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Lanxess lifts profit forecast floor as auto sector recovers

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·2-min read
FILE PHOTO: A logo of Lanxess is seen next to dark clouds at Cologne Bonn airport
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By Milla Nissi

(Reuters) -German chemicals maker Lanxess raised the floor of its 2021 profit forecast range on Wednesday, encouraged by continued strong demand for disinfectants in the pandemic and a recovery in the car industry.

However, shares in the Cologne-based company were down 4.5% at 0915 GMT as some investors had hoped for more after robust quarterly results from peers who, like Lanxess, are benefiting for a rebound in the global economy.

Lanxess now expects 2021 adjusted core earnings (EBITDA) of 950 million to 1 billion euros ($1.15-1.21 billion), hiking the lower end from its previous forecast by 50 million.

"The new midpoint of the 2021 EBITDA guidance as well as for the 2Q21 EBITDA guidance are slightly below consensus expectations," Baader analyst Markus Mayer said in a note.

Pandemic-driven demand for disinfectant ingredients last year helped Lanxess, whose rivals include Dutch-based Akzo Nobel and Germany's BASF, offset a slump in the auto sector, which makes up about 20% of its sales.

But the economic rebound in China - the world's biggest automobile market - has since driven a faster-than-expected recovery in the car industry.

Chief Executive Officer Matthias Zachert told reporters carmakers' low inventory levels meant continued strong growth in sales volumes.

However, high demand had also driven up the cost of raw materials, with some having as much as tripled this year, Zachert said.

He added Lanxess, which kicked off the year with three acquisitions including a $1.1 billion deal to buy U.S.-based rival Emerald Kalama Chemical, was committed to further strategic growth this year.

Quarterly EBITDA excluding one-offs fell 1.2% to 242 million euros, beating analysts' average estimate of 235 million.

Sales volumes topped 2020 levels, but were offset by weather-related shutdowns in the United States, higher energy costs and a weaker U.S. dollar.

Zachert said he currently expected second-quarter adjusted core earnings in a range of 250-260 million euros.

($1 = 0.8249 euros)

(Reporting by Milla Nissi and Linda Pasquini in Gdansk. Editing by Mark Potter)

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