Compared to sales, the cost of sales showed a disproportionately large decline of 4.4%, to €1,626 million. This was mainly attributable to lower puchase prices for raw materials, which more than offset the effect of higher volumes. In addition, manufacturing costs were below the prior-period level, partly due to the absence of start-up costs for new capacities in Singapore.
Gross profit was €417 million, up by €22 million or 5.6% against the prior-year quarter, and the gross profit margin rose from 18.9% to 20.4%. This development was particularly the result of the positive volume development and the lower manufacturing costs. Lower selling prices had a negative effect, more than offsetting a positive effect from lower raw material costs. Shifts in currency parities had no significant impact on the gross profit. Capacity utilization was higher than in the prior-year quarter.
EBITDA and operating result (EBIT)
The operating result before depreciation and amortization (EBITDA) pre exceptionals came in at €205 million in the first quarter of 2014, up €31 million or 17.8% from the prior-year period. The improvement in earnings owed mainly to positive volume effects and lower manufacturing costs. Earnings were diminished by the effect of adjusting selling prices, which exceeded the benefit from the decline in raw material prices because of the challenging competitive situation. Exchange rate developments also had a slightly negative effect. Selling expenses fell slightly by 1.6% to €186 million. Research and development expenses, at €45 million, were down 6.3% from the prior-year period. General administration expenses amounted to €74 million, compared with €79 million in the first three months of 2013. The trend in these functional costs already reflected efficiency improvements achieved through the Advance program. The Group’s EBITDA margin pre exceptionals rose to 10.0%, against 8.3% for the corresponding period of last year.
EBITDA pre exceptionals in our Performance Polymers segment advanced by €5 million, or 4.5%, in the first quarter, to €117 million. The positive volume development and the drop in manufacturing costs – partly due to the absence of last year’s one-time expenses, especially for the butyl rubber facility in Singapore – more than offset the decline in selling prices, which exceeded that of raw material costs. A strike in Belgium had an additional negative effect.
EBITDA pre exceptionals in the Advanced Intermediates segment, at €72 million, came in slightly above the prior-period figure of €71 million. Lower purchase prices for raw materials were passed along to the market. Continuing good demand for agrochemicals led to a positive volume effect, which was partially offset by slightly negative currency effects.
EBITDA pre exceptionals of the Performance Chemicals segment posted a year-on-year increase of €17 million, to €68 million. The earnings improvement resulted particularly from the clearly positive volume development, which more than offset the slight increase in manufacturing costs. Changes in selling prices and raw material costs had no material impact. Exchange rate developments and portfolio changes had a somewhat favorable effect.
The Group’s operating result (EBIT) for the first quarter came in at €75 million, against €67 million for the prior-year period. Depreciation and amortization, at €103 million, were only slightly above the first quarter of 2013 even after capital expenditures. The depreciation and amortization base at the end of 2013 was impacted by impairment charges. The exceptional charges included in other operating expenses, which fully impacted EBITDA, totaled €27 million and related mainly to measures connected with the Advance program and the design and implementation of IT projects. Exceptional charges in the prior-year quarter amounted to €5 million.
The reconciliation of EBITDA pre exceptionals to the operating result (EBIT) was as follows:
|Reconciliation of EBITDA Pre Exceptionals to Operating Result (EBIT)|
|€ million||Q1 2013||Q1 2014||Change %|
|EBITDA pre exceptionals||174||205||17.8|
|Depreciation and amortization||(102)||(103)||(1.0)|
|Exceptional items in EBITDA||(5)||(27)||< (100)|
|Operating result (EBIT)||67||75||11.9|
The financial result for the first quarter of 2014 was minus €37 million, compared with minus €36 million for the prior-year period. Interest expense declined slightly against the first quarter of 2013, reflecting the capitalization of attributable borrowing costs partly related to the construction of the new plants in Singapore and in China. The amount capitalized was in line with the prior-year quarter. The earnings contribution from investments accounted for using the equity method came to €1 million in the reporting period, against €0 million in the prior-year quarter. The balance of other income and expense items, which was mainly determined by the interest cost for provisions, declined by €3 million to minus €14 million.
Income before income taxes
First-quarter income before income taxes moved ahead by €7 million to €38 million. The effective tax rate was 36.8%, compared with 22.6% for the prior-year period.
Net income/Earnings per share/Earnings per share pre exceptionals
Net income for the reporting period came in at the prior-year level of €25 million. Non-controlling interests accounted for a loss of €1 million as in the prior-year quarter.
With the number of LANXESS shares in circulation unchanged, earnings per share were also level with the prior-year quarter at €0.30.
Earnings per share pre exceptionals were €0.53, against €0.34 in the prior-year period. This value was calculated by adjusting earnings per share for exceptional items and the attributable tax effects. Exceptional items in the reporting period came to €27 million, against €5 million in the prior-year quarter.