COLOGNE (dpa-AFX) - The chemical company Lanxess is somewhat more optimistic about its earnings development in 2024 due to a recovery in demand and cost reductions. "It seems that we have reached the bottom of the economic cycle in the chemical industry," said CEO Matthias Zachert on Wednesday, according to a press release. "However, it is clearly too early to sound the all-clear. Demand has not yet returned to a normal level worldwide." Essen-based industry colleague Evonik also still does not see a broad recovery in demand.

Zachert now expects earnings before interest, taxes, depreciation and amortization (EBITDA) adjusted for special items to grow by 10 to 20 percent in 2024. Previously, moderate growth compared to the EUR 512 million achieved in 2023 was in the plan. On average, analysts previously expected a profit increase at the lower end of the range now announced.

With the new target, the company's management is also counting on a recovery in business with the agricultural industry, which, according to Zachert, should continue to reduce excess inventories in the second quarter. However, demand should then pick up again from the third quarter of the year.

The company's forecast also includes the Urethane Systems division, which is to be sold. The sale of the customized plastics and resins business is going according to plan, as Zachert explained in a conference call with analysts. It is positive that the business is currently picking up strongly. Lanxess is currently looking at interested parties and intends to narrow down the group of bidders in the coming weeks.

In an initial reaction, expert Konstantin Wiechert from Baader Bank nevertheless spoke of only a limited surprise. The outlook announced on Tuesday probably still reflects a cautious market assessment. In addition, the multiple target cuts in the past year are likely to have made investors particularly cautious.

Analyst Chetan Udeshi from the bank JPMorgan would like to see a little more clarity on the profit trend in the second quarter, after the initial statements on this were not concrete.

Lanxess is forecasting a sequential increase in operating profit for the second and third quarters of the year, i.e. an improvement on the previous quarter. In the final quarter, the development is likely to be more subdued for seasonal reasons.

In the first quarter just ended, adjusted operating profit fell by almost half year-on-year to 101 million euros - with sales down by a good 15 percent to 1.6 billion euros. However, the first quarter of 2023 was also the best of the year. At the beginning of 2024, the net loss grew from 44 million euros to 98 million euros. High write-downs were also incurred this year.

The MDax company's share price continued its recent recovery at the start of trading with a jump to a high since the beginning of September, but then turned negative. The shares recently lost 0.8 percent to 28.42 euros. In 2024, the share price is thus back to square one.

Like Lanxess, the Essen-based specialty chemicals group Evonik also benefited from cost savings and a revival in demand at a low level at the start of the year. As already known, Evonik's sales fell by a good 5 percent to just under €3.8 billion in the first quarter despite a recovery in demand. However, this was also due to lower raw material costs, some of which were passed on to customers. The operating result adjusted for special items rose by around 28 percent to around 522 million euros.

The bottom line for Evonik shareholders is a surplus of 156 million - compared to 47 million a year ago. Evonik also significantly increased its free cash flow. Free cash flow, which is also important for the dividend, amounted to 127 million, a multiple of the figure achieved a year ago, as the company announced on Wednesday when it published its final results for the first quarter. JPMorgan analyst Udeshi praised the cash flow development.

In view of Evonik's recently confirmed annual targets, the expert believes it is more likely that the upper end of the targeted range of EUR1.7 billion to EUR2.0 billion for operating profit could be achieved.

Evonik is also making progress with its planned administrative restructuring, which - as announced in March - will involve the elimination of up to 2,000 of a total of around 33,000 jobs, around 1,500 of them in Germany. Once the program is completed in 2026, the annual costs are expected to be around €400 million lower than before. "Negotiations on the framework conditions for socially responsible job cuts in Germany as part of the program have been concluded," Evonik said on Tuesday. The program is expected to deliver initial savings from the end of the year./mis/ngu/stk