In the third quarter of 2023, LANXESS, a prominent chemical company, reported a significant decrease in its financial performance compared to the same period last year. The company’s sales dropped by 26.7%, falling from EUR 2.185 billion in the previous year to EUR 1.601 billion. This decline in sales was mainly due to reduced demand from various industries and a slowdown in purchases by customers. They will be launching a “Forward” Action Plan which aims to save about EUR 100 million in 2023 through cost reductions and lower investments.
LANXESS earnings before interest, taxes, depreciation, and amortization (EBITDA), excluding exceptional items, saw a sharp decrease of 50.4%, going from EUR 240 million to EUR 119 million. This decline was particularly noticeable in LANXESS’s Specialty Additives and Advanced Intermediates business segments. The Consumer Protection segment, although also affected, experienced a less severe drop in earnings.
The EBITDA margin, a measure of a company’s operating profitability as a percentage of its revenue, decreased to 7.4% from 11.0% in the previous year. LANXESS also reported a net loss of EUR 131 million, a significant downturn from the EUR 80 million profit reported in the same quarter of the previous year.
Matthias Zachert, the Chairman of LANXESS‘s Board of Management, expressed concerns about the ongoing weak demand in the global chemical industry, predicting no signs of recovery for the remainder of the year. In fact, the demand in the fourth quarter appears to be even weaker than anticipated.
As a response to the weak start of the fourth quarter, LANXESS has revised its full-year EBITDA forecast. The company now expects it to be between EUR 500 and EUR 550 million, lower than its previous expectation of EUR 600 to 650 million. In light of these challenges, LANXESS plans to reduce its dividend for the full year 2023 to EUR 0.10. The company is also initiating the sale of its Urethane Systems business unit, which no longer aligns with its strategic focus. This unit, the last polymer business at LANXESS, employs around 400 people across six global production sites.
Additionally, LANXESS has succeeded in reducing its net financial debt by 11% in the third quarter, from EUR 2.863 billion to EUR 2.557 billion, primarily through effective management of its working capital. Since the end of 2022, the company has reduced its debt by 33%.
To further address these economic challenges, LANXESS has launched the “FORWARD!” action plan. This plan aims to save about EUR 100 million in 2023 through cost reductions and lower investments. The company is also making structural changes to permanently reduce its annual costs by about EUR 150 million from 2025. These changes will include cutting 870 jobs, with 460 of these in Germany, mainly in administrative roles at various sites, including Cologne, Leverkusen, Uerdingen, and Mannheim. The reductions will be achieved through not filling vacancies, natural turnover, and termination agreements.
In a detailed breakdown of its business segments, the Consumer Protection segment saw a 12.2% decrease in sales, while its EBITDA fell by 23.6%. The Specialty Additives segment experienced a 30.7% decrease in sales and a 72.7% reduction in EBITDA. The Advanced Intermediates segment faced a 37.2% decline in sales and a 53.8% decrease in EBITDA, mainly due to weaker demand and lower selling prices, particularly from the construction industry. LANXESS is navigating through a period of economic downturn with strategic adjustments and cost-saving measures. The company remains focused on overcoming these challenges and improving its financial position in the coming years.
