SHARES in Lanxess, the world’s largest maker of synthetic rubber for tyres, fell to a two-month low Wednesday as the company said it was mired in weak car markets that showed no sign of recovery.
“The market conditions remain challenging. Car and tyre demand has not yet recovered,” a company spokesman said when asked about market talk that finance chief Bernhard Duettmann sounded a cautious note during an investor presentation in New York.
The spokesman cited Duettmann as saying that Lanxess was likely to reach the middle of its previous target range.
Germany’s Lanxess, which competes with Exxon Mobil in synthetic rubber for tyres, tubes and window seals, has said it expects second-quarter adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of EUR174-220 million (US$233-295 million).
Landesbank Baden-Wuerttemberg analyst Ulle Woerner said analyst consensus was for slightly higher adjusted EBITDA than the range mid-point of 200 million euros.
Kepler Cheuvreux analyst Markus Mayer said in a note that demand would take longer to improve than expected.
“In our view, the news shows just how oversupplied the rubber market is currently.”
The shares extended losses and dropped 3.6% to a two-month low at 1502 GMT, making them the worst performer on Germany’s blue-chip index DAX.
European car sales plunged to their lowest level in two decades in May, further eroding prospects for a recovery this year.
The spokesman added that the price of butadiene, the most important chemical raw material used by Lanxess, has dropped, particularly in Asia.
The company, which is the world’s largest consumer of butadiene, has long-term contracts with suppliers.
Smaller competitors that mainly buy butadiene on the spot market lose out to Lanxess when supplies are scarce and expensive but win more business when prices decline. (US$1=EUR0.7467) (Source: Reuters)