LANXESS 2024 Earnings: EPS Misses Expectations

In the ever-evolving landscape of the chemical industry, LANXESS has been a beacon of resilience and strategic foresight. However, the company's full-year 2024 earnings report has left investors with a mix of optimism and caution. While LANXESS managed to significantly increase its earnings despite a challenging global economic situation, the earnings per share (EPS) missed expectations, raising questions about the company's future trajectory.

LANXESS's strategic measures, particularly the "FORWARD!" action plan, have been pivotal in driving its financial performance. The plan, introduced in the summer of 2023, aimed to permanently reduce the company's annual costs by around EUR 150 million by 2025. In 2024, LANXESS realized EUR 110 million of these savings, EUR 20 million more than originally planned. This cost reduction contributed to a 19.9 percent increase in EBITDA pre exceptionals to EUR 614 million, up from EUR 512 million in the previous year. The EBITDA margin pre exceptionals also rose to 9.6 percent from 7.6 percent in the previous year, indicating improved profitability.



However, the decrease in Group sales, despite nearly all business units increasing their sales volumes, is a cause for concern. Group sales decreased by 5.2 percent from EUR 6.714 billion in the previous year to EUR 6.366 billion. This decline was primarily due to lower selling prices resulting from reduced raw material and energy costs. While this strategy may have made LANXESS's products more attractive to customers, it has also limited the company's ability to invest in growth initiatives.

For the current fiscal year 2025, LANXESS expects the economic and geopolitical environment to remain challenging. Nevertheless, the Group expects a portfolio-adjusted increase in EBITDA pre exceptionals of around 10 percent for the full year, also due to the ongoing effects of the "FORWARD!" action plan. This corresponds to a reported EBITDA pre exceptionals of between EUR 600 and 650 million, as the earnings contribution from the Urethane Systems business will only be included for the first quarter of 2025. LANXESS expects the business to be divested in April 2025. In 2024, the Urethane Systems business unit generated EBITDA pre exceptionals of around EUR 50 million. For the first quarter of 2025, the Group expects EBITDA pre exceptionals to be 25 to 35 percent higher than in the prior-year quarter.

Despite the EPS miss, LANXESS remains confident in its future growth prospects. Matthias Zachert, Chairman of the Board of Management of LANXESS AG, stated, "We have defied the economic and geopolitical headwinds and significantly increased our earnings from our own resources. This shows that our structural measures are working. They will continue to pay off in the current year. We therefore remain confident of achieving further growth by 2025, even if a broad-based recovery in global demand is not in sight."

In conclusion, while LANXESS's 2024 earnings report has its share of challenges, the company's strategic measures and cost reduction efforts provide a solid foundation for future growth. Investors should keep a close eye on the company's progress in the coming quarters, as the "FORWARD!" action plan continues to drive its financial performance.