LNXSY - Lanxess May Finally See Some Light At The End Of The Tunnel

2024-07-09 04:42:20 ET

Summary

• Lanxess has seen brutal volume and price pressure due to destocking across its markets and important competition subsidized by Chinese access to cheaper oil.
• With multiple end-markets showing at least tentative signs of restocking and Russian oil no longer trading at a steep discount, there seem to be some green shoots within Lanxess' business.
• If these unusual headwinds are done, the company's decade-long effort to transform into a less cyclical, higher value-added specialty chemical company should start to show some results in FY'26.
• Long-term revenue growth of 3%, EBITDA margins in the mid-teens, and FCF margins of around 4% can support a higher share price, but Lanxess has a lot to prove after years of disappointments.

Turnarounds and transformations take time, but I can understand why investors may question whether LANXESS (LXSG.DE) ( LNXSF ) (LNXSY) (“Lanxess”) will ever show real results for a decade-long transformation process that was supposed to leave the company as a less-cyclical, higher value-add, more consumer-focused specialty chemicals company. Although management has been making what generally seem like sound decisions, the company has been hammered by macro challenges that have seriously undermined the earnings of the company....

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