COLOGNE (dpa-AFX) – The chemicals group LANXESS intends to keep its operating result more or less stable in the current year, despite the economic downturn. Analysts are currently anticipating a slight decline on average. The takeover of the microbial control business from the US fragrance and flavor manufacturer IFF, which was completed in mid-2022 and has been merged into the Consumer Protection division for material protection and preservatives, should also provide tailwind. According to Lanxess, there will be a headwind, at least in the first few months of the year, from the ongoing reduction in customer inventories and the consequences of high energy prices.
2023 will not be any easier, said Lanxess boss Matthias Zachert according to a statement on Wednesday in Cologne when presenting the business figures for the past year. “The subdued demand, which we already felt clearly in the last quarter of 2022, has continued into the new year so far.”
Nevertheless, earnings before interest, taxes, depreciation and amortization (Ebitda) adjusted for special effects should remain at around the level of 930 million euros, which corresponded to an increase of a good 14 percent in 2022 compared to 2021. For the first quarter, Lanxess is expecting 180 to 220 million euros, so it expects an upward trend in the further course of the year.
The outlook underpins Lanxess’ robust positioning, wrote analyst Konstantin Wiechert from Baader Bank in an initial reaction. The shares initially gave way on the Tradegate trading platform in the morning.
Things should go up in 2023 for the Consumer Protection division, which, in addition to acquisitions, is also benefiting from good development in the agrochemicals business, according to Lanxess. The business with special additives, for example for tire rubber, plastics and lubricants (specialty additives), is likely to suffer from the weakness in the construction industry and post a significant drop in earnings. The area of basic and fine chemicals for industry (Advanced Intermediates division) should also feel the dreary construction industry and at best achieve a result at the previous year’s level.
With a view to 2022, Lanxess increased sales by around a third to EUR 8.1 billion thanks to acquisitions such as the IFF business and the purchase of the US specialty chemicals company Emerald Kalama Chemical, which was completed in mid-2021. In addition, it was possible to pass the significantly increased costs for energy and raw materials on to the customers in full. The bottom line is that last year was slightly less than 2021 at 250 million euros. The dividend should remain stable at 1.05 euros per share.
In 2021, the group still benefited from the sale of the organic leather chemicals business. In addition, the proportion of discontinued operations fell in 2022. The business with high-performance plastics for the automotive and electrical industry is reported here.
The relevant area will be brought into a joint venture with the holding company Advent, which is also taking over the plastics business Engineering Materials of the Dutch group Royal DSM (DSM NV) in a billion-dollar deal. With this step, Lanxess wants to reduce its dependency on economic fluctuations, as the business volume with the automotive industry is reduced.
As has also been known for some time, Advent will hold at least 60 percent of the new joint venture. In return, Lanxess will receive an initial payment of around EUR 1.1 billion and a share in the joint venture. According to a presentation on Wednesday, this should be accounted for at around 1.4 billion euros. Completion is now expected in early April. According to the original plans, Lanxess can pass on the stake to Advent after three years at the earliest – and that in relation to the profit at the same valuation as in the current deal.
According to a company presentation on Wednesday, the 1.1 billion euros that Lanxess will receive in the first step are to be used to reduce debt. A share buyback is not being considered – also with reference to discussions with investors./mis/ngu/tih
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