Lanxess AG, the second-worst performer on Germany’s benchmark DAX index this year, lowered the top end of its profit goal range and said it expects “modest” economic momentum to persist in the fourth quarter.
Earnings before interest, tax, depreciation, amortization and one-time items will probably be 710 million euros ($950 million) to 760 million euros this year, the Cologne, Germany-based company said today in a statement. Previously it predicted 700 million euros to 800 million euros. The stock dropped the most in more than three months in Frankfurt trading.
Chief Executive Officer Axel Heitmann said today that customers have used lower rubber prices to build up inventories and in response the company has been running some plants at lower capacity as well as stopping some production lines. The company is cutting jobs and bonuses and may sell some smaller businesses to stem costs.
“Customers have been massively exploiting their purchasing power,” Heitmann said on a conference call with journalists. Even for more specialty products, the company has “had to make price concessions because the market price in general has fallen.”
The shares fell as much as 4.2 percent, the biggest intraday drop since Aug. 6, to 50.09 euros and were trading down 3.4 percent 50.50 euros as of 11:08 a.m. local time. The stock has lost 24 percent this year, cutting the company’s market value to 4.2 billion euros. Only potash producer K+S AG has dropped further, declining 41 percent.
Ebitda before special items dropped 26 percent to 187 million euros in the quarter, beating a 179 million-euro analyst estimate, according to a Bloomberg survey. Sales fell 5 percent to 2.05 billion euros, in line with estimates. Net income plunged 88 percent to 11 million euros.
Lanxess suffered from falling selling prices, with revenue dropping 13 percent in North America and 17 percent in Latin America compared with the year-ago quarter. The maker of synthetic rubber and agrochemicals said emerging markets will provide only limited impetus and it doesn’t yet see lasting stability in Europe.
The chemical maker, which generates about 40 percent of sales from the auto and tire industries, suffered after European car sales dropped to the lowest in more than 20 years. Lanxess has said it will target acquisitions in the mid to long-term to strengthen its chemical units and reduce dependence on rubber.
The manufacturer is exploring strategic options for some units that don’t belong to its main business, it said in September. Divisions with about 500 million euros in combined sales and 1,000 workers, may be sold or put into joint ventures within two years, the CEO said.