to supplier reasons had additional impacts on performance. Therefore, LANXESS expects EBITDA in the normal business range in 2023 to be between 500 million and 550 million euros. Lanxess had previously expected EBITDA within the full-year regular business range of 600 million to 650 million euros.

Dividend cut and sale of Polyurethane Systems business unit

In view of the weak business development, the Management Board intends to recommend a reduction in the full-year dividend for 2023 to 0.10 euros. The thus avoided cash outflow will further reduce net financial debt. Expected gains from the currently initiated sale of the Polyurethane Systems business unit will also contribute.

As the only remaining polymer business of LANXESS Group, this business unit is no longer in line with the group's strategic positioning, and the group has made systematic adjustments to its business portfolio in recent years. This business unit has six production sites worldwide and approximately 400 employees.

debt reduction

In the third quarter, Lanxess's net financial liabilities further decreased by 11% to 2.557 billion euros from 2.863 billion euros as of June 30, 2023. The decrease in debt was primarily due to the continued decrease in net working capital. Compared with EUR 3.814 billion at the balance sheet date of December 31, 2022, net financial liabilities decreased by 33%.

“FORWARD!” Action Plan

LANXESS responds to the weak economic development phase of the chemical industry with its "FORWARD!" action plan. The plan is being fully implemented: through cost reduction and investment reduction, LANXESS will achieve one-time savings of approximately 100 million euros in 2023. In addition, the Group is improving efficiency and will make structural adjustments to continuously reduce costs by approximately 150 million euros per year from 2025. The changes include cutting 870 jobs, 460 of them in Germany.

The layoffs in Germany are mainly concentrated in administrative functions, with the aim of streamlining the organization and adapting to the company's economic situation. The layoffs will particularly affect the production sites in Cologne, Leverkusen, Uerdingen and Mannheim and will be achieved through no refilling of vacancies, natural turnover and the provision of termination agreements.

Market segments: Low demand in almost all industries

Sales in the Consumer Protection Division fell to 581 million euros from 662 million euros, a decrease of 12.2%. The segment's regular operating EBITDA was 84 million euros, a decrease of 23.6% compared with 110 million euros in the same period last year. Lower sales volumes, lower capacity utilization and exchange rate movements had a negative impact on earnings development and margins. The EBITDA rate within the normal business scope was 14.5%, compared with 16.6% in the same period last year.

In the Specialty Additives segment, sales declined due to reduced demand from the construction, electronics and automotive industries. Only the aviation industry has seen relatively stable demand. Sales in the third quarter were 549 million euros, a decrease of 30.7% compared with 792 million euros in the same period last year. Weaker demand and reduced inventory led to lower capacity utilization, which negatively impacted earnings. Compared with 121 million euros in the same period last year, EBITDA in the ordinary business fell by 72.7% to 33 million euros. The EBITDA rate within the normal business scope was 6.0%, compared with 15.3% in the same period last year.

Business development in the High Quality Intermediates business unit was negatively affected by weak demand, especially from the construction industry, and lower sales prices. Sales of this business unit in the third quarter were 403 million euros, a decrease of 37.2% compared with 642 million euros in the same period last year. Regular business scope EBITDA for the High Quality Intermediates business was EUR 30 million, a decrease of 53.8% compared to EUR 65 million in the same period last year, mainly due to lower capacity utilization. The EBITDA rate within the normal business scope was 7.4%, compared with 10.1% in the same period last year.