Sales down 26.7 per cent to €1.601 billion in the third quarter of 2023
LANXESS’ business figures for third quarter of 2023were again influenced by the persistently weak economy. Sales amounted to €1.601 billion, down 26.7 per cent on the previous year’s figure of € 2.185 million. EBITDA pre exceptionals fell by 50.4 per cent from 240 million to €119 million.
The main reasons for this development were the low demand from nearly all industries and customers’ ongoing albeit diminishing inventory reduction. The associated reduction in sales volumes and high idle costs led to declining earnings, especially in the Specialty Additives and Advanced Intermediates segments. The Consumer Protection segment saw only a comparatively moderate earnings decline.
The Group’s EBITDA margin pre exceptionals was 7.4 per cent, against 11 per cent in the prior-year quarter. Net income declined to minus EUR 131 million in the third quarter compared with EUR 80 million in the prior-year quarter.
“The weak demand in the global chemicals industry persists, and we see no signs of recovery for the rest of the year. On the contrary, demand in the fourth quarter to date seems to be even weaker than expected,” said Matthias Zachert, Chairman of the Board of Management at LANXESS AG.
LANXESS had already announced the unexpectedly weak start to the fourth quarter on November 6. Initiated destocking of customers in the agroindustry and a supplier-related production limitation for the Business Unit Flavors & Fragrances at its production site in Botlek (NL) impact results additionally. LANXESS therefore expects EBITDA pre exceptionals for the full year 2023 to be between € 500 and 550 million. LANXESS' previous guidance was EUR 600 to 650 million for EBITDA pre exceptionals for the total year.
Given the weak business development, the Board of Management intends to propose a reduction of the full year 2023 dividend to €0.10. The hereby avoided cash outflow would result in a further reduction of net financial debt. Expected proceeds from the now initiated sale of the Business Unit Urethane Systems would contribute as well.
As the last remaining polymer business at LANXESS, the business unit no longer fits in with the strategic orientation of the Group, which has systematically realigned its portfolio in recent years. The business unit has a global presence with six production sites and employs around 400 staff.
In the third quarter, LANXESS reduced its net financial liabilities by a further 11 percent from €2.863 billion as of June 30, 2023 to €2.557 billion. The decline was mainly the result of a consistent reduction in net working capital. Compared to EUR 3.814 billion on the balance sheet date of December 31, 2022, net financial liabilities fell by 33 per cent.
With its “FORWARD!” action plan, LANXESS is counteracting the phase of weak economic development in the chemical industry. Its implementation is in full swing: LANXESS will realize one-time savings of around € 100 million in 2023 through cost reductions and lower investments. In addition, the Group is increasing its efficiency and will make structural changes to permanently reduce its annual costs by around EUR 150 million from 2025 onwards. The changes include the cut of 870 jobs, 460 of which in Germany.
The job cuts in Germany will be made primarily in administrative functions in order to streamline structures there and adapt to the company’s economic situation. The downsizing will particularly affect the sites in Cologne, Leverkusen, Uerdingen and Mannheim, and will be achieved by not re-filling vacancies, through natural turnover, and by offering termination agreements.
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