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Result

Gross profit

The cost of sales fell at a slower rate than sales, decreasing by 2.2% to €1,662 million for the quarter. Production costs rose due to higher volumes, while lower raw material prices and currency changes had the opposite effect.

Gross profit came in at €388 million, down significantly by €72 million or 15.7% from the prior-year quarter. The gross profit margin declined from 21.3% to 18.9%. This development was mainly attributable to price effects from sales and raw materials that were negative overall, along with higher manufacturing costs. Higher volumes had the opposite effect. Shifts in exchange rates had a slightly negative effect, while capacity utilization was roughly at the level of the prior-year period.

EBITDA and EBIT

The third-quarter operating result before depreciation and amortization (EBITDA) pre exceptionals decreased compared to the same period a year ago by €67 million or 26.4% to €187 million. This was mainly the result of lower market prices, particularly for synthetic rubber, while increased volumes had the opposite effect. Earnings were additionally held back by adverse currency effects. Selling expenses, at €186 million, were more or less flat with the same period of 2012. The expenses for regional and central research activities came to €43 million, against €49 million in the prior-year period. The Group’s EBITDA margin pre exceptionals declined from 11.8% to 9.1%.

EBITDA Pre Exceptionals by Segment
             
€ million Q3 2012 Q3 2013 Change % 9M 2012 9M 2013 Change %
             
Performance Polymers 152 84 (44.7) 664 290 (56.3)
Advanced Intermediates 75 71 (5.3) 224 216 (3.6)
Performance Chemicals 75 72 (4.0) 236 190 (19.5)
Reconciliation (48) (40) 16.7 (140) (137) 2.1
  254 187 (26.4) 984 559 (43.2)
2012 figures restated            

EBITDA pre exceptionals in our Performance Polymers segment receded by €68 million in the third quarter, to €84 million. The positive volume development did not offset the selling price adjustments, which were driven by raw material prices. Adverse exchange rate effects, inventory devaluation and our targeted destocking likewise had a negative impact.

In our Advanced Intermediates segment, EBITDA pre exceptionals posted a slight decrease of €4 million to €71 million. Lower prices for raw materials were passed along to the market. A positive volume effect from the increased demand for agrochemicals was counteracted by exchange rate developments.

EBITDA pre exceptionals for the Performance Chemicals segment, at €72 million, was only €3 million below the prior-year period. At segment level, positive volume effects were more than offset by higher manufacturing and selling expenses and negative currency effects. There was a small positive portfolio effect from the acquisition made in Singapore in the second quarter.

The Group operating result (EBIT) came to €52 million in the third quarter of 2013, compared with €155 million in the year-earlier period. Due to the substantial acquisition and capital expenditure activity of recent years, depreciation and amortization was €19 million or 20.0% above the prior-year quarter, at €114 million. The exceptional charges included in other operating expenses totaled €21 million, with the full amount EBITDA-effective. These charges related mainly to the “Advance” program for increasing efficiency and competitiveness and to expenses for the design and implementation of IT projects. Exceptional charges in the prior-year quarter amounted to €4 million.

Financial result

The financial result for the third quarter of 2013 was minus €32 million, compared with minus €36 million for the prior-year period. Interest expense, at €28 million, slightly exceeded the previous year’s €25 million. Capitalized construction-period borrowing costs were below the corresponding period of last year due to the start-up of the butyl rubber facility in Singapore. The earnings contribution from companies accounted for in the consolidated financial statements using the equity method was €0 in the reporting period, against minus €3 million in the prior-year quarter.

Income before income taxes

Income before income taxes for the third quarter came to €20 million, compared with €119 million for the prior-year period. The effective tax rate of 45.0% for the quarter is not meaningful due to the low pre-tax earnings. The figure for the year-earlier period was 22.7%.

Net income and earnings per share

Non-controlling interests accounted for a negative income of less than minus €1 million in the reporting period, against positive income of less than €1 million a year ago. Net income for the third quarter came to €11 million, compared with €92 million for the prior-year period. With the number of LANXESS shares in circulation unchanged, third-quarter earnings per share dropped substantially from €1.10 to €0.13.

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