COLOGNE, Germany (dpa-AFX) - After a drop in profits at the start of the year, chemicals group Lanxess is becoming somewhat more cautious about 2023. The previously rather vague profit outlook has been made more concrete, but the range is very wide. Hopes rest on the second half of the year. The economic environment continues to be marked by uncertainties caused by the Ukraine war as well as destocking by customers, and the easing of the coronavirus policy in China has not yet materialized, the company said on Wednesday when presenting its first-quarter results.

Although the situation regarding raw material and energy costs is easing, this will only have a positive effect after the expensive purchased inventories, which are therefore highly valued in the books, are reduced in the coming months, the statement added. A trader spoke in a first reaction of light and shadow with regard to the quarterly report. The shares fell 1.8 percent to 35.17 euros in the morning. This extended their losses for the year to 6.7 percent, which means one of the bottom places in the MDax index of medium-sized stocks.

In view of the aforementioned uncertainties and burdens, Lanxess CEO Matthias Zachert said he expects operating earnings to be roughly on a par with the first quarter of the year, which would represent a decline of around a quarter compared with the same period last year. At the start of the year, the Koln-based company, like the industry as a whole, felt the effects of weak demand, for example from the construction sector, and continued destocking by many customers in response to sluggish demand. Higher selling prices due to increased raw material costs were only able to offset this to a limited extent.

As a result, although Lanxess kept sales almost constant year-on-year in the first quarter at 1.9 billion euros, earnings before interest, taxes, depreciation and amortization (Ebitda) adjusted for special items fell 28 percent to 189 million euros - about as much as analysts had expected. Net income from continuing operations slumped 85 percent to 10 million euros, also due to special effects and depreciation. According to a trader, free cash flow stood out positively, improving by 264 million to plus 112 million euros.

Looking at the individual business units, the Specialty Additives segment, which focuses on specialty additives for tire rubber, plastics and lubricants, was weaker, mainly due to lower demand from the construction and automotive industries. The Advanced Intermediates division, which focuses on basic and fine chemicals for industry, suffered in particular from restraint in the construction and chemical industries.

Sales and earnings growth was achieved only by the Consumer Protection division, which also produces substances for material protection and preservation. It benefited from the acquisition of the Microbial Control business from the US fragrance and flavorings manufacturer IFF, which was completed in mid-2022, and good demand for agricultural chemicals at the subsidiary Saltigo, while production difficulties at a supplier weighed on the flavors, fragrances, preservatives and pet food products business.

It is only in the second half of the year that Zachert then expects the economic environment for the entire Group to pick up significantly, driven mainly by stronger growth in China. The statements of the 55-year-old, whose contract was extended by five years from April 2024 just the day before, are thus in line with those of other chemical companies such as Evonik and Covestro. They also currently see at best slight signs of recovery in some regions, but are counting on an overall improvement in the second half of the year.

For the full year 2023, Lanxess is targeting a profit of between EUR 850 million and EUR 950 million in day-to-day operations. So far, an operating profit at the previous year's level of 930 million euros has been envisaged. The average analyst estimate is currently EUR 915 million./mis/zb/stk