Lanxess Shares Disappointed by Outlook: Price Plunge Despite Handsome March Profits

After an encouraging surge in March, which saw the share price of the chemical company Lanxess climb an impressive 12 percent, hopes for a sustained recovery have been dampened. A look at the operational profit for 2023 does promise stability, precisely matching the average forecast of market analysts, but the forward-looking outlook offers little reason to hope for a substantial recovery of the company. Consequently, investors responded sensitively and the share price dropped by 8.2 percent, pushing the stock to the lowest level of the past week. Market observers such as Jefferies analyst Chris Counihan had already seen signs of an impending market correction. The anticipated significant improvement in EBITDA by 22 percent, and even up to 29 percent in some estimates, was in stark contrast to the more realistic, modest projections of the company itself, which expects only a moderate increase in profits for 2024. Konstantin Wiechert from Baader Bank did acknowledge the stronger-than-expected free cash flow as support for the company’s debt reduction. However, he too emphasized that Lanxess’s cautious outlook provides little room for enthusiasm in the next fiscal year. Although the moderate rise in EBITDA did not come as a surprise to Wiechert, the current consensus estimate of over 600 million euros might be revised downwards after the adjusted EBITDA for 2023 fell to 512 million euros, compared to the previous year. Wiechert's critical remarks also pertain to markets with even more cyclical business models, such as fragrance and flavor manufacturers, especially Symrise and Givaudan, which had sent out more optimistic signals in the past. This development means that Lanxess’s share price continues to struggle in a year-over-year comparison. The recent setback has increased the year-to-date loss to over 15 percent, making the shares one of the ten weakest performers in the MDax.