LANXESS continue profitability

11 May 2007




EBITDA pre exceptionals grew by 6.8% in the period from January to March 2007, to 219 million euros (205 million euros in the same period in 2006). The EBITDA margin pre exceptionals rose to 12.8% (Q1 2006: 11.2%). The group improved operating result (EBIT pre exceptionals) by 10.5% to 158 million euros (Q1 2006: 143 million euros). Reported sales, after the effects of divestments and shifts in exchange rates, declined by 6.8% as expected to 1,711 million euros (Q1 2006: 1,836 million euros). Adjusted for these effects, sales grew by 3.1%. Net income improved by 11% to 91 million euros (Q1 2006: 82 million euros). 'With this further improvement in profitability, we have laid a solid foundation for further growth', said LANXESS management board chairman Axel C Heitmann. Net debt declined by more than 12% compared to the end of 2006, to 448 million euros. Against a background of planned corporate growth, capital expenditures were increased by nearly a third to 47 million euros (Q1 2006: 37 million euros). Adjusted for portfolio and currency effects, sales of LANXESS rose in all regions. As a result of these effects, reported sales showed a budgeted decline. In the EMEA region (Europe [excluding Germany], Middle East, Africa), LANXESS Group sales fell by 4.7% to 590 million euros (Q1 2006: 619 million euros). Adjusted for portfolio changes and currency effects, sales in this region edged up by 1.8% due to expanding markets for the company's products in eastern Europe and the Middle East. Sales in LANXESS's home market of Germany shrank by 1.4% to 411 million euros (Q1 2006: 417 million euros), due solely to portfolio changes. Adjusted for this effect, sales rose by more than 1.5%. In the Americas region, LANXESS recorded a drop in sales of 17.5%, to 410 million euros (Q1 2006: 497 million euros). After adjusting for portfolio and currency effects, sales in North and Latin America rose by 3.2% compared with the first quarter of 2006. Sales dipped by 1% in the Asia-Pacific region to 300 million euros (Q1 2006: 303 million euros), but advanced by 7.9% on an adjusted basis. Due to portfolio changes and currency effects, first-quarter sales of the Performance Chemicals segment came in 22.6% lower year-on-year, at 400 million euros (Q1 2006: 517 million euros). Adjusted for currency effects and the divestment of the Paper and Textile Processing Chemicals business units, sales were at the previous year's level. The Leather business unit boosted volumes of chrome ore and chromic acids. The Material Protection Products business unit also performed well. Prices and volumes declined in the Rubber Chemicals business unit due to heightened competition. Business in the Functional Chemicals unit was negatively impacted by an operational incident at the hydrazine hydrate production facility in Weifang, China. The segment's EBITDA pre exceptionals shrank by 13% to 60 million euros (Q1 2006: 69 million euros). The EBITDA margin pre exceptionals improved by 1.7 percentage points to 15%. This development reflects the effects of the completed portfolio changes. LANXESS remains optimistic about the rest of the year. The economic perspectives are positive in Germany and elsewhere in Europe, as well as in Asia. The pace of economic growth in the United States is expected to slacken, with a corresponding effect on the Group's business. If the euro were to remain above US$1.35, this could adversely affect LANXESS's earnings by a low single-digit million euro figure in the fourth quarter of 2007. LANXESS does not anticipate any significant short-term impact in light of its currency hedging. Raw material and energy prices are expected to remain volatile at a high level in the coming months. After the recent price hikes, an improvement in the situation is not anticipated until the third quarter of 2007 at the earliest. LANXESS will continue to aim for profitable growth in this market environment. The further earnings improvement in the first quarter of 2007 provides a good basis for meeting the company's targets for 2007. 