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Songwon Industrial experiences slow start, reduced profit in 1Q 2019
FINANCIALS
FINANCIALS Lanxess withstands weaker trading conditions in first quarter of 2019
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or the first quarter of 2019, Germany’s Lanxess reported net income of €84 million, an increase of 3.7% compared to net income of €81 million in 1Q 2018. The company’s sales for the opening quarter of this year were €1.82 billion, slightly exceeding the sales total achieved in the same period of 2018. The company describes its results as a ‘solid start’ to the financial year ‘despite the weakening economy’. EBITDA pre exceptionals for the three-month period was E275 million, a rise of 1.9% from E270 million in the strong first quarter of 2018. Lanxess attributes this increase largely to higher selling prices and favourable foreign currency exchange effects particularly against the US dollar. The company’s EBITDA margin pre exceptionals rose from 14.9% in 1Q 2018 to 15.1% this year. ‘Despite the weaker trading environment, we have made a good start to the new fiscal year’, comments Matthias Zachert, chairman of the board of management of Lanxess. The company has succeeded in offsetting the declining demand from the automotive industry and increased its profitability once again in the quarter, despite the strong previous-year result, which Zachert says is ‘further proof’ that Lanxess is now on ‘a much more stable footing’ compared to a few years ago. In the company’s Specialty Additives segment, sales fell by 3.0% from E500 million in the first quarter of 2018 to E485 million this year. Sales volumes decreased due to the termination of margin-dilutive toll manufacturing contracts, the relinquishing of a site and the weaker automotive industry, Lanxess reports. The segment’s earnings increased by 2.5% from E81 million last year to E83 million in 1Q 2019. Regarding EBITDA pre exceptionals, positive price and exchange rate effects together with cost synergies more than offset the decrease in sales, the company says. The phosphorus chemicals business acquired from Solvay in the first quarter of 2018 [ADPO, January 2018, p. 5] also delivered a positive contribution to the Specialty Additives segment’s earnings. The EBITDA margin pre exceptionals was 17.1%, up from 16.2% in 1Q 2018 and exceeding the company’s average for the quarter. Since the quarterly results were published, Lanxess has reorganized the Specialty Additives segment in recognition of its
July 2019
increased contribution to the company as a result of recent acquisitions (see pp. 6–7). The core business of Lanxess is the development, manufacturing and marketing of chemical intermediates, additives, speciality chemicals and plastics. As of 1Q 2019, it has about 15 450 employees in 33 countries and is represented at 60 production sites worldwide. The company had sales of E7.2 billion in 2018. More information: www.lanxess.com
Songwon Industrial experiences slow start, reduced profit in 1Q 2019
F
or the first quarter of 2019, South Korean polymer additives major Songwon Industrial Group achieved sales of KRW190.42 billion (c. €140 million), on a par with revenue of KRW190.47 billion recorded for 1Q 2018. Net profit for the quarter was KRW8.8 billion, a drop of almost 24% from the net profit of KRW11.5 billion recorded in 1Q 2018. EBITDA declined by 2.6% in 1Q 2019 to KRW23.09 billion, while the associated margin was reduced to 12.1% compared to 12.4% in 1Q 2018. The company describes the start to the 2019 financial year as ‘unexpectedly slow’ after achieving ‘very good overall results’ in 2018 [ADPO, May 2019, p. 10]. The slowdown in the global economy detected in the fourth quarter of last year continued into the first months of this, it says. Consumer demand was down particularly in the automotive and building and construction industries, the company notes. The challenging start to the year also reflected the current ‘suboptimal market conditions’ for the worldwide chemical industry, with the on-going US/ China trade war and global concern relating to other socio-political areas ‘clearly having an impact’ on global demand in general, according to Songwon. Higher costs driven by lower capacity utilization in 4Q 2018 and increased material costs also continued into the first quarter of 2019, further contributing to a decline in the company’s gross profit. In addition, the Chinese New Year celebrations throughout February, and the traditional closing of businesses in Northeast Asia for the holiday, impacted results and led to a short-term weakening in
