Lanxess: A successful 2016 and a strong start to 2017
Friday, 17 March 2017
In fiscal 2016, specialty chemicals company Lanxess successfully advanced its transformation, underscoring this with strong performance data. EBITDA pre exceptionals increased by 12.4 percent to EUR 995 million (2015: EUR 885 million).
The main drivers of this positive development were higher volumes in all segments, the associated increase in capacity utilisation and cost savings resulting from the improved competitiveness of plants and processes.
EBITDA improved from 11.2 to 12.9 percent
The EBITDA pre exceptionals was therefore at the upper end of the recent guidance range of EUR 960 million to EUR 1 billion. The Group’s EBITDA margin pre exceptionals improved from 11.2 percent to 12.9 percent. Net income also increased by a substantial 16.4 percent to EUR 192 million from EUR 165 million. Sales declined slightly, from EUR 7.9 billion in 2015 to EUR 7.7 billion, primarily due to the adjustment in selling prices to reflect lower raw material costs.
Back on track for success
"Lanxess is back on track for success. We have achieved key milestones in our reorganization to make Lanxess a more stable and profitable enterprise and we have progressed a good way on our course of growth. This is reflected in our very positive business data for 2016,” said Matthias Zachert, Chairman of the Board of Management of Lanxess AG. "We aim to continue on this growth path, above all through the planned acquisition of Chemtura, and to further increase our operational strength.”
Planned acquisition of Chemtura on schedule
The planned acquisition of Chemtura is a crucial step on Lanxess’s growth path and continues to progress on schedule. At the start of March, the authorities in South Korea approved the acquisition as antitrust authorities in the United States and Brazil did before. In early February 2017, Chemtura’s shareholders had voted by a large majority in favor of the planned merger. Lanxess expects to receive all remaining regulatory clearances and to close the transaction by mid-2017.
Business development by segment
Sales of the Advanced Intermediates segment in 2016 were around EUR 1.74 billion, 4.6 percent below the prior-year figure of EUR 1.83 billion. On account of the anticipated decline in demand in the agrochemicals industry in the fourth quarter, EBITDA pre exceptionals decreased by a slight 3.8 percent to EUR 326 million, down from a very strong prior-year figure of EUR 339 million. Nevertheless, the EBITDA margin pre exceptionals was slightly up on the prior year, from 18.6 percent to 18.7 percent.
Sales in the Performance Chemicals segment improved by 2.7 percent from some EUR 2.09 billion to around EUR 2.14 billion. EBITDA pre exceptionals advanced by a substantial 14.7 percent from the prior-year level of EUR 326 million, to EUR 374 million. This improvement in earnings was mainly attributable to strong volume growth and better capacity utilization. The EBITDA margin pre exceptionals improved accordingly to 17.5 percent, compared with 15.6 percent in 2015.
In the High Performance Materials segment, sales declined by a slight 2.7 percent, from EUR 1.09 billion to EUR 1.06 billion. However, EBITDA pre exceptionals advanced by around 43 percent to EUR 159 million, which was substantially higher than the prior-year level of EUR 111 million. The main drivers here were higher volumes in more profitable product groups and higher capacity utilization. The EBITDA margin pre exceptionals grew respectively to 15.1 percent, compared with 10.2 percent in 2015.
Outlook for 2017
The good development seen in 2016 has continued into 2017. Lanxess had a very good start to the new fiscal year and is expecting EBITDA pre exceptionals between EUR 300 million and EUR 320 million for the first quarter of 2017. This would represent an increase in earnings of around 20 percent compared with the prior-year quarter (EUR 262 million). For the full year 2017, Lanxess expects a slight increase in EBITDA pre exceptionals compared with 2016. Successful closing of the planned acquisition of Chemtura would generate an additional earnings contribution that Lanxess has not yet included in its current guidance for 2017.