'We therefore expect EBITDA pre exceptionals for the full year to increase by a medium to high single-digit percentage from the 2006 figure of 675 million', stated Heitmann, adding that the company predicts a moderate increase in sales and will thus continue to narrow the gap with their competitors in terms of profitability. In view of their systematic growth strategy, LANXESS will increase capital expenditures in the current fiscal year to more than 300 million euros, which is significantly above the prior-year level of 267 million euros.LANXESS continue profitable growth by once again posting a year-on-year increase in earnings (EBITDA pre exceptionals) in the first quarter, which is traditionally the strongest three-month period in the year. EBITDA pre exceptionals grew by 6.8% in the period from January to March 2007, to 219 million euros (205 million euros in the same period in 2006). The EBITDA margin pre exceptionals rose to 12.8% (Q1 2006: 11.2%). The group improved operating result (EBIT pre exceptionals) by 10.5% to 158 million euros (Q1 2006: 143 million euros). Reported sales, after the effects of divestments and shifts in exchange rates, declined by 6.8% as expected to 1,711 million euros (Q1 2006: 1,836 million euros). Adjusted for these effects, sales grew by 3.1%. Net income improved by 11% to 91 million euros (Q1 2006: 82 million euros). 'With this further improvement in profitability, we have laid a solid foundation for further growth', said LANXESS management board chairman Axel C Heitmann. Net debt declined by more than 12% compared to the end of 2006, to 448 million euros. Against a background of planned corporate growth, capital expenditures were increased by nearly a third to 47 million euros (Q1 2006: 37 million euros). Adjusted for portfolio and currency effects, sales of LANXESS rose in all regions. As a result of these effects, reported sales showed a budgeted decline. In the EMEA region (Europe [excluding Germany], Middle East, Africa), LANXESS Group sales fell by 4.7% to 590 million euros (Q1 2006: 619 million euros). Adjusted for portfolio changes and currency effects, sales in this region edged up by 1.8% due to expanding markets for the company's products in eastern Europe and the Middle East. Sales in LANXESS's home market of Germany shrank by 1.4% to 411 million euros (Q1 2006: 417 million euros), due solely to portfolio changes. Adjusted for this effect, sales rose by more than 1.5%. In the Americas region, LANXESS recorded a drop in sales of 17.5%, to 410 million euros (Q1 2006: 497 million euros). After adjusting for portfolio and currency effects, sales in North and Latin America rose by 3.2% compared with the first quarter of 2006. Sales dipped by 1% in the Asia-Pacific region to 300 million euros (Q1 2006: 303 million euros), but advanced by 7.9% on an adjusted basis. Due to portfolio changes and currency effects, first-quarter sales of the Performance Chemicals segment came in 22.6% lower year-on-year, at 400 million euros (Q1 2006: 517 million euros). Adjusted for currency effects and the divestment of the Paper and Textile Processing Chemicals business units, sales were at the previous year's level. The Leather business unit boosted volumes of chrome ore and chromic acids. The Material Protection Products business unit also performed well. Prices and volumes declined in the Rubber Chemicals business unit due to heightened competition. Business in the Functional Chemicals unit was negatively impacted by an operational incident at the hydrazine hydrate production facility in Weifang, China. The segment's EBITDA pre exceptionals shrank by 13% to 60 million euros (Q1 2006: 69 million euros). The EBITDA margin pre exceptionals improved by 1.7 percentage points to 15%. This development reflects the effects of the completed portfolio changes. LANXESS remains optimistic about the rest of the year. The economic perspectives are positive in Germany and elsewhere in Europe, as well as in Asia. The pace of economic growth in the United States is expected to slacken, with a corresponding effect on the Group's business. If the euro were to remain above US$1.35, this could adversely affect LANXESS's earnings by a low single-digit million euro figure in the fourth quarter of 2007. LANXESS does not anticipate any significant short-term impact in light of its currency hedging. Raw material and energy prices are expected to remain volatile at a high level in the coming months. After the recent price hikes, an improvement in the situation is not anticipated until the third quarter of 2007 at the earliest. LANXESS will continue to aim for profitable growth in this market environment. The further earnings improvement in the first quarter of 2007 provides a good basis for meeting the company's targets for 2007. 'We therefore expect EBITDA pre exceptionals for the full year to increase by a medium to high single-digit percentage from the 2006 figure of 675 million', stated Heitmann, adding that the company predicts a moderate increase in sales and will thus continue to narrow the gap with their competitors in terms of profitability. In view of their systematic growth strategy, LANXESS will increase capital expenditures in the current fiscal year to more than 300 million euros, which is significantly above the prior-year level of 267 million euros.



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