Additives for Polymers
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FINANCIALS
performance, although performance increased again in March due to the combined effects of positive currency translation (particularly the US dollar) and the price increases implemented throughout 2018. Until 31 December 2018, Songwon’s activities were organized into one main operating segment. However, for the 2019 financial year the group has changed its management approach and is now organized into two main reporting segments, ‘Industrial Chemicals’ and ‘Performance Chemicals’. The Industrial Chemicals operating segment mainly comprises the company’s polymer stabilizers product lines; the Performance Chemicals operating segment mainly includes its ‘TPP’ product lines – Tin Intermediates, PVC Additives, Polymers – and speciality chemicals. There are no transactions between the two operating segments. In 1Q 2019, the Industrial Chemicals segment reported sales of KRW140.9 billion, up 0.1% from the pro rata figure for 1Q 2018. The segment’s adjusted operating profit for the quarter was KRW14.7 billion, down from KRW15.5 billion in 1Q 2018. The Performance Chemicals segment posted sales of KRW49.5 billion for the 2019 quarter, a 0.3% decline from the previous year’s figure. The segment reported an adjusted operating loss of KRW972 million in 1Q 2019 compared to a profit of KRW63 million a year earlier. By region, Songwon’s sales in its domestic Korean market fell 6.7% year on year to KRW43.2 billion in 1Q 2019, while sales in the Rest of Asia, which is now the company’s largest market, were down 2% to KRW49.2 billion. However, sales in Europe rose 4.5% year on year to KRW47.2 billion in 1Q 2019, leapfrogging South Korea into second place compared to the same period in 2018. Combined sales in North and South America increased by 12.9% in the first quarter of 2019, reaching KRW41.2 billion compared to KRW36.5 billion a year earlier. Sales in the Middle East and Africa region fell 23.8% year on year to KRW9.1 billion while demand surged in Australia, with sales up 30.4% to KRW523 million. In other recent news, Songwon has promoted Elena Scaltritti from the position of Leader Polymer Stabilizers, which she has held for four years, to become Division Leader of Industrial Chemicals, which includes the Polymer Stabilizers and Fuel and Lubes businesses. She has also been appointed a member of Songwon’s executive committee. More information: www.songwon.com
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Additives for Polymers
Cabot Corp reports improved sales and profitability in 2Q fiscal 2019
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lobal performance materials company Cabot Corp reported net sales of US$844 million for the three-month period ended 31 March 2019, the second quarter of its 2019 fiscal year. The total was up 3.2% from sales of $818 million a year earlier. Despite a ‘challenging’ environment, the company posted net income of $23 million for the 2019 quarter, reversing a net loss of $173 million a year earlier. As with Songwon and Lanxess (p. 9), Cabot noted that its results in the quarter were impacted by softness in automotive demand; weakness in China and higher raw material costs also had a negative effect. However, the company says that these items were partially offset by improved results in its Purification Solutions and Specialty Fluids segments. The Reinforcement Materials segment achieved sales of $445 million in 2Q fiscal 2019, down from sales of $454 million a year earlier. Globally, volumes decreased by 1% year on year. In the EMEA region, volumes decreased by 6% as a result of softer automotive demand, while weaker volumes in South America were responsible for a 1% decline in the Americas region, Cabot reports. Volumes in Asia improved by 2% year on year, driven by China. Quarterly EBIT for the segment decreased by $18 million from $79 million in 2Q fiscal 2018 to $61 million this year. This reduction was largely due to higher raw material costs and to lower margins driven by pricing declines in China, partially offset by improved 2019 agreements with tyre customers, the company comments. In 2Q fiscal 2019, the Performance Chemicals segment’s performance was impacted by soft automotive demand and a less-favourable product mix, Cabot reports. The segment posted sales of $254 million, down from $268 million the previous year. Compared to 2018 figures, volumes decreased by 1% in the Performance Additives business and by 16% in Formulated Solutions, largely due to the above-mentioned softer automotive demand in EMEA and China, as well as de-stocking by customers. The less-favourable product mix was largely due to the speciality carbons and speciality compounds
