Business Development
Business Development in the first quarter of 2007
Business Trends
- Sales show 3.1% year-on-year gain when adjusted for portfolio and currency effects
- EBITDA pre exceptionals increases by 6.8%
- EBITDA margin rises to 12.8% from 11.2% in prior-year quarter
- Successful portfolio management and restructuring provide solid foundation for growth
- First acquisition in LANXESS’s history successfully completed
- Guidance for 2007: EBITDA pre exceptionals to advance by medium to high single-digit percentage
Economic environment
In the first quarter of 2007, the global economy remained on a path of steady expansion. While the Asia-Pacific region maintained a very strong momentum, growth in North America was only moderate. The upswing in Germany continued unabated, with domestic demand up and exports still strong. This environment had a positive effect on the chemical economy. In the first two months of 2007, chemical production rose by 4.6% over the prior year. Raw material prices remained volatile at a high level. In March 2007, political tension in the Gulf region led to a further jump in the price of petrochemical derivatives.
Sales
In the first quarter of 2007, the LANXESS Group generated €1,711 million in sales. The 6.8% decline from the figure of €1,836 million for the prior-year quarter was entirely due to portfolio changes and negative currency effects. Adjusted for the divestment of the Fibers, Paper and Textile Processing Chemicals business units and adverse shifts in exchange rates, particularly for the U.S. dollar, LANXESS Group sales grew by 3.1%. With volumes almost unchanged, LANXESS succeeded in raising selling prices.
| Effects on Sales | Q1 2007 |
|---|---|
Approximate data | in % |
Price | 3.1 |
Volume | 0.0 |
Currency | (3.9) |
Portfolio | (6.0) |
| (6.8) |
With demand remaining stable from the Group’s perspective, the trend in raw material costs in the first quarter prompted further price increases in all segments. Sales of the Performance Rubber and Chemical Intermediates segments advanced. Those of the Engineering Plastics and Performance Chemicals segments declined due to portfolio and currency changes, but remained at the level of the prior-year quarter when adjusted for these effects.
| Sales by Segment | Q1 2006 | Q1 2007 | Change | Proportion of Group sales |
|---|---|---|---|---|
in Mio. € |
|
| in % | in % |
Performance Rubber | 438 | 451 | 3.0 | 26.4 |
Engineering Plastics | 456 | 428 | (6.1) | 25.0 |
Chemical Intermediates | 395 | 408 | 3.3 | 23.8 |
Performance Chemicals | 517 | 400 | (22.6) | 23.4 |
Other/Consolidation | 30 | 24 | (20.0) | 1.4 |
1,836 | 1,711 | (6.8) | 100.0 | |
Although LANXESS saw sales recede in all regions, this was solely due to portfolio and currency shifts. On an adjusted basis sales moved ahead, particularly in the Asia-Pacific region, thanks to strong demand for our products. Sales were positive in Germany as well against the background of the country’s economic climate. Sales in the EMEA region (excluding Germany) rose slightly on a comparable basis thanks to the encouraging development of central and eastern European markets. Adjusted for portfolio and currency effects, business in the Americas was above the previous year.