Lanxess Profit Beats Estimates After Raising Prices

Lanxess AG, the world's second- largest maker of butyl rubber used in tires, reported first- quarter profit that beat analyst estimates on higher prices.The synthetics supplier to tiremaker Bridgestone Corp. climbed as much as 5.9 percent in Frankfurt trading. Net income at the Leverkusen, Germany-based company gained 13 percent to 103 million euros ($159 million). Analysts estimated 76 million euros.Lanxess predicted profit margins will this year catch up with European rivals BASF SE and Switzerland's Clariant. Chief Executive Officer Axel Claus Heitmann has exited businesses with margins lower than 5 percent. Chemical markets are expected to remain ``stable,'' boosted by demand in Asia, Latin America and central and eastern Europe, the company said today.``These are again very good results,'' said James Knight, an analyst at Collins Stewart with a ``buy'' rating on the stock. ``The company is showing pricing power'' and profiting from the ``defensiveness'' of some of its end markets such as tires and agriculture, he said.Lanxess rose as much as 1.60 euros, or 5.9 percent, to 28.74 euros, trading at that level as of 11:18 a.m. local time. The stock has lost 14 percent this year, giving the company a market value of 2.39 billion euros.Sales fell 10 percent to 1.54 billion euros. They rose 8.1 percent after adjusting for divestments and currency effects, the company said. The Asia-Pacific region led growth, with an advance of 25 percent.``We have done our homework on time,'' Heitmann said in a conference call, adding that the company will build on this as ``times are going to get tougher'' because it is facing a ``strong'' increase in raw material prices. In the first quarter the company succeeded in passing on the increase in raw material costs in all segments.Chinese FactoryLanxess makes a range of solid-rubber plastic and synthetic-fiber products, including chemicals used by the leather and automotive industries. It opened a factory in Shanghai last year to make raw materials used in pigments and plans to double high-tech plastics production at its Wuxi, China site.The company said that prices for petrochemical raw materials ``are likely to remain high and volatile'' while the ``strength of the euro against other currencies, especially the U.S. dollar, will also affect business trends.''Based on these assumptions, Lanxess expects operational sales growth for the full year, with earnings before interest, taxes, depreciation, amortization and before exceptional items to be more than 700 million euros.The company expects to generate 35 million to 40 million euros in Ebitda before exceptional items in 2008 from the stake in Brazilian synthetic rubber maker Petroflex Industria e Comercio SA. In December, Lanxess agreed to buy a 70 percent stake for 198 million euros as tire makers shift as much as $1 billion of capacity to the country.