German specialty chemicals company Lanxess says it has achieved robust results in the first quarter of the year, despite the weak economic environment due to the coronavirus pandemic. The company saw positive earnings in the new Consumer Protection segment and in the Specialty Additives segment significantly mitigated the impact of the coronavirus crisis.
Lanxess says the exchange rate effects, particularly from the US dollar, also had a positive impact. By contrast, a further decline in demand from the automotive industry as a result of the coronavirus crisis had a negative effect on earnings, particularly in the Engineering Materials segment. In Q1 CY2020 the group sales came at 1.70 billion euro (Rs 14,086 crore), down 2 percent compared to same period last year. The net income (profit) came at 63 milion euro from continuing operation, a drop of 27.6 percent, compared to 87 million euro (Rs 720 crore) a year ago.
Matthias Zachert, chairman of the Board of Management of Lanxess, said: “So far, we have been able to keep the economic impact of the coronavirus pandemic within limits – mainly thanks to our balanced portfolio. We know that we have not yet reached the peak of the crisis. However, we feel well prepared, as we have a stable positioning and have taken extensive measures for crisis management. The most important thing is that our employees are mostly healthy and our plants are running.”
In the second and third quarters, Lanxess expects the impact of the coronavirus pandemic to intensify.
An extensive package of measures for coronavirus crisis
Lanxess says at the start of the coronavirus crisis it already took a wide range of measures to minimise the impact on the company. Employees’ health remains a top priority. And using protective measures such as strict hygiene regulations, solutions to work from home for the majority of office workers, and changes in the shift model, the infection rate among employees has been kept low. Till now, 31 employees worldwide have contracted coronavirus of which 27 of have already recovered.
Lanxess says its ability to deliver has hardly been restricted to date. The largest production facilities remained in operation continuously. Only plants in China, Italy, India, and Argentina were temporarily shut down, in some cases based on government requirements.
In addition, the specialty chemicals company says it has also taken important steps to further strengthen its already good liquidity situation. In April, Lanxess announced that it would suspend its share buy-back program until further notice. The company will also save between 50 million euro (Rs 413 crore) and 100 million euro (Rs 826 crore) by means of cost discipline in fiscal year 2020 and reduce its investment budget by around 50 million euro by postponing projects. With the sale of its Currenta stake on April 30, 2020, LANXESS realised an equity value of 780 million euro (Rs 6,448 crore) (after deduction of net debt and pensions) and a profit participation of 150 million euro (Rs 1,240 crore) (both pre tax).
Michael Pontzen, CFO, Lanxess said: “In order to meet the challenges of the coronavirus pandemic, high liquidity is a top priority. We have now further increased our already strong liquidity position to around 3 billion euro (Rs 24,801 crore) through the sale of our Currenta stake.”