LANXESS achieves full-year target for 2019 despite challenging environment
Leather business unit reported as a discontinued operation
Dividend to increase again
Also in fiscal year 2019, the dividend is to be increased again. The Board of Management and Supervisory Board will propose a dividend of EUR 0.95 per share to the Annual Stockholders’ Meeting on May 13, 2020. This would be around 6 percent more than in the previous year.
New segment: Consumer Protection
On its growth course, LANXESS intends to focus more sharply on consumer protection products and is therefore adjusting its segment structure, effective immediately. The Saltigo, Liquid Purification Technologies and Material Protection Products business units make up the new Consumer Protection segment. This segment’s portfolio includes, for example, active ingredients for the agricultural and pharmaceutical industries, for insect repellents and disinfectants as well as technologies for processing and cleaning water.
“Our Consumer Protection products are characterized by attractive and stable growth rates. At the same time, our years of expertise in these often heavily regulated markets give us a competitive edge,” said Zachert.
The Consumer Protection segment is replacing the former Performance Chemicals segment. At the same time, the Inorganic Pigments business unit is now part of the Advanced Intermediates segment. Reporting will be adjusted accordingly from the first quarter of 2020.
Lithium project: pilot facility test
The project for the commercial extraction of battery-grade lithium at the U.S. site in El Dorado, Arkansas, which LANXESS started with its partner Standard Lithium, has made further progress. At the site, LANXESS operates three plants manufacturing bromine products. The bromine is obtained from the brine extracted at the site, which also contains lithium. Standard Lithium has developed an innovative method for the extraction of high-purity lithium directly from brine. A pilot facility was set up on the plant premises and commissioned at the beginning of March 2020. LANXESS expects initial findings with regard to technological feasibility by mid-2020.
2020 outlook: operationally stable, but coronavirus burdens
LANXESS expects its operating business to remain stable in fiscal 2020. However, the company expects the effects of the coronavirus epidemic to impact the operating result by between EUR 50 million and EUR 100 million for the year as a whole. Overall, LANXESS therefore expects EBITDA pre exceptionals to be between EUR 900 million and EUR 1.0 billion. For the first quarter of 2020, the specialty chemicals company is currently anticipating charges of around EUR 20 million from the coronavirus epidemic.
Details on full-year 2019: three of four segments increase earnings
In 2019 as a whole, the Advanced Intermediates segment outperformed the previous year thanks in particular to the Saltigo business unit’s strong project business in the agrochemicals sector and positive exchange-rate effects. Despite a negative price effect from lower raw material prices, sales were up 1.9 percent at EUR 2.249 billion as compared to the previous year’s figure of EUR 2.207 billion. EBITDA pre exceptionals grew by 8.4 percent from EUR 359 million to EUR 389 million. The EBITDA margin pre exceptionals improved from 16.3 percent to 17.3 percent.
The Specialty Additives segment closed fiscal year 2019 successfully despite weaker demand from the automotive industry and the termination of low-profit contract-manufacturing agreements. This was thanks to advantageous exchange-rate effects and strong business in the Polymer Additives business unit. At EUR 1.965 billion, sales were close to the prior-year level (EUR 1.980 billion). EBITDA pre exceptionals improved by 2.9 percent to EUR 353 million, compared with EUR 343 million in the previous year, supported also by cost synergies from the integration of Chemtura. The EBITDA margin pre exceptionals rose to 18.0 percent from 17.3 percent in the previous year.
Especially driven by the operating strength of the business units with water treatment and material protection products and positive exchange-rate effects, the Performance Chemicals segment considerably improved its sales and earnings for 2019. Sales amounted to EUR 1.052 billion and were therefore 7.8 percent higher than the previous year’s figure of EUR 976 million. EBITDA pre exceptionals increased by a considerable 23.1 percent from EUR 156 million to EUR 192 million. The EBITDA margin pre exceptionals rose from 16.0 percent to a very strong 18.3 percent.
As of December 31, 2019, the Leather business unit is recognized as a discontinued operation, and is therefore no longer part of the segment. The previous year’s figures have also been restated accordingly.
Developments in the Engineering Materials segment continued to be influenced by weaker demand from the automotive industry. This was attenuated only slightly by advantageous exchange rates. Sales were also reduced by lower selling prices due to decreased raw material costs, falling by 8.0 percent from EUR 1.576 billion to EUR 1.45 billion. At EUR 238 million, EBITDA pre exceptionals was 10.9 percent down on the previous year’s figure of EUR 267 million. However, the EBITDA margin pre exceptionals of 16.4 percent was only slightly below the prior-year figure of 16.9 percent.
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