Lanxess Sees Bigger-Than-Predicted Drop in Quarterly ProfitSheenagh Matthews and Tino Andresen
Lanxess AG, the chemical maker that joined Germany’s benchmark DAX index in September, forecast a larger-than-estimated drop in profit for the current quarter on weak demand in the tire and automotive industries.
Earnings before interest, taxes, depreciation, amortization and one-time items may fall to 160 million euros ($207 million) to 180 million euros in the quarter, the Leverkusen, Germany-based company said today. That compares with 369 million euros a year earlier. Norbert Barth, an analyst at Baader Bank, had predicted 250 million euros. Lanxess shares fell the most in more than 17 months.
Lanxess is budgeting for profit to decline in 2013, and said March 7 that it will idle synthetic rubber factories in Belgium and the U.S. because of weak orders from the auto industry. Europe’s car-market contraction accelerated in February, with registrations dropping 10 percent from a year earlier, the Brussels-based European Automobile Manufacturers’ Association said on March 19.
“The outlook is disappointing,” said Barth, who has a buy recommendation on the stock. “We already saw the announcement that the market is difficult. But it’s surprising that they expect 2013 to be lower.”
The shares fell as much as 7.5 percent, the biggest intraday decline since October 2011. The stock was down 6.2 percent at 58.16 euros as of 9:27 a.m. local time. The shares have declined 12 percent this year, cutting the company’s market value to 4.8 billion euros.
Lanxess, which expects a pick-up in demand in the second half, will give a more precise outlook for the current year when it publishes its first-quarter report on May 8, it said today.
The maker of synthetic rubber is proposing to increase its annual dividend payment 18 percent to 1 euro a share for 2012, it said today. A payout of 95 euro cents was expected, according to data compiled by Bloomberg.
“In this persistently volatile environment, Lanxess will continue to focus on cost discipline and its proven flexible asset management,” the company said in the statement.
A plant in Zwijndrecht, Belgium, that makes butyl rubber, used in the inner linings of car tires, will be closed for four weeks in May. Production of ethylene propylene diene monomer, or EPDM, used in wiper blades and door sealants, in Orange, Texas, will stop for as many as six weeks, Lanxess said earlier this month.
The company is sticking to medium-term targets for earnings of 1.4 billion euros in 2014 and 1.8 billion euros in 2018, it said today.
Lanxess, which is moving its headquarters to Cologne, said today that the new building will be inaugurated on Sept. 3. About 1,000 employees will move into the building on the banks of the Rhine river.