The specialty chemicals group Lanxess is benefiting from its cost-cutting measures and a recovery in demand.

According to preliminary figures, adjusted operating profit (EBITDA) rose by 69 percent to EUR 181 million in the second quarter, as the Cologne-based company announced on Wednesday. The result is thus well above analysts' latest estimates of a good 137 million euros. Lanxess attributed the strong growth to its cost-cutting program and the company's improved capacity utilization following customers' inventory reductions in the previous year. The company nevertheless confirmed its forecast for the year, which envisages an increase in earnings of ten to 20 percent. Lanxess shares jumped by more than 20 percent and were thus on course for their biggest daily gain to date.

"We are benefiting from the fact that we have consistently adjusted our cost structures in recent months and have become more efficient," explained Lanxess CEO Matthias Zachert. "Wherever demand picks up further, we are in a much better position to benefit from this." However, Lanxess still sees no signs of a broad market recovery. The agrochemicals business remained weak and the difficult market conditions in the construction industry also persisted. In some customer industries, however, volumes increased slightly compared to the previous year.

For the third quarter, Lanxess expects adjusted earnings to be close to or up to the level of the second quarter. The company plans to present the full figures for the past quarter on August 9. Zachert had already announced at the Annual General Meeting in May that Lanxess was out of the woods and that 2024 should be better than last year. The destocking process had been completed for many customers and sales volumes were on the rise again. The Group also intends to permanently reduce its annual costs by around 150 million euros from 2025. This also includes a reduction of 870 jobs, 460 of which are in Germany.

The chemical industry has long suffered from weak demand and high production costs. Other companies also responded with cost-cutting programs. Evonik, for example, announced the reduction of 2,000 jobs, while industry leader BASF also plans to cut jobs, as does Covestro. However, the outlook for the chemical industry is now brightening again. The industry association VCI expects a 3.5 percent increase in production this year and a 1.5 percent rise in industry turnover.

(Report by Patricia Weiß, edited by Philipp Krach. If you have any queries, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)