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Earnings

Chemicals group Lanxess lifts lower end of 2020 profit forecast as auto demand picks up

(Reuters) - German specialty chemicals maker Lanxess LXSG.DE lifted the lower end of its 2020 core profit forecast range on Thursday, saying the auto industry was showing first signs of recovery and demand for disinfectant ingredients remained robust amid a second wave of the coronavirus.

It now sees full-year earnings before interest, tax, depreciation and amortization (EBITDA) excluding one-off items of between 820 million and 880 million euros ($962 million to $1.03 billion).

In August, Lanxess predicted EBITDA would come in at the lower end of its earlier outlook range of 800 million to 900 million euros.

Lanxess said third-quarter EBITDA excluding one-offs fell by 28.3% year-on-year to 193 million euros, but demand in some sectors that had been falling was starting to improve by the end of the quarter.

“Demand in key customer industries, including the automotive sector, picked up again in comparison to the second quarter,” Chief Executive Matthias Zachert said, adding that China and the United States in particular were providing positive stimuli.

Lanxess has been hit by a slump in demand from the auto industry, which accounts for about 20% of its sales, though this has been partly offset by a rise in demand for disinfectant ingredients during the pandemic.

The consumer protection segment, which makes biocides used in surface disinfectants, hand sanitizers and soaps, was the only division to show stable sales and positive EBITDA growth in the third quarter.

The Cologne-based group said that in addition to the continued impact of the pandemic, its quarterly results were burdened by a planned maintenance shutdown in Belgium, reduced selling prices and adverse currency effects.

Baader analyst Markus Mayer said the results “might disappoint the market” following significantly better than expected results from European peers.

Lanxess shares, which have fallen by nearly a quarter this year, were down 0.4% at 0807 GMT in Frankfurt.

The results came after German rivals Covestro 1COV.DE and Evonik EVKn.DE reported third quarter profits above market expectations.

($1 = 0.8520 euros)

Reporting by Milla Nissi in Gdansk, additional reporting by Linda Pasquini; Editing by Christian Schmollinger, Kim Coghill and Susan Fenton

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