Updated Version 1 - Update 2 - Lanxess quarterly cash flow improves, stock price surges

Restated the stock price trend and free cash flow in paragraph 1, and added analyst comments in paragraph 6.

Ozan Ergenay

Reuters, November 5 - Specialty chemicals manufacturer Lanxess (LXSG.DE) on Thursday reported a significant improvement in free cash flow for the third quarter, driving its share price higher, even as the company lowered its full-year earnings forecast.

As of 09:01 GMT, the stock price had surged about 18%, on track for its largest one-day gain ever and narrowing its year-to-date losses to roughly 18%.

The Cologne-based company said quarterly free cash flow reached 48 million euros ($54 million), compared to negative 14 million euros a year earlier. The company also forecasts a positive figure for the fourth quarter.

As Germany’s third largest industry, the German chemical sector has long struggled with weak demand, high energy costs, supply chain disruptions, and a broader economic slowdown.

The conflict in the Middle East has exacerbated this pressure, pushing up costs for this energy-intensive industry and prompting companies to raise prices.

“The driving force behind today's share price surge is the very strong free cash flow performance. Despite considerable headwinds and volatility in the market, free cash flow has improved significantly compared to last year,” said Michael Schaefer at ODDO BHF.

Lanxess lowers performance outlook

Lanxess said its operating performance and cost-saving measures contributed to the improvement in free cash flow.

However, CEO Matthias Zachert said demand remains weak in several of the company’s core markets, especially for agrochemicals, automotive, and construction, adding that ongoing cost-cutting measures would help support earnings.

The company’s third-quarter revenue increased by 9.6% to 1.46 billion euros, above the company’s forecast of 1.44 billion euros provided in its survey (link) , mainly due to price increases implemented to pass on higher raw material and energy costs.

Lanxess now expects its full-year earnings before interest, tax, depreciation and amortization (EBITDA) before special items to be at the upper end of the 450 million to 500 million euro range, compared with a previous forecast ((link)) of 450 million to 550 million euros.

For the quarter, EBITDA before special items grew 11.2% to 139 million euros, versus market expectations of 138.2 million euros.

($1 = 0.8880 euros)

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