Dusseldorf The German chemical industry continues to run smoothly. After BASF, the specialty chemicals companies Lanxess and Evonik also announced strong results for the third quarter on Thursday. However, the companies warn of growing burdens from massively expensive raw materials as well as expensive energy and logistics. The supply chains are also still stretched.
The chemical companies are in a position to pass on the higher costs for raw materials and energy to the customers in almost all of them. In the third quarter, Cologne-based Lanxess AG increased sales prices by up to 19 percent – according to CEO Matthias Zachert, the group has never seen such values before. The adjusted profit shot up in the third quarter by 44 percent to 278 million euros.
The price increases will initially affect the processing industry, which needs chemicals and plastics for their products. It has to be prepared for further increases in procurement costs. “We assume that the cost pressure will increase again in the fourth quarter,” said Zachert. Where necessary, prices would be increased further to offset this.
Lanxess is able to do this because of its strong portfolio. However, the price increases often only succeed with a time lag, so that chemical companies also have to contend with the skyrocketing costs for containers and energy.
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At Lanxess, this was the reason, in addition to internal production problems, that the group will land at the lower end of the range for the forecast profit of 1.0 to 1.05 billion euros this year. Investors took this clarification as a profit warning. The Lanxess share fell by seven percent.
The Essen-based specialty chemicals company Evonik, on the other hand, will land at the upper end of its forecast range in 2021 – i.e. at 2.4 billion euros in adjusted profit. Operationally, the Essen company showed hardly any weaknesses in the third quarter: The operating profit rose by a quarter to 645 million euros.
Lanxess and Evonik can pass on the high raw material and freight costs one-to-one because the demand in the downstream industries is unbroken. “From our point of view, demand from the global economy is intact,” says Evonik boss Christian Kullmann. Lanxess also reports consistently high orders.
The large chemical companies rely on the “pricing power” that they have in such an overall economic situation. Some segments in chemistry are currently downright sold out – for example, hard and soft foams (polyurethane), where few suppliers dominate the market.
From Germany, Covestro and BASF are among them. In its plastics division, which includes polyurethanes, BASF increased profits in the first nine months from 346 million to more than two billion euros. Massive price increases have contributed to this, which in view of the shortage could be implemented without any problems. It should be similar at Covestro, but its quarterly results will not come until Monday.
Other segments of BASF are lagging behind when it comes to price adjustments, such as agrochemicals and cosmetic precursors. But this should be made up for in the coming months. Evonik has also announced that it will be passing on further increases in purchasing costs to customers. “The price increases will continue into 2022,” says Evonik CFO Ute Wolf.
Brenntag: supply chains affected like never before
This also applies to the impairment of supply chains in the chemical industry. The CEO of the world’s largest chemicals trader Brenntag, Christian Kohlpaitner, has never experienced the current extent of this in his 30-year career: “Product availability dominates the daily conversation with customers,” he said on Thursday.
However, Brenntag itself is not operationally affected. In the third quarter, the DAX group posted growth rates of almost 30 percent in sales and operating profit, which skyrocketed to around 343 million euros. The forecast for 2021, which has been raised twice this year, remains in place.
After all: Lanxess boss Zachert sees a “calming at a high level” at least with raw materials and freight costs. The unprecedented price jumps continue to be a major challenge in individual business areas. The Cologne-based company therefore sometimes approach customers with special contracts in order to be able to adjust prices more quickly depending on developments.
Evonik was relaxed, at least with regard to energy costs. For 70 percent of the demand for natural gas, the costs are hedged for three years. That is why CEO Kullmann looks to the coming year with confidence. “We have shown resilience and continue to trust it,” he said.
The current showcase business of the Essen company is the production of lipids, which are used as protective molecules in mRNA vaccines. One of Evonik’s largest customers is Biontech. The group expects average annual growth of 25 percent from the entire lipid business over the next five years.
Lanxess wants to benefit from its numerous acquisitions in the coming year. Most recently, the Cologne-based company took over the microbial division of the US company IFF for 1.3 billion euros. It strengthens the new Lanxess Consumer Protection segment with active ingredients and formulations for material protection, preservatives and disinfectants.
Lanxess boss Zachert used the opportunity to appeal on energy policy on Thursday. Energy prices have risen particularly sharply in Germany because the supply is deliberately reduced by the elimination of nuclear and coal. “We will be forced to have the increasing energy demand of the industrial location Germany covered by French nuclear reactors and Polish coal-fired power plants that do not meet our standards.”
Zachert expects the massive increase in energy costs to hit consumers in four to six months. “Then it will hopefully be a public issue and politically discussed. Because in the end it is the consumers who foot the bill. “
More: BASF multiplies profit – and increases annual targets again