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German chemicals group Lanxess confident of sharp rise in 2022 core profit

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·2-min read
FILE PHOTO: The headquarters of chemicals maker Lanxess are seen in Cologne
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By Karol Badohal and David Latona

(Reuters) -German speciality chemicals maker Lanxess said on Thursday it expects its adjusted core profit to rise by up to a quarter in 2022 as it is able to pass on soaring raw material and energy costs to customers through higher prices.

The group gave full-year guidance for earnings before interest, tax, depreciation and amortisation (EBITDA) pre exceptionals of between 900 million and 1 billion euros ($0.92 billion-$1.02 billion), or up to 25% growth year-on-year.

Lanxess, which makes high-end speciality chemicals such as additives, lubricants, flame retardants and plastics, had previously said the figure would be significantly higher than the restated EBITDA excluding one-offs of 800 million euros in 2021.

"In the second half of the year, a rougher wind will blow in the global economy, but we are prepared for this," Chief Executive Matthias Zachert said in a statement.

The company said it had continued to pass on sharp cost increases to the market through higher selling prices in the second quarter.

Asked about the gas supply situation in Europe, Zachert told reporters the company's contingency plans for shortages, which it has said could include reducing production, remained unchanged, though costs had climbed "catastrophically".

German chemical companies, which are highly dependent on Russian gas imports, are scrambling to prepare for further gas supply cuts in response to Western sanctions imposed following Russia's invasion of Ukraine.

"The industry is facing an epochal challenge and if we are not careful here in Germany, we are risking a deindustrialisation of gas-intensive industries," Zachert said. "The situation is dramatic."

Lanxess retroactively restated its 2021 results to reflect the transfer of its High Performance Materials business to a joint venture with financial investor Advent.

Second quarter sales jumped 36% to 2 billion euros as the group benefited from price hikes and advantageous exchange rates.

The company's shares were up 2.7% at 1020 GMT, as the mid-cap index rose 1.8%.

The shares are down by nearly a third since the start of this year as German chemical companies have been hit by high energy costs and global supply chain disruptions.

($1 = 0.9814 euros)

(Reporting by Karol Badohal and David Latona in Gdansk; editing by Milla Nissi and Susan Fenton)

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