July 2019
FINANCIALS Lanxess withstands weaker trading conditions in first quarter of 2019
F
or the first quarter of 2019, Germany’s Lanxess reported net income of €84 million, an increase of 3.7% compared to net income of €81 million in 1Q 2018. The company’s sales for the opening quarter of this year were €1.82 billion, slightly exceeding the sales total achieved in the same period of 2018. The company describes its results as a ‘solid start’ to the financial year ‘despite the weakening economy’. EBITDA pre exceptionals for the three-month period was E275 million, a rise of 1.9% from E270 million in the strong first quarter of 2018. Lanxess attributes this increase largely to higher selling prices and favourable foreign currency exchange effects particularly against the US dollar. The company’s EBITDA margin pre exceptionals rose from 14.9% in 1Q 2018 to 15.1% this year. ‘Despite the weaker trading environment, we have made a good start to the new fiscal year’, comments Matthias Zachert, chairman of the board of management of Lanxess. The company has succeeded in offsetting the declining demand from the automotive industry and increased its profitability once again in the quarter, despite the strong previous-year result, which Zachert says is ‘further proof’ that Lanxess is now on ‘a much more stable footing’ compared to a few years ago. In the company’s Specialty Additives segment, sales fell by 3.0% from E500 million in the first quarter of 2018 to E485 million this year. Sales volumes decreased due to the termination of margin-dilutive toll manufacturing contracts, the relinquishing of a site and the weaker automotive industry, Lanxess reports. The segment’s earnings increased by 2.5% from E81 million last year to E83 million in 1Q 2019. Regarding EBITDA pre exceptionals, positive price and exchange rate effects together with cost synergies more than offset the decrease in sales, the company says. The phosphorus chemicals business acquired from Solvay in the first quarter of 2018 [ADPO, January 2018, p. 5] also delivered a positive contribution to the Specialty Additives segment’s earnings. The EBITDA margin pre exceptionals was 17.1%, up from 16.2% in 1Q 2018 and exceeding the company’s average for the quarter. Since the quarterly results were published, Lanxess has reorganized the Specialty Additives segment in recognition of its
July 2019
increased contribution to the company as a result of recent acquisitions (see pp. 6–7). The core business of Lanxess is the development, manufacturing and marketing of chemical intermediates, additives, speciality chemicals and plastics. As of 1Q 2019, it has about 15 450 employees in 33 countries and is represented at 60 production sites worldwide. The company had sales of E7.2 billion in 2018. More information: www.lanxess.com
Songwon Industrial experiences slow start, reduced profit in 1Q 2019
F
or the first quarter of 2019, South Korean polymer additives major Songwon Industrial Group achieved sales of KRW190.42 billion (c. €140 million), on a par with revenue of KRW190.47 billion recorded for 1Q 2018. Net profit for the quarter was KRW8.8 billion, a drop of almost 24% from the net profit of KRW11.5 billion recorded in 1Q 2018. EBITDA declined by 2.6% in 1Q 2019 to KRW23.09 billion, while the associated margin was reduced to 12.1% compared to 12.4% in 1Q 2018. The company describes the start to the 2019 financial year as ‘unexpectedly slow’ after achieving ‘very good overall results’ in 2018 [ADPO, May 2019, p. 10]. The slowdown in the global economy detected in the fourth quarter of last year continued into the first months of this, it says. Consumer demand was down particularly in the automotive and building and construction industries, the company notes. The challenging start to the year also reflected the current ‘suboptimal market conditions’ for the worldwide chemical industry, with the on-going US/ China trade war and global concern relating to other socio-political areas ‘clearly having an impact’ on global demand in general, according to Songwon. Higher costs driven by lower capacity utilization in 4Q 2018 and increased material costs also continued into the first quarter of 2019, further contributing to a decline in the company’s gross profit. In addition, the Chinese New Year celebrations throughout February, and the traditional closing of businesses in Northeast Asia for the holiday, impacted results and led to a short-term weakening in
