Published On : 06/20/2023

Lanxess slashes profit outlook as demand recovery lags

(Reuters) – German speciality chemicals maker Lanxess on Monday evening cut its second-quarter and annual core profit forecasts, saying it saw no demand recovery in June as customers continued to destock.

It said “very weak” demand, especially in the construction and electronics industries and from consumer related products, along with effects from customers destocking had spilled into the second quarter from the first and were ongoing.

The company, which makes high-end speciality chemicals such as additives, lubricants, flame retardants and plastics, expects its earnings before interest, taxation, depreciation and amortisation (EBITDA) pre-exceptionals to be around 100 million euros ($109 million) in the second quarter.

It had previously targeted profit “roughly at the level” of the first-quarter figure of 189 million euros.

For 2023, Lanxess sees EBITDA pre-exceptionals between 600 million and 650 million euros, versus prior forecast of 850 million to 950 million euros.

The demand recovery we originally expected in the second half is not yet visible – neither in China nor in other meaningful end markets,” CEO Matthias Zachert said in a statement.

Zachert also said business was “massively impacted” by disadvantageous conditions in Germany, such as high energy prices and bureaucracy.

Jefferies analysts said that “investors should rightly wonder whether … a warning of this magnitude calls into question the success of (Lanxess’s) strategy to date”, after the company used more than 2 billion euros in acquisitions over the past three years to upgrade portfolio mix and business resilience.

The Lanxess shares were down 6.8% in early Frankfurt trade.

($1 = 0.9165 euros)

(Reporting by Linda Pasquini in Gdansk; Editing by Milla Nissi)

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