Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lanxess AG (LNXSF, Financial) reported a 5% volume increase, particularly in the additives and intermediates segments.
- Nine out of ten business units reported growth, indicating broad-based performance improvements.
- The company achieved a significant EBITDA improvement due to cost control measures and increased utilization rates.
- Lanxess AG (LNXSF) successfully maintained stable net financial debt despite an increase in working capital.
- The divestment of Urethane Systems is expected to be beneficial, marking a strategic shift away from polymer businesses.
Negative Points
- The Saltigo business unit experienced a significant decline, impacting the consumer protection segment's profitability.
- The anticipated rebound in the agro segment did not materialize, affecting overall performance.
- Macroeconomic uncertainties and a softening market environment pose challenges for the second half of 2024.
- The company had to prepare for a potential US harbor strike, which impacted inventory levels.
- Despite improvements, the company does not expect to return to normal trading levels until potentially 2026.
Q & A Highlights
Q: Was there any margin pressure in consumer protection due to selling price pressure, and what is the outlook for the construction market?
A: Matthias Zachert, CEO, explained that the margin pressure in consumer protection was not due to pricing but rather a demand shortfall, particularly in the Saltigo business unit. He expects an uptick in margins in the fourth quarter. Regarding construction, Lanxess is gaining market share in inorganic pigments, with improved margins driven by their strong market position.
Q: Can the safety stocks in net working capital be unwound quickly if there is no strike, and what is the margin potential for advanced industrial intermediates (AII)?
A: Matthias Zachert, CEO, stated that while they will address inventory levels in Q4, they will maintain some caution due to ongoing negotiations in North America. He expects a gradual improvement in AII margins over the next one to two years, but not a full return to normal trading levels in 2025.
Q: How much of the US sales are from exports from Europe, and is the net working capital outflow a reflection of last year's reductions?
A: Matthias Zachert, CEO, noted that about 30% of sales are in the US, with a similar percentage of global assets located there. Oliver Stratmann, CFO, added that the net working capital outflow is a normal development with slightly higher demand, not a correction of last year's reductions.
Q: What are remnant costs, and have you noticed higher bromine prices?
A: Oliver Stratmann, CFO, explained that remnant costs are costs that remain after a business disposal, and they plan to compensate for these burdens. Matthias Zachert, CEO, noted that bromine prices are improving in the Asian spot market, but this does not immediately impact European and North American markets.
Q: Can you update on Envalior's operational development and the path towards 80% utilization?
A: Matthias Zachert, CEO, reported operational improvements at Envalior despite tough market conditions, with substantial savings targeted. He expects utilization rates to gradually increase while working capital to sales ratios decrease, improving cash flow over time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
