Lanxess AG (LXS), which until today had lost 30 percent since joining Germany’s benchmark DAX index in September, cut its profit forecast for 2014 as it sees no sign of a demand recovery in the second half of this year.
Earnings before interest, tax, depreciation, amortization and one-time items of 1.4 billion euros ($1.85 billion) next year is no longer a realistic goal, the company said. Earnings this year will probably be 700 million euros to 800 million euros, excluding potential inventory devaluations. The stock fell the most in more than four months in Frankfurt trading.
It’s “clearly a disappointment,” said Baader Bank analyst Norbert Barth. “The company gives up former hopes for a demand recovery in the tire industry.” He rates the stock sell.
Lanxess, based in Cologne, Germany, has cut costs as clients reduce inventories, especially in Asia, and it already idled factories in the first half to counter falling auto industry demand. Chief Executive Officer Axel Heitmann said today he’ll review strategy for less competitve products and present the results in mid-September. Measures include short-and long-term cost savings as well as structural changes, he said.
“It’s not about a new strategy,” Heitmann said today on a conference call with journalists. “It won’t be a revolutionary, but more of an evolutionary effect and will affect less-competitive products. These are peripheral areas.”
The shares slid as much as 7.9 percent, the biggest drop since March 21, to 42.81 euros and were trading down 3.3 percent as of 11:02 a.m. local time. The stock has lost 32 percent this year, cutting the company’s market value to 3.7 billion euros.
“We assume that the weakness will reach into 2014,” Heitmann said on the conference call. “We can’t give any new targets for 2014 but I can point out that the consensus is just below 1.1 billion euros” for profit, he said.
The chemical maker is cutting costs at the performance chemicals unit, which makes preserving agents, pigments, leather and rubber chemicals. It is consolidating production for vulcanization accelerators, used in the tire industry, at sites in Belgium and the U.S. and an antidegradants factory in Isithebe, South Africa is being closed.
Heitmann today declined to give further details on cost and job cuts, saying the strategy review will be presented in September.
Ebitda excluding one-time items fell 45 percent to 198 million euros in the second quarter. Analysts had predicted 191.2 million euros, according to estimates compiled by Bloomberg. Sales fell 12 percent to 2.14 billion euros, in line with the average analyst estimate. Net income plunged 95 percent to 9 million euros.
Lanxess is still aiming to meet a target for 1.8 billion euros in earnings by 2018, although the goal has become more challenging, it said today. The company is also reducing its capital expenditure and is planning to spend about 600 million euros instead of the previously envisaged 650 million euros to 700 million euros, it said in May.
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