Additives for Polymers
9
FINANCIALS
performance, although performance increased again in March due to the combined effects of positive currency translation (particularly the US dollar) and the price increases implemented throughout 2018. Until 31 December 2018, Songwon’s activities were organized into one main operating segment. However, for the 2019 financial year the group has changed its management approach and is now organized into two main reporting segments, ‘Industrial Chemicals’ and ‘Performance Chemicals’. The Industrial Chemicals operating segment mainly comprises the company’s polymer stabilizers product lines; the Performance Chemicals operating segment mainly includes its ‘TPP’ product lines – Tin Intermediates, PVC Additives, Polymers – and speciality chemicals. There are no transactions between the two operating segments. In 1Q 2019, the Industrial Chemicals segment reported sales of KRW140.9 billion, up 0.1% from the pro rata figure for 1Q 2018. The segment’s adjusted operating profit for the quarter was KRW14.7 billion, down from KRW15.5 billion in 1Q 2018. The Performance Chemicals segment posted sales of KRW49.5 billion for the 2019 quarter, a 0.3% decline from the previous year’s figure. The segment reported an adjusted operating loss of KRW972 million in 1Q 2019 compared to a profit of KRW63 million a year earlier. By region, Songwon’s sales in its domestic Korean market fell 6.7% year on year to KRW43.2 billion in 1Q 2019, while sales in the Rest of Asia, which is now the company’s largest market, were down 2% to KRW49.2 billion. However, sales in Europe rose 4.5% year on year to KRW47.2 billion in 1Q 2019, leapfrogging South Korea into second place compared to the same period in 2018. Combined sales in North and South America increased by 12.9% in the first quarter of 2019, reaching KRW41.2 billion compared to KRW36.5 billion a year earlier. Sales in the Middle East and Africa region fell 23.8% year on year to KRW9.1 billion while demand surged in Australia, with sales up 30.4% to KRW523 million. In other recent news, Songwon has promoted Elena Scaltritti from the position of Leader Polymer Stabilizers, which she has held for four years, to become Division Leader of Industrial Chemicals, which includes the Polymer Stabilizers and Fuel and Lubes businesses. She has also been appointed a member of Songwon’s executive committee. More information: www.songwon.com
10
Additives for Polymers
Cabot Corp reports improved sales and profitability in 2Q fiscal 2019
G
lobal performance materials company Cabot Corp reported net sales of US$844 million for the three-month period ended 31 March 2019, the second quarter of its 2019 fiscal year. The total was up 3.2% from sales of $818 million a year earlier. Despite a ‘challenging’ environment, the company posted net income of $23 million for the 2019 quarter, reversing a net loss of $173 million a year earlier. As with Songwon and Lanxess (p. 9), Cabot noted that its results in the quarter were impacted by softness in automotive demand; weakness in China and higher raw material costs also had a negative effect. However, the company says that these items were partially offset by improved results in its Purification Solutions and Specialty Fluids segments. The Reinforcement Materials segment achieved sales of $445 million in 2Q fiscal 2019, down from sales of $454 million a year earlier. Globally, volumes decreased by 1% year on year. In the EMEA region, volumes decreased by 6% as a result of softer automotive demand, while weaker volumes in South America were responsible for a 1% decline in the Americas region, Cabot reports. Volumes in Asia improved by 2% year on year, driven by China. Quarterly EBIT for the segment decreased by $18 million from $79 million in 2Q fiscal 2018 to $61 million this year. This reduction was largely due to higher raw material costs and to lower margins driven by pricing declines in China, partially offset by improved 2019 agreements with tyre customers, the company comments. In 2Q fiscal 2019, the Performance Chemicals segment’s performance was impacted by soft automotive demand and a less-favourable product mix, Cabot reports. The segment posted sales of $254 million, down from $268 million the previous year. Compared to 2018 figures, volumes decreased by 1% in the Performance Additives business and by 16% in Formulated Solutions, largely due to the above-mentioned softer automotive demand in EMEA and China, as well as de-stocking by customers. The less-favourable product mix was largely due to the speciality carbons and speciality compounds
July 2019