Lanxess Sees Lower-Than-Estimated Profit on Car Industry

Lanxess AG, the chemical maker that joined Germany’s benchmark DAX index in September, predicted lower-than-estimated operating profit in the second quarter on weaker orders from the tire and auto industries.

Earnings before interest, taxes, depreciation, amortization and one-time items will probably fall to less than 220 million euros ($288 million) in the three months through June, the Leverkusen, Germany-based company said today. That compares with 250 million euros that analysts were predicting, according to estimates compiled by Bloomberg.

Chief Executive Officer Axel Heitmann said today that he plans further measures to counter “ongoing demand weakness” at the performance chemicals unit, which makes preserving agents, pigments, leather and rubber chemicals. Lanxess already said it will idle synthetic rubber factories in Belgium and the U.S. European car sales are sliding to a 20-year low, with registrations dropping 10 percent in March, the 18th consecutive decline, the European Automobile Manufacturers’ Association said last month.

“We are not immune to a sharp drop in demand, but we are responding to it pro-actively as always,” Heitmann said in a statement today. “These measures are not merely designed to achieve short-term savings. We aim to raise the competitiveness of our international sites.”

Shares of Lanxess fell 1.1 percent to 56.6 euros in Frankfurt trading as of 9:35 a.m. local time. The stock has dropped 15 percent this year, cutting the company’s market value to 4.7 billion euros.

Capex Restrained

Lanxess is reducing its capital expenditure for the full year and is planning to spend about 600 million euros instead of the previously envisaged 650 million euros to 700 million euros, it said today.

Ebitda before special items is expected to be less than 1 billion euros for the full year, Lanxess said today. Analysts are estimating profit of 989.2 million euros. The company reiterated medium-term targets for earnings of 1.4 billion euros in 2014 and 1.8 billion euros in 2018.

A plant in Zwijndrecht, Belgium, that makes butyl rubber, used in the inner linings of car tires, is closed for four weeks this month. Production in Orange, Texas, of ethylene propylene diene monomer, or EPDM, used in wiper blades and door sealants, stopped production for as many as six weeks before reopening in April.

Ebitda before special items dropped 53 percent to 174 million euros and sales fell 12 percent to 2.1 billion euros in the first quarter. Those figures beat analyst estimates of 169 million euros for earnings and 2.04 billion euros for revenue. Net income in the quarter plunged 87 percent to 25 million euros, in line with estimates.

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