Lanxess seems to have left the path of strong cyclicality and the respective impact on profitability. Nevertheless, the company could not completely decouple from the economic environment as Engineering Materials recorded lower margins. Reported figures were stronger than expected, especially on the profitability line, but full matched the street’s expectations.
13 Nov 19
Doing well in a harsh environment
Back in 2014, prior to Mr Zachert taking over, the current harsh environment would have had a significantly negative impact on the figures. For the current-day Lanxess, these negative impacts were not that strong as prices remained quite stable in Q2. The reported figures were a notch above our expectations and in line with consensus.
02 Aug 19
Good operational performance...
... but the non-operational activities could have been better under control. However, Lanxess showed quite a good resilience in a shaky business environment. It looks as if the company has implemented a stronger ‘volume-resilience’ as profitability did not suffer too much from lower volumes, which stemmed from the strong adjustment of the business model, additionally helped by the other measures implemented. Our expectations have been met and consensus was beaten on the profitability level.
14 May 19
Managing a challenging year not too badly
All divisions have increased their profitability, except for Performance Chemicals, by implementing higher sales prices and seeing good demand for their products in a demanding business environment. Q4 came in stronger than expected due to the successful passing on of higher raw material prices and lower one-offs. Consensus was met.
14 Mar 19
Good momentum until the end of 2018?
Lanxess reported quite a good set of Q3 figures with profitability (hard figures) slightly above our expectations and barely failing consensus. The reporting period’s figures were characterised by mid single-digit organic growth with a small contribution from higher volumes. Price increases could partly protect margins, but EBITDA was helped by lower non-operating effects. Despite seeing some challenges emerging, management looks to have narrowed the guidance to the upper end of given guidance (EBITDA pre one-offs 2018E: 5-10%).
12 Nov 18
Higher raw material and energy prices have no strong impact
The NEW Lanxess reported quite good Q2 figures and a strong profitability increase (partly due to lower costs for the ‘Let LANXESS again’ programme) and some synergies. The top-line was above our expectations and profitability broadly fitted into our picture. The seasonal higher NWC outflow looks like the outlook for the remainder of the year. Consensus was broadly met.
02 Aug 18
Good start – guidance up for New Lanxess
Despite the good, but mixed, picture painted by the Q1 figures, the increase in guidance is an indication and not to be highlighted. But it confirms our view on the company as the Q1 figures did fit into our broad picture. Consensus for the New Lanxess was slightly beaten.
04 May 18
Party pooping one-offs
Lanxess’ FY figures look at first irritating and then at a second look disastrous. Top-line, we clearly missed the unexpected strong year-end sales party and on the earnings level the sun still shone at the pre one-offs level, but descending to the real world (one-offs were €-218m (€-50m)) the scenery looks wintery. Q4 was not a really successful quarter. Consensus was not met on the net earnings level.
15 Mar 18
Gross profit margin dampened
Q3 sales were pushed by the Chemtura acquisition and clearly rose +25% (p: +6%; v: +3%; FX: -3%; portfolio) to €2,404m. The gross profit margin softened from 32.2% to 22.9%, but EBITDA strongly improved by +31% to €315m. Net profit attributable to shareholders came to €55m after €62m. Operating CF rose +21% to €369m driven by higher D/A (€184m after €119m) and higher NWC inflow (€133m after €113m). Despite higher capex (€-125m after €-106m; 67.9% of D/A after 89.1%), investing CF moved from €-170m to €-119m, lacking the previous year’s negative net balance of €-68m generated by acquisition-related costs (€-198m) partly counterbalanced by financial inflows (€130m). Financing CF (€-484m after €-264m) reflected the higher net gross debt repayment (€-468m after €-249m). Lanxess acquired Solvay’s phosphorous additives business in the US in order to improve its phosphorus-derivatives portfolio in flame retardants. Management refined its FY guidance now expecting EBITDA pre one-offs to come in at €1,250-1,300m (previously: €1,225-1,300m; 2016: €995m).
15 Nov 17
Operation ‘Recapture of the DAX’
Lanxess held an Investors Day in early September, at which management updated the road map presented in 2014 and provided more detailed information on Lanxess’s next steps. Furthermore, the future financial targets (EBITDA pre-offs margin: 14-18%; cash conversion: >60%; EBITDA margin volatility: 2-3pp) were outlined and discussed.
