MOSCOW (MRC) -- Lanxess says net profits in the second quarter of 2020 were almost eight times higher than in the same period of the previous year, to EUR798 million (USD943 million), said Chemweek.
This is primarily due to the sale of its 40% stake in chemical park curator Currenta to Macquarie Infrastructure and Real Assets in April, which resulted in a disposal gain of EUR740 million. Sales declined 16.7% year on year, to EUR1.44 billion, due to weak demand across many industries and lower raw material prices, the company says. EBITDA and EBIT shrank by 23.8% and 57.3%, to EUR198 million and EUR61 million, respectively.
"As expected, after the huge slump in the global economy we felt the effects of the coronavirus crisis much more strongly in the second quarter than in the first three months of the year. However, our stable positioning, strong liquidity, and high cost discipline are continuing to get LANXESS through this challenging time well. Besides, we are already seeing initial signs of a recovery in Asia. I therefore remain confident, even though a rapid macroeconomic recovery cannot be foreseen at present,” says Matthias Zachert, chairman at Lanxess.
The company’s consumer protection business posted a positive quarter with sales growing 21.9% YOY, to EUR301 million and EBITDA pre-exceptional items 41.7% higher YOY, to EUR68 million. The result was mainly due to strong business with agricultural chemicals in the Saltigo business unit and continued good demand for disinfectants in the material protection products division, the company says.
However, weak demand from the automotive industry squeezed earnings in the other three segments, especially engineering materials, which recorded a 33% YOY drop in sales, to EUR244 million, dragging EBITDA pre-exceptionals down 57%, to EUR28 million, Lanxess says. Sales of the advanced intermediates business fell by 20%, to EUR469 million, with EBITDA pre-exceptionals down 12%, to EUR100 million. Specialty additives’ sales went down 20% YOY, to EUR403 million, and EBITDA pre-exceptional items declined 29%, to EUR63 million.
The company says that its ongoing strong liquidity is helping it secure financial and operating liquidity in the uncertain environment caused by COVID-19. Operating cash flow decreased 39% YOY, to EUR52 million, and net debt at the end of June was down to EUR929 million from EUR1.74 billion at the end of June 2019. Meanwhile, in response to the impact of the pandemic the company reduced its capital expenditure by 19%, to EUR88 million, it says.
Lanxess confirms the full-year forecast it presented with its first-quarter 2020 results, and expects EBITDA pre-exceptional items to be in the range of EUR800-900 million. It anticipates business momentum to improve sequentially in the third quarter. In addition, the company does not expect the global economic environment to return quickly to the prior-year level and assumes that apart from the significant negative developments in the automotive industry, the construction, agro-industry, and chemical sectors will decline in 2020.
As MRC informed earlier, Lanxess has announced that it expects its core income to decline in 2020 as the global coronavirus epidemic is expected to damage its supply chains. The company forecasts that profit before exceptional items will slash EUR 50-100 million (USD56.4-112.8 million) as a result of coronavirus, with EUR20 million (USD22.6 million) impact projected for the first quarter. However, the company anticipates its operating business will remain stable for the year.
Russia's output of chemical products rose in June 2020 by 2.6% year on year. However, production of basic chemicals increased year on year by 4.9% in the first six months of 2020. According to the Federal State Statistics Service of the Russian Federation, polymers in primary form accounted for the greatest increase in the output in January-June. Production of benzene was 106,000 tonnes in June 2020, compared to 110,000 tonnes a month earlier. Overall output of this product reached 721,000 tonnes over the stated period, up by 3.9% year on year.