LANXESS has reported Q1FY23 earnings at €189 million compared to €262 million during the corresponding period in 2022, reflecting a decline of 27.9 per cent. The decline is due to weak demand in some customer industries, especially in construction, and continued destocking by many customers. However, sales remained almost stable at €1.899 billion, down only 1.7 per cent from the previous year’s figure of € 1.931 million.

Earnings were squeezed in the Advanced Intermediates and Specialty Additives segments. The Consumer Protection segment proved robust in comparison, with sales and earnings increasing despite slightly lower sales volumes. The Microbial Control business acquired from the U.S. company IFF in mid-2022 made a particularly positive contribution. LANXESS again successfully passed on the increased raw material and energy costs and benefited from positive currency effects in all segments.

Free cash flow improved significantly by €264 million year-on-year and amounted to €112 million. This was supported by stable working capital despite a seasonal increase pattern. Net income from continuing operations reached €10 million in the first quarter after €66 million in the previous year. The EBITDA margin pre exceptionals came to 10 per cent, against 13.6 per cent a year ago.

“As expected, 2023 will be a tough year for the chemical industry and for LANXESS. Our figures for the first quarter make this very clear. It was therefore all the more vital that we transfered our high-performance plastics business to a joint venture as planned on April 1. We thus geared our portfolio further toward specialty chemicals and strengthened our balance sheet. This makes us even more resilient in the current difficult waters,” says Matthias Zachert, CEO of LANXESS AG. “However, I expect the economic situation to brighten considerably in the second half of the year, which will also be reflected in our earnings.”

For the coming months, LANXESS anticipates an economically challenging environment still characterized by high levels of uncertainty. The Group therefore expects earnings in the second quarter of 2023 to be roughly on a par with those of the first quarter. For the second half of the year, LANXESS expects a clear rebound of earnings based on a pick-up of the global economy and, in particular, a positive development of the Chinese market. Against this backdrop, the Group expects EBITDA pre exceptionals of between EUR 850 million and €950 million for the full financial year 2023.

LANXESS has continued to sharpen its focus on specialty chemicals and transferred its High Performance Materials (HPM) business unit to a joint venture with the private equity investor Advent International on April 1, 2023. The joint venture for high-performance engineering polymers is called Envalior and, alongside HPM, also comprises the former Engineering Materials business from DSM. LANXESS has a stake of around 40 per cent in Envalior, Advent around 60 percent. As part of the transaction, LANXESS received a payment of around €1.27 billion from Advent on March 31. The Group will use this primarily to reduce debt and thus strengthen its balance sheet.