13 Sep 17
One-offs spoiled the party, guidance confirmed
Q2 sales saw strong growth of +30% (v: +11%; p: +1%; FX: +1%; portfolio: +16%) to €4,923m, whereas the gross profit margin declined from 24.6% to 22.4% due to higher raw material and energy costs. EBITDA posted a significant drop by -22% to €227m absorbing the one-offs. Net profit attributable to shareholders deteriorated from €75m to €3m. Operating CF declined by -13% to €156m burdened by the weaker operating performance, which could not be offset by lower NWC outflows (€-20m after €-79m) despite higher inventories and receivables. Investing CF swung from €-981m to €289m with the proceeds from the divestment of financial assets (€2.1bn) above the purchase price of Chemtura (€-1.8bn). Inversely, the financing CF (€-69m after €1,115) lacked the €1.2bn contribution for the creation of ARLANXEO. Management confirmed FY guidance and continues to expect EBITDA pre one-offs of €1,225-1,300m (2016: €995m).
10 Aug 17
Full steam into 2017 and strong guidance given
Q1 sales clearly rose +25% (organic: +22%, equally volumes and prices) to €2,401m, but the gross profit margin suffered (22.7% after 24.0%) from the somewhat higher raw material prices. EBITDA was also clearly up (+26% to €316m) and net profit attributable to shareholders increased +47% to €78m. Operating CF (€10m after €48m) was hit by the strong development and the expected continuation in demand as the strong operating performance was more than offset by the much higher NWC outflow (€-231m after €141m), primarily due to higher receivables. Investing CF swung from €56m to €-15m as in lacking the last quarter’s net proceeds (€100m) they have swung to net outflows (€-40m). Financing CF (€52m after €-137m) saw net proceeds of €38m after net repayments of borrowings (€-131m). Management updated FY guidance and took the Chemtura acquisition into account. It expects EBITDA pre one-offs to come in at €1,225-1,300m (previously: a slight increase without Chemtura; 2016: €995m).
11 May 17
Perfect landing and a good start to 2017
Lanxess reported accidentally its 2016 figures a day earlier than announced. Sales declined 3% (organic: -2%) to €7,699m, but the gross profit margin was up +7ßbp to 22.8% helped by higher volumes (+4%). EBITDA rose +13% to €945m and net income attributable to shareholders came in at €192m after €165m. Operating CF stood pretty much unchanged at €689m (€692m) as the swing in NWC (€-3m after €60m) ate completely up the stronger operating performance. Investing CF (€-2,879m after €-400m) was hit by the re-investment of the cash contribution from the creation of Arlanxeo and the proceeds of the bonds issuance for the financing of the planned Chemtura acquisition. Additionally, €-200m was spent on the external financing of pension obligations. Financing CF moved from €-333m to €2,173m, as it faced a €1,194m cash inflow from non-controlling interests (Arlanxeo) and a swing from net gross debt repayments (€-200m) to net gross debt issuance (€1,107m). Management will propose a +17% higher dividend of €0.70 (€0.60) per share at the AGM on 26 May 2017. For 2017, management expects a slight increase in EBITDA before one-offs (2016: €995m) and, after the closing of the acquisition, Chemtura will then make additional contributions.
15 Mar 17
Lower prices mist the picture – outlook again lifted
Q3 sales (-2% to €1,921m) was burdened by passing through lower raw material prices (p: -7%), whereas volumes positively developed (+5%). Gross profit margin came in unchanged at 23.2% (23.3%) and EBITDA was up +11% to €241m. Net profit attributable to shareholders rocketed +51% to €62m. Operating CF reflected the good operating performance, additionally helped by higher NWC inflow (€113m after €38m) primarily propelled by a swing in trade payables into the black. Investing CF (€-170m after €46m) was dominated by the €-198m outflow for former Chemour’s Clean and Disinfect business. Financing CF (€-264m after €-75m) mainly saw higher net gross debt repayments (€-259m after €-59m). Management again lifted FY 2016 guidance, now expecting EBITDA pre one-offs in the €960-1,000m (€930-970m) range.
10 Nov 16
Better in additives
Lanxess has announced the acquisition of Chemtura, a US-based speciality chemicals company, for an equity value of ~€1.9bn (EV: ~€2.4bn). Anticipating a positive response from Chemtura’s shareholders and positive votes from the anti-trust authorities, closure is expected to take place in mid 2017.
