Lanxess Takes a Different Approach Amid Industry Challenges
The specialty chemicals giant, Lanxess, is grappling with industry headwinds more intensely than ever before. In a recent financial update, the company announced a shift in strategy, predicting EBITDA of only between €500 million and €550 million for the fourth quarter, as opposed to the earlier projected range of €600 million to €650 million.
Various factors have contributed to this financial adjustment, including weaker demand and a customer-led destocking in the agricultural sector. Additionally, production disruptions stemming from supplier-related issues have further compounded the situation.
In response, Lanxess has decided to trim its dividend for the current year. The proposed new dividend ranges from €0.10 to €1.05 per share, a significant reduction from the previous €1.05 per share. This move is intended to support debt reduction efforts, even in the face of a challenging business environment.
Contrary to some misconceptions, Lanxess is neither cutting its dividend nor reducing profit expectations. Instead, the company has reported an impressive growth in its operating income for 2024, driven primarily by pull-forward effects in customer purchases, particularly in the U.S. for products in the Specialty Additives and Consumer Protection segments. As a result, Lanxess anticipates achieving approximately €159 million in EBITDA pre-exceptionals for the fourth quarter of 2024, surpassing market expectations by 22%.
Furthermore, Lanxess remains optimistic about its full-year 2024 EBITDA, projecting an income of around €614 million – a 20% increase over the previous year and positioned at the upper end of its guided growth range of 10-20%. However, it's important to note that this surge in earnings can be attributed to non-recurring pull-forward effects, rather than suggesting a permanent improvement in underlying demand.
Enrichment Data: Lanxess’s positive performance in Q4 2024 is attributed to stronger-than-expected customer pre-buying, primarily in the U.S., leading to an EBITDA pre-exceptionals increase of approximately €159 million. This temporary boost prevails ahead of potential tariff changes, causing market expectations to climb by 22%. Lanxess still forecasts an EBITDA of around €614 million for the full year 2024, representing a 20% increase over the previous year and aligning with the upper end of its guided growth range of 10-20%.
