COLOGNE, Germany—Arlanxeo, the synthetic rubber joint venture between Lanxess and Saudi Aramco, should deliver some growth over this year as a whole—but it won't be easy.
Despite a fairly strong first half, the rubber business "continues to be affected by overcapacity and ongoing price pressure," Cologne-headquartered Lanxess noted in its first half results statement.
"We anticipate a weakening in growth in the second half of the year," Lanxess said. "Overall, and taking into account the strong first half, we anticipate slight growth for the segment compared to last year, despite the challenging market environment."
In the first half, Arlanxeo's sales lifted 36.1 percent to $2.08 billion though this was compared with the "low level" of a year earlier. The increase reflected higher selling prices in the Tire & Specialty Rubber business unit to reflect higher raw materials costs. Currency effects contributed another 2.9 percent to sales growth.
The rubber producer delivered a 13.5 percent increase in earnings (EBITDA pre-exceptionals) to $276 million in the first six months. The earnings margin, however, came in at 13.2 percent for the first half, versus 15.9 percent a year ago.
Earnings were impacted by a planned maintenance shutdown in its Zwijndrecht site in Belgium—production there includes butyl and halobutyl rubber.
Higher procurement costs for raw materials and energy were largely passed on to the market, the 50/50 JV partner added.
In the second quarter, sales at Arlanxeo increased 24.6 percent to $980 million, though earnings fell 3 percent to $108 million.
"Higher energy costs in particular stood against the success in passing on increased raw material costs," reported Lanxess.
Selling prices in Arlanxeo's Tire & Specialty Rubbers business unit increased in line with raw materials costs. This resulted in a positive price effect of 25.2 percent for the segment, while a change in volumes added 8 percent to sales.
Volumes were about level with the prior-year second quarter, with the High Performance Elastomers business unit increasing its volumes. The Tire & Specialty Rubber unit recorded a shutdown-related drop in volumes
Lanxess linked the second-quarter earnings dip to the maintenance shutdown in Belgium, which led to "lower volumes and an altered portfolio of products sold."
While increases in energy and raw materials costs were largely passed on to the market, the earnings margin came in at 11 percent, down from 14.2 percent a year ago.