26 Sep 16
Another quarter of weaker sales, but profitability up
Q2 sales were down 8% (prices: -7%; volume: +1%; FX: -1%) to €1,943m, but the gross profit margin strongly rose from 23.0% to 25.0%. EBITDA came in slightly weaker (-2% to €291m) and net profit attributable to shareholders dropped 14% to €75m, facing €-8m (nil) of minority interest. Operating CF strongly moved up (+51% to €180m), lacking the previous year’s quarter minus-sign-carrying disposal gains and lower NWC outflows (€-79m after €-101m). Investing CF (€-981m after €-151m) absorbed the payments for financial assets investing in the purchase price for the ARLANEXO share and a €200m cash outflow for the addition to the German pension fund assets. Financing CF swung from €-105m to €1,115m, primarily due to the €1,194m inflow for Saudi Aramco’s interest. Management again lifted FY 2016 guidance, now expecting EBITDA pre one-offs in the €930-970m (€900-950m) range.
10 Aug 16
Guidance lifted based on good Q1 figures. Too early?
Despite lower Q1 sales, which declined 6% (prices: -8%; volumes: +2%; FX: +1%) to €1,920m, the gross profit margin moved strongly up from 21.7% to 24.0%. EBITDA jumped +41% to €251m and net income attributable to shareholders moved up from €22m to €53m. Operating CF did not fully reflect the strong operating performance (€48m after €33m) as NWC outflow was up (€-141m after €-124m) driven by higher receivables and lower payables. The latter looks to us like a kind of financing of suppliers and the former is linked to higher business activities in the reporting period. Investing CF swung from €-61m to €56m, nudged by cash inflows from financing assets (near cash assets are nil in the balance sheet as of 31/03/2016). Financing CF moved from €-52m to €-137m due to higher net gross debt repayments (€-151m after €-44m). Management lifted its FY 2016 guidance, now expecting EBITDA pre one-offs in the €900-950m (€880-930m) range, which wipes out the former expectation that H2 16 might be softer.
11 May 16
Conciliatory ending to 2015
After the long period of weaker sales, Q4 was no dramatic change, but profitability continued to stabilise. Q4 sales were -5% (price: -10%) to €1,806m, but the gross profit margin strongly increased from 17.3% to 20.2%. EBIT swung from €-62m to €71m and net profit attributable to shareholders came in at €15m after €-68m. Q4 operating CF dropped 14% to €350m mainly due to lower NWC inflows (€249m after €381m). Investing CF declined from €-91m to €-234m suffering from a swing from an inflow (€142m) to an outflow (€-25m) in financial assets. Financing CF (€-101m after €-175m) saw some lower repayments of borrowings (€-85m after €-156m). Management proposes a +20% higher dividend (€0.60 after €0.50) at the next AGM on 20 May 2016. For FY 2016, management sees EBITDA pre one-offs in the €880-930m range and at €240-260m in Q1. Furthermore, H2 16 is expected to be softer.
17 Mar 16
Getting fragile traction
Sales continued to suffer, but profitability continued to improve yoy. Q3 sales declined 4% (organic: -11%) to €1,953m, suffering from lower (raw material) prices (-10%). The gross profit margin strongly rose by +3.6pp to 23.3%. EBITDA increased +19% to €218m and net profit attributable to shareholders rose +17% to €41m. Operating CF came in a bit weaker (€190m after €201m) despite the better operating performance seeing lower NWC inflows (€38m after €68m). Investing CF swung from €-81m to €46m driven by significantly higher inflows from financial assets (€142m after €29m). Financing CF moved from €-147m to €-75m helped by lower net gross debt repayments. Management again lifted FY guidance expecting EBITDA pre one-offs to come in at €860-900m (prev.: €840-880m; 2014: €808m).
05 Nov 15
Higher prices but lower raw material prices had to be passed on
Q2 group sales were up +4% to €2,105m and the gross profit margin increased from 21.8% to 23.0%. EBITDA very strongly rose +40% to €296m and net profit attributable to shareholders jumped by +58% to €87m. Operating CF dropped 33% to €119m not reflecting the better operating performance as NWC outflow increased from €-33m to €-101m burdened by changes in other assets and liabilities. Investing CF (-48% to €-151m) is characterised by a halved capex (€-73m after €-154m) partly attributable to the finalisation of the building of the new Asian sites. Financing CF swung from €11m to €-105m, suffering from lower income from the capital increase (€433m), which had partly been absorbed by net gross debt repayments (€-298m) in the previous year’s period. Management lifted FY guidance expecting EBITDA pre one-offs to come in at €840-880m (previously: €820-860m; 2014: €808m).
06 Aug 15